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Renewable energy and low carbon energy


renewable energy

This World Bank research addresses technical, economic, and environmental characteristics of specific renewable energy and energy efficiency technologies, and associated policies related to their use.

Contact: Govinda Timilsina,


 Research focus: biofuels & renewables  |  Research outputs  



Concerns over climate change, energy price volatility and energy security are among the drivers of public and private support for the biofuels industry in several countries. The resulting expansion of biofuels has not been free of controversy, however, and support for biofuels based on food crops has waned since they were linked to the 2007/2008 grain price spike.

The climate change mitigation potential of biofuels is also being questioned, and the existing literature is sharply divided on the issue of whether biofuels should be developed as a source of energy or not. Currently, some countries are in the predicament of whether or not to introduce policy interventions to scale up biofuels production; countries that have already announced biofuels targets face the dilemma of whether or not to enforce the targets.

Our research aims to help resolve this issue through further investigation of the economic and environmental consequences of biofuels at national, regional, and global levels. 


Renewable energy resources, such as solar and wind, have many times higher technical potential for energy supply than current global energy demand. The installation of renewable energy technologies has been growing at an exponential rate over the last ten years. Yet, these sources contribute less than one percent of global energy supply.

Large scale deployment of renewable energy has been constrained by several technical, economic, market and institutional barriers. Although, many countries have introduced policy instruments to overcome these barriers, they are still inadequate to trigger significant penetration of renewable energy into the national energy supply mix.

Our research evaluates renewable energy resources in terms of their economics and policies and highlights the need for further policy intervention to ensure substantial contribution of renewable energy to the global energy supply mix. 

 Research outputs

"Assessment Opportunities and Challenges to Increased Regional Energy Cooperation in South Asia"
AF-Mercados EMI, Prepared for the World Bank, January 2014

The South Asia region is confronting several challenges affecting national electricity systems in the region: rapidly growing demand; electricity supplies that have not kept pace with demand and are frequently interrupted; large but unevenly distributed electricity generation potential (across space and seasons); many electricity suppliers in moderate to severe financial distress; strong incentives for use of often-inefficient captive generation sources; and substantial environmental challenges associated with electricity production. Responding effectively to these challenges will require concerted national-level efforts to increase generation capacity, improve its operating reliability and environmental performance, and strengthen transmission systems – including the achievement of fully national-scale grid inter-connections.

"Technological learning, energy efficiency, and CO2 emissions in China's energy intensive industries,"
Michael T. Rock; Michael Toman; Yuanshang Cui; Kejun Jiang; Yun Song; Yanjia Wang;
World Bank Policy Research Working Paper 6492, June 2013

Since the onset of economic reforms in 1978, China has been remarkably successful in reducing the carbon dioxide intensities of gross domestic product and industrial production. Most analysts correctly attribute the rapid decline in the carbon dioxide intensity of industrial production to rising energy prices, increased openness to trade and investment, increased competition, and technological change. China's industrial and technology policies also have contributed to lower carbon dioxide intensities, by transforming industrial structure and improving enterprise level technological capabilities. Case studies of four energy intensive industries -- aluminum, cement, iron and steel, and paper -- show how the changes have put these industries on substantially lower carbon dioxide emissions trajectories. Although the changes have not led to absolute declines in carbon dioxide emissions, they have substantially weakened the link between industry growth and carbon dioxide emissions.

"A review of solar energy: markets, economics and policies,"
Govinda Timilsina, Lado Kurdgelashvili, Patrick A. Narbel, World Bank Policy Research Working Paper 5845, 2011.

Solar energy has experienced phenomenal growth in recent years due to both technological improvements resulting in cost reductions and government policies supportive of renewable energy development and utilization. This study analyzes the technical, economic and policy aspects of solar energy development and deployment. While the cost of solar energy has declined rapidly in the recent past, it still remains much higher than the cost of conventional energy technologies. Like other renewable energy technologies, solar energy benefits from fiscal and regulatory incentives and mandates, including tax credits and exemptions, feed-in-tariff, preferential interest rates, renewable portfolio standards and voluntary green power programs in many countries. Potential expansion of carbon credit markets also would provide additional incentives to solar energy deployment; however, the scale of incentives provided by the existing carbon market instruments, such as the Clean Development Mechanism of the Kyoto Protocol, is limited. Despite the huge technical potential, development and large-scale, market-driven deployment of solar energy technologies world-wide still has to overcome a number of technical and financial barriers. Unless these barriers are overcome, maintaining and increasing electricity supplies from solar energy will require continuation of potentially costly policy supports.


