Hoover Institution (Stanford, CA) — In an effort to uplift middle-income countries and people living in poverty while prioritizing a global energy transition, World Bank president Ajay Banga says he’s working to make the organization nimbler.
Banga joined Hoover Institution director Condoleezza Rice, Stanford Doerr School of Sustainability dean Arun Majumdar, and Hoover senior fellow Peter Blair Henry on October 1 for a conversation in Hoover’s Hauck Auditorium about how to balance concerns about sustainability with the need for continued economic growth.
“Even as people in emerging economies seek more energy to power their production, to light their homes, to educate their children, we and they are challenged by climate change and environmental sustainability,” Rice said, summarizing the core of the discussion. “These are areas of the world that sometimes do not have access to the new technologies that may indeed hold the answer to some of these challenges.”
Banga said a key priority for the World Bank, an international financial institution created in the aftermath of the Second World War, is to accelerate economic development programs for client countries in a shorter time frame than has previously been feasible.
“It used to take 19 months from first discussions in a country to implementation, we are heading to 16 [months] and working toward 12 [months], and I would like to get it down below that,” he said.
A little more than one year into his five-year term as World Bank president, Banga said his organization and many global governments need to better recognize the interconnectedness of challenges today. “Dealing only with poverty or the spreading of prosperity is inadequate unless you understand that it’s impacted deeply by climate change. It’s impacted by fragility, conflict, and violence. It’s impacted by pandemics. It’s impacted by food security,” he said.
To that aim, Banga said he is organizing the World Bank’s priorities to center around five “verticals”: people, climate, infrastructure, prosperity, and digitization. “This is almost the same mission as [that of the] Doerr School,” remarked Majumdar.
The conversation was part of the school’s Big Ideas in Sustainability series, which invites global thought leaders on climate and sustainability for conversations that engage the entire Stanford community. This fourth installment in the series was cosponsored by the Hoover Institution, where Rice, Majumdar, and Blair are all senior fellows.
Practical Solutions for an Energy Transition
Banga spoke about lessons learned from past efforts to fund low-carbon development around the world. ”No politician,” he said, will successfully impose a tax on citizens in one country to fund sustainability efforts elsewhere. A more promising alternative, he said, is a system for buying carbon credits verified for social and environmental integrity.
He also suggested governments and private enterprise consider technologies including what he called “carbon capture.” When asked by Majumdar if he meant removing carbon dioxide from the atmosphere, Banga replied, “Absolutely, not just carbon abatement at a plant.”
“The public debate right now is that if we start using carbon capture, are you giving a cop-out to the fossil fuel companies?” Banga continued. “But we are going to need to fire every bullet in our gun if we are going to get this right for our children.”
Toward a Sustainable Future
And when diving deeper into the issue of decarbonization, Banga said it’s important to consider farmers’ needs and incentives when striving to reduce methane emissions from sources such as rice fields and cattle ranching.
“Methane emitted from growing rice is 8 percent of all methane emissions, and methane is 80 times more dangerous than carbon dioxide,” Banga said. During the first twenty years after its release, methane heats the atmosphere nearly ninety times faster than carbon dioxide. If rice farmers change their irrigation practices, it can dramatically reduce methane emissions from their fields.
“This is proven. We’ve done it in Vietnam with 600,000 hectares [and] we’re going to a million,” Banga said. “There’s no reason why you can’t do this in ten countries.”
Banga pointed to growing fragility around the world as a serious challenge to increased prosperity, with more than one hundred million people now living with some form of refugee status and more than a quarter of World Bank funds going into countries affected by fragility, conflict, and violence.
Banga described the impact of fragile and conflict-affected situations, “burning through” the resources that the World Bank could use to encourage development or fuel the green energy transition, “because delivering development in a fragile country is very hard and very risky,” he said.
An average refugee lives in “a refugee state of mind,” unable to plan for the future, for sixteen years, he said.
In addition to conflicts and fragility, there are other vexing problems Banga is trying to address.
As middle-income countries continue to grow their economies, they are expected to generate approximately 400 million jobs in the coming years. But approximately 1.2 billion young people will enter the labor force in those countries in that same period.
Even as Europe reduces emissions by switching away from coal-fired electricity generation and expanding wind and solar capacity, Banga said, emissions from middle-income countries could increase as their prosperity and energy consumption grow.
“Why is it that there aren’t people beating the doors down in these middle-income countries to put up solar and wind plants in an effort to make money from it, which is what they should be doing?” Banga asked. One reason, he said, is investors don’t always believe policies will be carried out as promised.
Banga said one of his goals for the World Bank is to get three hundred million people in Africa connected to electricity from renewable sources by 2030. So, the World Bank, in concert with the leaders of 15 African states, are developing a new plan to boost electrification.
Reasons for Optimism
Both wind and solar capacity have dramatically increased in recent years, and costs have come down. The time to install a gigawatt of solar capacity has fallen by 99 percent to a little over one day. “This is headed in the right direction,” Banga said.
He said the next challenge will be to convince institutional investors to fund renewable projects in emerging markets, especially in places investors have shied away from in the past due to unstable regulatory regimes.
And everything the World Bank does in the future will have to be completed in a shorter time frame than ever before to be able to execute projects within the four-to-five-year terms of many democratically elected governments. Emphasizing a need for partnerships, he said, “The task is big, the numbers required are large, and we’re not going to do it by ourselves.”
