THE GEF IN THE YEAR OF THE ENVIRONMENT
Caio K. Koch-Weser
Managing Director
The World Bank
First Meeting on the Second GEF Replenishment
Washington, D.C.
May 2, 1997
THE GEF IN THE YEAR OF THE ENVIRONMENT
I. INTRODUCTION
1. Thanks to Co-Chairs Mohamed El-Ashry and Hirao Fukui.
• Congratulations to Mohamed on his re-appointment as CEO yesterday.
• Welcome all, to our new Bank Headquarters building.
• . And to the first meeting on the Second GEF Replenishment.
2. Today's meeting is important as it launches the detailed discussions that are
expected to lead to the second replenishment of the GEF.
• At the World Bank, we believe that a strong GEF replenishment is essential.
• I know you share this view, but not everybody does.
3. It is important, therefore, that we clarify for ourselves -- as donors and
implementing agencies -- why a generous replenishment is justified.
• Most of my remarks will be on this topic.
• I will also say a few words about how we at the Bank Group have been
seeking to improve our performance as an Implementing Agency and how
we are seeking to mainstream the global agenda into the core of our
activities. (I know you had a good discussion on this subject yesterday).
• Finally, in closing, I will share some thoughts about how we see the current
challenges in the international environmental arena in this important "Year of
the Environment" leading up to the Special Session of the UN and the Kyoto
Meetings.
II. WHY IS REPLENISHMENT SO IMPORTANT?
4. The short answer is because the GEF works and works well.
• It is genuinely helping countries meet their obligations under the Climate
Change and Biodiversity conventions.
• It is providing the economies in transition with resources to complete their
ODS phase-out and meet their obligations to the Montreal Protocol.
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• It is underwriting durable partnerships between countries who share large
water bodies to manage them sustainably.
• It is building capacity both at the country level and within the UN system,
including of course the World Bank, to identify and address global
environment problems.
• It is promoting unprecedented cooperation between UNDP, UNEP and the
World Bank.
5. We all know that GEF resources are not sufficient to solve global environmental
problems.
• Their effectiveness must be judged by their ability to leverage additional
resources and catalyze technology transfer and new partnerships.
• . Here there is a good story to tell. I'll mention some examples from World
Bank programs, but UNDP and UNEP could mention others.
• We see evidence of three types of leverage.
6. First, the GEF is leveraging substantial financial resources.
• As you know, Bank management has, since the start of the GEF Pilot Phase
in 1991, approved $700 million in GEF resources for a total of 70 projects, in
more than 50 countries, across every region of the globe.
• For every dollar of GEF assistance there is an associated dollar of IBRD and
IDA resources, and two additional dollars of co-funding from elsewhere.
• For every GEF dollar invested in mobilizing private capital, at least 1O dollars
of private investment are mobilized.
7. Some Bank-supported projects would not have happened without GEF
assistance.
• The $18 million Kalipeda Geothermal Project in Lithuania -- which is
demonstrating the feasibility of developing indigenous geothermal energy
resources in the Salties -- would not have been implemented without critical
GEF financing of $7 million. Had such funding not been available, the World
Bank would not have been involved in the project and associated co-
financing from bi-lateral donors and the private sector would not have been
made available.
• The GEF grant to arrest environmental degradation in Africa's Lake Victoria
region was vital in securing an equal amount of IDA resources in support of
the collaborative effort among the three riparian nations (Kenya, Tanzania,
and Uganda).
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8. GEF resources are mobilizing private funds. In the first 2-3 years of the GEF,
Bank/GEF projects were typically stand-alone with little private sector involvement.
Today, in contrast, one sees a significant injection of private sector flows and private
sector initiatives in activities related to the global environment.
• In IFC's Renewable Energy and Energy Efficiency Fund, every dollar of
GEF's $30 million will leverage six times as much private financing in the
Fund, and twenty times the amount of the GEF funds in total project costs.
Overall, the project is expected to leverage up to $200 million in equity from
commercial investors and US$800 million-$1 billion in total project costs.
• GEF's contribution of $30-60 million in the Photovoltaic Market
Transformation Initiative (PVMTI) -- which will provide a window for
promoting large-scale use of PV as a long-term strategy for a low carbon-
emission energy future -- is expected to mobilize $200-$250 million in private
investment in developing nations. This market-pull approach is expected to
catalyze competition and stimulate formation of joint ventures at the country
level.
• Preparation of an IFC sponsored Biodiversity Enterprise Fund for Latin
America is now complete. Some 5 million dollars of GEF resources will
facilitate a total capitalization of 20-50 million dollars.
9. Second, the GEF is catalyzing significant technology transfer.
• In India, a $26 million GEF grant, as part of a $186 million project promoting
wind farms and solar photovoltaics, has helped to raise India's industry-wide
capacity from 30 MW to over 700 MW over the past five years. India is now
the third largest producer of wind-powered energy in the world.
Simultaneously, the Bank is deepening its dialogue with the Government of
India on addressing remaining distortions in energy policies that hold back
further investments in renewable energy production.
• In Northeast Amazon, Brazil, a multi-national technology development and
transfer effort will build in the world's first commercial-scale biomass
integrated gasification/gas turbine project. A successful demonstration of
this technology will expand the potential of biomass, most notably in the
sugar/alcohol industry where considerable quantities of bagasse are currently
incinerated in inefficient energy recovery systems.
• In Indonesia, the Bank and GEF are financing the largest single photovoltaic
(PV) solar homes system project attempted to date. At a cost of $75 million,
the project forms a central component of the Government's off-grid
electrification strategy.
