SPECIAL FEATURE SEAR THE CLIMATE CHANGE– ENERGY ACCESS NEXUS Sameer Akbar and Gary Kleinman, World Bank b    S TAT E O F E N E R GY ACCES S R EPO RT  |  2 0 1 7 Copyright © 2017 International Bank for Reconstruction and Development / THE WORLD BANK Washington DC 20433 Telephone: +1-202-473-1000 Internet: www.worldbank.org This work is a product of the staff of the World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work and accept no responsibility for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Furthermore, the ESMAP Program Manager would appreciate receiving a copy of the publication that uses this publication for its source sent in care of the address above, or to esmap@worldbank.org Cover photo: © Yusuf Turker | World Bank THE CLIMATE CHANGE–ENERGY ACCESS NEXUS Sameer Akbar and Gary Kleinman, World Bank INTRODUCTION A s the Turn Down the Heat series of reports from Change), an agreement was adopted that defines multi- the World Bank makes clear, climate change com- ple objectives that, taken together, strengthen the global plicates development efforts: response to the threat of climate change (I4CE, 2015). At the same time, it incorporates new terms and concepts, “  Data show that dramatic climate changes, heat, and including “climate justice” and “the right to develop- weather extremes are already impacting people, dam- ment” that link the global mitigation effort to the UN Sus- aging crops and coastlines, and putting food, water, tainable Development Goals (Wuppertal, 2016). and energy security at risk. . . . The task of promoting The Paris Agreement’s structure—including “contribu- human development, of ending poverty, increasing tions” from all countries and a technology framework that global prosperity, and reducing global inequality will addresses access and finance for those technologies that be very challenging in a 2°C world, but in a 4°C world shift away from fossil-based infrastructure—is critical for there is serious doubt whether this can be achieved at improving resilience and the eventual reduction of GHGs all. Many of the worst projected climate impacts could in countries that still lack access to modern fuels. This still be avoided by holding warming to below 2°C. But, point has been reinforced by recent World Bank research the time to act is now. ” (Hallegate et al., 2016) that shows that very poor, agricul- — Turn Down the Heat: The New Climate Normal (WB, 2014a) ture-focused countries typically do not consume a lot of energy. In fact, in 2011, the 900 million people (13 percent One of those development efforts would be achieving of the population) living in the 50 poorest countries emit- sustainable energy access for all. If the world is to have a ted only 0.8 percent of global CO2 emissions, yet they are reasonable chance of preventing global temperatures among the most vulnerable to climate impacts. from increasing beyond 2°C above pre-industrial levels, Thus, one policy approach to address the global miti- net emissions of carbon dioxide (CO2) and other long- gation challenge—but not disadvantage the poor— lived greenhouse gases (GHGs) must approach zero in the would be to sequence fossil fuel subsidy removal, leaving second half of this century (OECD, 2013). This will have the removal of liquefied petroleum gas (LPG) subsidies implications for virtually all aspects of the energy system, for later on. Similarly, carbon taxes can be combined with given the large and dominant role of energy-related emis- policies that help the shift to modern energy, such as low- sions in our current carbon budget (Le Quéré, C. et al., cost financing for clean cookstove purchase or targeted 2014). At the same time, the effort under way to expand subsidies for modern energy (for example, recycling car- energy access through the Sustainable Energy for All bon tax revenue through cash transfers or programs that (SE4ALL) objectives—universal access to modern energy help the poor) (Hallegate et al., 2016). This would have the services, double the share of renewable energy in the double dividend of addressing energy access and climate global energy mix, and double the global rate of improve- challenges while increasing resilience and providing mul- ment in energy efficiency—will have significant conse- tiple localized development benefits (for example, better quences for existing energy systems, especially if all three health, forest protection, and gender empowerment) to objectives are to be achieved (SE4ALL, 2014). those who are most vulnerable to the impacts of climate On the bright side, emerging linkages between the change. energy access and climate change agendas offer opportu- nities to simultaneously bring energy access solutions to LINKS BETWEEN CLIMATE CHANGE AND scale, achieve mitigation objectives, and create more resil- ENERGY ACCESS ient and sustainable communities. And there are some signs of initiatives under way or being considered that try The linkages between the climate and energy access chal- to seize these opportunities. For example, at the Decem- lenges have typically been framed in terms of the carbon ber 2015 climate