"Under what conditions does a carbon tax on fossil fuels stimulate biofuels?"
Govinda Timilsina, Stefan Csordas, Simon Mevel, World Bank Policy Research Working Paper 5678, 2011.

A carbon tax is an efficient economic instrument to reduce emissions of carbon dioxide released from fossil fuel burning. Its impacts on production of renewable energy depend on how it is designed -- particularly in the context of the penetration of biofuels into the energy supply mix for road transportation. Using a multi-sector, multi-country computable general equilibrium model, this study shows first that a carbon tax with the entire tax revenue recycled to households through a lump-sum transfer does not stimulate biofuel production significantly, even at relatively high tax rates. This reflects the high cost of carbon dioxide abatement through biofuels substitution, relative to other energy substitution alternatives; in addition, the carbon tax will have negative economy-wide consequences that reduce total demand for all fuels. A combined carbon tax and biofuel subsidy policy, where part of the carbon tax revenue is used to finance a biofuel subsidy, would significantly stimulate market penetration of biofuels. Although the carbon tax and biofuel subsidy policy would cause higher loss in global economic output compared with the carbon tax with lump sum revenue redistribution, the incremental output loss is relatively small.


"The impacts of biofuel targets on land-use change and food supply : A global CGE assessment,"  Govinda Timilsina, John C. Beghin, Dominique van der Mensbrugghe and Simon Mevel,  World Bank Policy Research Working Paper 5513, 2010.

This study analyzes the long-term impacts of large-scale expansion of biofuels on land-use change, food supply and prices, and the overall economy in various countries or regions using a global computable general equilibrium model, augmented by a land-use module and detailed representation of biofuel sectors. The study finds that an expansion of global biofuel production to meet currently articulated or even higher national targets in various countries for biofuel use would reduce gross domestic product at the global level; however, the gross domestic product impacts are mixed across countries or regions. The expansion of biofuels would cause significant land re-allocation with notable decreases in forest and pasture lands in a few countries. The results also suggest that the expansion of biofuels would cause a reduction in food supply. Although the magnitude of the impact on food supply at the global level is not as large as perceived earlier, it would be significant in developing countries like India and those in Sub-Saharan Africa. Agricultural commodities such as sugar, corn, and oil seeds, which serve as the main biofuel feedstocks, would experience significant increases in their prices in 2020 compared with the prices at baseline due to the expansion of biofuels to meet the existing targets.


"Biofuels: markets, targets and impacts,"  Govinda Timilsina and Ashish Shrestha, World Bank Policy Research Working Paper 5364, 2010.

This paper reviews recent developments in biofuel markets and their economic, social and environmental impacts. Several countries have introduced mandates and targets for biofuel expansion. Production, international trade and investment have increased sharply in the past few years. However, several existing studies have blamed biofuels as one of the key factors behind the 2007-2008 global food crisis, although the magnitudes of impacts in these studies vary widely depending on the underlying assumptions and structure of the models. Existing studies also have huge disparities in the magnitude of long-term impacts of biofuels on food prices and supply; studies that model only the agricultural sector show higher impacts, whereas studies that model the entire economy show relatively lower impacts. In terms of climate change mitigation impacts, there exists a consensus that current biofuels lead to greenhouse gas mitigation only when greenhouse gas emissions related to land-use change are not counted. If conversion of carbon rich forest land to crop land is not avoided, the resulting greenhouse gas release would mean that biofuels would not reduce cumulative greenhouse gas emissions until several years had passed. Overall, results from most of the existing literature do not favor diversion of food for large-scale production of biofuels, although regulated production of biofuels in countries with surplus land and a strong biofuel industry are not ruled out. Developments in second generation biofuels offer some hope, yet they still compete with food supply through land use and are currently constrained by a number of technical and economic barriers.


"Clean Development Mechanism Potential and Challenges in Sub-Saharan Africa," Govinda R. Timilsina, Christophe de Gouvello, Massamba Thioye, and Felix B. Dayo, Mitigation and Adaptation Strategies for Global Change 15(1): 93-111, 2010.