10. Third, the GEF is creating partnerships that will last. The Implementing
Agencies are well positioned to foster partnerships that are strategically important for
global environmental management; GEF grant resources help extend and deepen these
partnerships.
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• The Lake Victoria Basin project has promoted collaboration between three
riparian governments, enhanced dialogue between government and non-
government parties, and coordination between the three GEF implementing
agencies.
• The Conservation Trust Funds GEF has supported in countries such as
Brazil, Uganda, Peru are not just mechanisms to plug recurrent costs
financing gaps but are mechanisms to empower local communities to design
futures that simultaneously serve their welfare interests and the global
environment.
Ill. RECENT EFFORTS TO IMPROVE THE EFFICIENCY OF GEF OPERATIONS
WITHIN THE BANK
11. Turning to what all this costs, you will all want to be reassured that the Bank's
GEF business is cost-effective. And I can give you that reassurance.
• By associating GEF operations with IDA/IBRD assistance, GEF projects
require about half as much staff-time to prepare as Bank projects.
• The cost to coordinate Bank GEF operations has hardly grown since 1993,
even though the volume of transactions handled has doubled. The result has
been a sharp reduction in coordination costs per project.
• But we can and will do even better. Last September, we reviewed
streamlining opportunities for GEF Bank procedures, which was coordinated
with GEF Secretariat review of business practice. We confirmed that it is
possible to reduce processing time by as much as 50 percent for the steps
that are the Bank's responsibility. To make this a reality, we are now moving
to better align GEF processing with regular Bank processing schedules.
12. These changes are part of a much broader set of reforms underway at the Bank
of course. You may have he·ard of our new direction laid out by Jim Wolfensohn to the
Board in the Strategic Compact. The core of the changes include:
• refocusing the development agenda -- including much greater attention to
social and environmental sustainability;
• retooling our knowledge base;
• revamping our institutional capabilities (including network structure); and
• refueling our front-line activities.
These will substantially improve our efficiency and effectiveness across the board and
for GEF programs.
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IV. THE WORLD BANK AND THE GLOBAL ENVIRONMENT
13. Let me finally say a few words about how we see the broader environmental
agenda five years after Rio -~ and the GEF's and the Bank's role in it.
14. As you know, progress in implementing Agenda 21 and the conventions over the
past five years has clearly been mixed.
On the positive side:
• Almost 100 countries have prepared national environmental strategies, and
about 50 are beginning to show real progress on the ground.
• Energy subsidies, which cause pollution and waste have been reduced by
half.
• Sixteen additional countries have phased out lead entirely. In Latin America,
use of lead has fallen by 2/3 since 1990.
• Use of ozone-depleting substances has fallen by 60 percent thanks to the
effectiveness of the Montreal Protocol.
• 164 countries have ratified the Climate Change Convention and 165
countries have ratified the Biodiversity Convention.
On the negative side:
• Progress on greenhouse gas emissions has been especially disappointing;
global emissions of carbon dioxide have increased by about 4 percent since
Rio, w.hile emissions in developing countries have increased by nearly 25
percent, and it is likely that only two or three industrial countries will meet
their convention obligations for the year 2000.
• Natural habitats and species continue to be lost at a rapid rate: 3.5 percent of
tropical forests have been converted since Rio.
• Pollution continues to worsen in may cities of the world, with 1.3 billion
people still affected by dangerous air pollution.
• Provision of clean water and sanitation has probably slightly exceeded the
growth in population but 1.3 billion people still lack clean water, and 2 billion
people still lack sanitation.
• Land degradation threatens food security and livelihoods in many parts of
Africa and Asia.
15. We see a serious danger of loss of momentum and even retrogression in
commitment to environmental sustainability -- at the national and international level.
• The remaining 8 months of 1997 provide a crucial window of opportunity to
turn the tide and reseize the initiative.
• The G-7 Summit and the Special Session of the UN in June, the GEF
Replenishment discussions, and the Kyoto Meeting, must all demonstrate
strong will to take real action.
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• This will require some compromise, and even sacrifice, on all sides.
16. On our side, we plan to do all we can to support this agenda.
• We are, of course, already sharply expanding our assistance for national and
local environmental reform.
• Across the World Bank Group, we are stepping up our support for
environmentally-friendly private sector activities.
• We are also doing strategic thinking about how the Bank Group as a whole
can better support our client countries in meeting their obligations under the
conventions.
17. And it is here that the GEF's catalytic role comes in again.
• By far the most important leverage GEF can exercise is to truly mainstream
global environment concerns and actions into the wider development agenda
-- in helping to redefine sustainable development in global environment
terms, instead of purely at the local level.
• At the Bank we want to be proactive in mainstreaming the global environment
in our Country Assistance Strategies and in our operations, and here the
GEF has been an invaluable catalyst. Acting as GEF Implementing Agency
has facilitated: learning of operational staff and managers about global
environment issues and the global Convention processes, and the building of
capacity to reflect these concerns in regular sector work, the country
dialogue, and our assistance strategies.
• GEF has thus provided substantial synergies.
V. Conclusion
18. In closing, in this Year of the Environment, the next six months -- the G-7
Summit, the Special Session of the UN, the Kyoto Meetings, and the GEF
Replenishment -- offer us an unprecedented opportunity to improve the prospects of
success.
• Thank you for your important efforts to seize this challenge.
• Thank you for your important efforts to support the Global Environment
Facility.