change negotiations in Paris (under the “footprint” of achieving the SE4ALL goals—in other words, auspices of the UN Framework Convention on Climate mitigation—which the literature shows has been and is   1  2    S TAT E O F E L E C T RI CI TY ACCES S R EPO RT  |  2 0 1 7 expected to be negligible. One recent study finds that that currently lack access so that they can become more improvements in household electricity access contributed resilient. After all, energy access is essential to power early 3-4 percent of the national GHG emissions growth in India warning systems, improve emergency responses, and over the past three decades (Rogelj, et al., 2013). Another enable coping mechanisms for new weather extremes. study reports that the climate impacts of achieving univer- Fortunately, addressing climate change and energy sal access to modern energy carriers and technologies by access can go hand-in-hand. But success on both fronts 2030 are negligible or might even be negative (Pachauri et requires establishing a careful balance of mitigation, adap- al., (2012). The International Energy Association (IEA, tation, and finance concerns. 2011) estimates that achieving universal modern energy access by 2030 would raise CO2 emissions as compared to Mitigation their current practices scenario by only 0.7 percent. Energy access goals could provide an important point of But a broader view of the “climate change—energy entry for mitigation of both long-lived GHGs (like carbon access nexus” also accounts for adaptation challenges that dioxide, methane, and nitrous oxide) and short-lived cli- rising temperatures and extreme weather will create for mate pollutants (SLCPs) (like black carbon, methane, and achieving the SE4ALL goals (see Box 1). This is vital given hydrofluorocarbons). Many of the solutions that provide that damages from extreme weather alone have risen four- energy to poor, rural communities (like renewable mini- fold over just the last three decades (World Bank, 2013). grids and more efficient cookstoves) have the added ben- As new infrastructure is deployed to increase access to efit of reducing emissions of global warming pollutants modern fuels, expand renewable generation, and increase that contribute to climate change as well as other air pol- efficiency, it must be resilient in the face of harsher environ- lutants that worsen air quality. Integrated assessment mod- mental conditions and able to cope with the “new normal” els have shown that many scenarios that achieve all three climatic conditions that will occur in future decades. At the SE4ALL goals are consistent with levels of climate mitiga- same time, expanded access is critical for communities tion that have a high probability of limiting warming to 2°C BOX 1 Challenges for Energy Access in a Warmer World The world is currently on course for global average sur- influenced by higher sea levels, and adaptation options face temperatures to warm by 4°C or more by the end often require extra energy supply (for example, where of the century. The projected impacts span a wide major rivers meet the ocean, additional pumping facil- range of climatologically sensitive areas – including ities could be required). highly unusual and unprecedented heat extremes, At the regional level, there are bound to be big rainfall regime changes and water availability conse- variations. In Latin America, the concomitant increase quences, agricultural yields and food security, terres- in energy demand during heat extremes and the trial and marine ecosystem impacts, sea-level rise, decrease in energy supply through reduced river flow glacier loss, and increased social vulnerability (World and low efficiencies may put existing energy systems Bank, 2014a). under increasing pressure. In the Middle East and These climate changes will directly affect the provi- North Africa, projected impacts are primarily related to sion of energy services and alter energy demand. lower thermal conversion efficiency, decreased volume Increased air and water temperatures can decrease the and efficiency of water for cooling, and extreme efficiency of generation and increase the need for weather impacts on production and distribution sys- cooling, exacerbating supply limitation (ADB, 2012, tems. In Central Asia, careful management of reser- and World Bank, 2011). Changes in precipitation pat- voirs may be able to balance agricultural needs with terns and surface water discharges, as well as an increased demand for hydroelectricity. But in the West- increasing frequency or intensity of droughts, may ern Balkans, lower precipitation will likely intensify the adversely impact hydropower generation and reduce challenges of meeting additional hydro-demand while water availability for cooling purposes to thermal and thermal and nuclear plant cooling capacity is simulta- nuclear power plants – although large decreases in neously reduced (World Bank, 2014a). precipitation may also be associated with decreased Thus, there will need to be both enhanced risk cloud cover and increased solar potential. Extreme screening of new energy access projects and