Sub-Saharan Africa lags far behind other regions in terms of the implementation of Clean Development Mechanism (CDM) projects due to several reasons. One of the reasons is a general perception that, since the region contributes very little to global GHG emissions, it also offers few opportunities to reduce these emissions. Using a bottom-up approach, this study investigates the technical potential of reducing GHG emissions from the energy sector in Sub-Saharan Africa through the CDM. The study finds that sub-Saharan Africa could develop 3,227 CDM projects, including 361 programs of activities, which could reduce approximately 9.8 billion tons of GHG emissions during the CDM project cycles. The study also estimates that the realization of this CDM potential could significantly enhance sustainable development in the region as it would attract more than US$200 billion in investment and could generate US$98 billion of CDM revenue at a CER price of US$10/tCO2. Another notable finding of the study is that the realization of this CDM potential could supply clean electricity by doubling the current capacity and thereby providing access of electricity to millions of people in the region. However, realization of this CDM potential is severely constrained by a number of financial, technical, regulatory and institutional barriers.


"On interfuel substitution: some international evidence,"  Apostolos Serletis, Govinda Timilsina and Olexandr Vasetsky, World Bank Policy Research Working Paper 5026, 2009.

This paper estimates interfuel substitution elasticities in selected developing and industrialized economies at the national and sector levels. In doing so, it employs state-of-the-art techniques in microeconometrics, particularly the locally flexible normalized quadratic functional forms, and provides evidence consistent with neoclassical microeconomic theory. The results indicate that the interfuel substitution elasticities are consistently below unity, revealing the limited ability to substitute between major energy commodities (i.e., coal, oil, gas, and electricity). While the study finds some evidences of larger interfuel substitution potential in high-income economies as compared to that in the middle- and low-income economies in the industrial and transportation sectors, no such evidence is observed in the residential and electricity generation sectors or at the national level. The implication is that interfuel substitution depends on the structure of the economy, not the level of economic development. Moreover, a higher change in relative prices is needed to induce switching toward a lower carbon economy.


"Lock-in Effects of Road Expansion on CO2 Emissions: Results from a Core-Periphery Model of Beijing," Govinda R. Timilsina and Alex Anas,  World Bank Policy Research Working Paper 5017, 2009.

In the urban planning literature, it is frequently explicitly asserted or strongly implied that ongoing urban sprawl and decentralization can lead to development patterns that are unsustainable in the long run. One manifestation of such an outcome is that if extensive road investments occur, urban sprawl and decentralization are advanced and locked-in, making subsequent investments in public transit less effective in reducing vehicle kilometers traveled by car, gasoline use and carbon dioxide emissions. Using a simple core-periphery model of Beijing, the authors numerically assess this effect. The analysis confirms that improving the transit travel time in Beijing’s core would reduce the city’s overall carbon dioxide emissions, whereas the opposite would be the case if peripheral road capacity were expanded. This effect is robust to perturbations in the model’s calibrated parameters. In particular, the effect persists for a wide range of assumptions about how location choice depends on travel time and a wide range of assumptions about other aspects of consumer preferences.


"Wind Power Development: Economics and Policies," G. C. van Kooten, and G.R. Timilsina, World Bank Policy Research Working Paper 4868, 2009.

This study reviews the prospects of wind power at the global level. Existing studies indicate that the earth's wind energy supply potential significantly exceeds global energy demand. Yet, only 1 percent of the global electricity demand is currently derived from wind power despite 40 percent annual growth in wind generating capacity over the past 25 years. More than 98 percent of total current wind power capacity is installed in the developed countries plus China and India. It has been estimated that wind power could supply 7 to 34 percent of global electricity needs by 2050. However, wind power faces a large number of technical, economic, financial, institutional, market, and other barriers. To overcome these barriers, many countries have employed various policy instruments, including capital subsidies, tax incentives, tradable energy certificates, feed-in tariffs, grid access guarantees and mandatory standards. Besides these policies, climate change mitigation initiatives resulting from the Kyoto Protocol (e.g., CO2-emission reduction targets in developed countries and the Clean Development Mechanism in developing countries) have played a significant role in promoting wind power.


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