consider- weather events, such as stronger or more frequent ation of whether the failure of existing infrastructure storms, can reduce the supply and potentially the might create additional energy access needs—for quality of fuel (coal, oil, and gas), reduce the input of example, about 25 percent of future demand growth is energy (water, wind, sun, and biomass), damage gen- projected to stem from higher cooling demand owing eration and grid infrastructure, reduce output, and to warmer temperatures (IPCC, AR5). affect the security of supply. Coastal structures are T H E CLIMAT E CH ANGE–ENERGY ACCES S NE X U S   3  (Rogelj, et al., 2013)—and thus would also bring tremen- Adapting Energy Access to Ensure dous public health benefits attributed to cleaner air. Energy Resilience Universal access to modern fuels—in particular—would Of course, mitigation will need to be complemented by result in large regional reductions of black carbon emis- adaptation. Here, two key questions arise. What consti- sions that, as a component of fine particulate air pollution, tutes full access in a hotter world? And what do climate have enormous public health consequences in areas like projections and resilience planning mean for energy sys- South and East Asia. Black carbon can also affect ecosys- tem deployment and integrity? tem health by depositing on plant leaves and increasing Starting with how one defines “appropriate” access, it their temperature, dimming sunlight that reaches the is worth considering that the end-use demand is sensitive earth, and modifying rainfall patterns. The latter can have to temperature in general, but particularly to heat waves, far-reaching consequences for ecosystems and human which calls into question whether emergency cooling con- livelihoods (for example, by disrupting monsoons, which stitutes access (ADB, 2012). Disaster response needs (like are critical for agriculture in large parts of Asia and Africa) early warning systems and hydro-meteorological services) (CCAC, 2014). In addition, all SLCPs can help reduce near- to other extreme weather events (like typhoons and flood- term warming and provide greater time for adaptation to ing) should be considered when establishing the level of climate change, thereby lengthening and improving the access deemed appropriate. quality of lives (CCAC, 2014). Pragmatically, the resilience imperative may add con- Plus many energy access solutions—that often both straints to energy access programs. For example, flooding expand energy access and reduce emissions of GHGs, may have the biggest impact for a wide range of genera- SLCPs, and other air pollution—provide multiple benefits tion technologies, but higher water temperatures or for sustainable development (World Bank, 2014b). Renew- reduced water availability may result in the most severe able or more efficient technologies can save energy and impact where energy systems are dependent on water for reduce financial flows to purchase or subsidize fossil fuels, cooling (ADB, 2012). Transmission and distribution grids offsetting some of the capital expense associated with are notoriously sensitive to storm damage, and thus dis- those technologies. And energy access investments in a tributed technologies may represent an appropriate adap- single sector can have multiplier and forward linkage tation strategy for energy systems in general, while effects across the economy that can yield broader output providing solutions for rural populations without access. and employment gains, which are not always recognized in Adaptations for key access-related energy systems can project financial analysis. Lower emissions choices reduce include: (i) more robust design standards (wider range of climate change and improve air quality, providing agricul- operating temperatures, able to withstand weather tural and public health benefits and reducing future losses extremes); (ii) enhanced passive airflow cooling under roof- that can be monetized. mounted solar systems; and (iii) transmission and distribu- But if we are to address the energy priorities of the poor tion redundancy in control systems and routes or and disconnected while simultaneously recognizing the underground distribution (ADB, 2012). From a planning long-term mitigation challenge and associated benefits, perspective, adaptation and resilience advice for energy we will need to carefully balance interventions to support planners (ADB, 2012) is equally relevant to energy access access objectives while achieving net zero carbon levels by planning and includes: the end of the century. This means recognizing the syner- • Understanding current climate variability and how the gies that come from pursuing both efficiency gains and climate might change in the future, and therefore which more renewable energy generation—for example, Rogelj measures are warranted at the level of specific projects. et al. (2013) find that the SE4ALL 2030 targets for primary energy from renewable energy are reduced by 20 percent • Improving energy sector (and broader) decision mak- if the energy efficiency objectives are achieved simultane- ing by improving local weather and climate knowl- ously. It also means carefully planning for a judicious edge, regardless of whether large climate changes are deployment of “transition” fuels (like LPG, whose emis- expected. sions may need to be offset), along with a rapid scale up of • Improving access to existing meteorological and hydro- sustainable solutions (like biogas). logical data and developing better mechanisms so that Furthermore, recognizing the health, agricultural, local weather and climate data are archived for the employment, and economic benefits of access programs— public good. and accounting for their full social value—will strengthen the case for action and for finance (both public and pri- vate). At the project level, these benefits have often been left out of economic analyses because many health and CLIMATE FINANCE environmental benefits were not easily quantifiable. How- From a technical and economic perspective, providing ever, recent efforts to better estimate the full impacts of almost universal access to electricity and modern cooking proposed development projects have produced several fuels by 2030 will require global investments of $36-41 bil- new analytical tools and models that allow economists to lion annually, which is about 3 percent of total energy infra- more fully assess the multiple impacts of pollutants, esti- structural investments (Pauchauri, 2012). But one recent mate the value of emission reductions, and model the syn- study (Cameron et al., 2015) finds that efficient policy ergistic impacts of harms and benefits as they flow through design (mainly targeted stove and fuel price supports) can the economy (World Bank, 2014b). achieve energy access and climate goals while counteract- 4    S TAT E O F E L E C T RI CI TY ACCES S R EPO RT  |  2 0 1 7 ing the effects of climate policies on cooking fuel prices in (public and private) to expand energy access through South Asia—although international financial transfers renewable energy. Since its creation, the amount of cli- under effort-sharing scenarios may be needed to enable mate finance contributed and pledged has increased from price support policies in developing countries. Climate $300 million to $800 million, and the number of pilot finance could play a catalytic role, along with other under- countries has grown to 27. A wide range of technologies lying sources of finance, in unlocking this potential and have been supported, from geothermal, solar, wind, small financing the interventions that expand energy access. hydro, and biomass to renewable mini-grids and clean Securing these funds requires financing and business cookstoves (see Box 3). models within the energy access community to be under- stood and embraced by operating entities of the Financial Climate and Clean Air Coalition (CCAC). This coalition Mechanism of the UNFCCC (the Green Climate Fund, the was formed in 2012 to reduce SLCPs at the global level. As Global Environment Facility, and the Standing Committee of May 2016, it counted over 100 partners (including gov- on Finance). Examples include the creation of windows of ernments, multilateral institutions and private organiza- patient (10 or more years), subordinated, mezzanine debt, tions). It supported a study group led by the World Bank to and convertible grant instruments for decentralized review potential strategies for financing projects that can energy, especially mini-grids (Practical Action, 2015). In significantly reduce black carbon emissions. Significant India, the mini-grid experience suggests that clustering finance for clean residential energy solutions (including community-scale projects enables the establishment of clean cooking, heating, or lighting) could have both large critical O&M services, and bundling projects can be help- climate benefits (depending on geographic context and ful in minimizing transaction costs to attract venture capital intervention design) and improve the health and well- funding and carbon finance credit (GNESD, 2014). In Ban- being of millions who lack access to cleaner modern fuels. gladesh, grants and soft loans with strong government support are the key to solar home programs (see Box 2). The dual challenges of weak enabling environments FUTURE PROSPECTS AND PROJECTIONS and lack of access to capital make it doubly hard to ramp Once connected and provisioned with modern fuels, new up renewable and other modern energy use in low-income users of energy may increase their energy use rapidly, pos- countries. But two recent models for financing energy sibly leading to a climate mitigation challenge; hence pro- access show how it can be done. viding them clean energy access is paramount. Climate- smart solutions for energy access—solutions that expand Program for Scaling Up Renewable Energy in Low access, lower emissions, and yield other development Income Countries (SREP). Launched in 2010, under the benefits that are consistent with energy access for the Climate Investment Funds (CIF), SREP started as a small poor—are being deployed already. These include cleaner program with six pilot countries (Ethiopia, Honduras, (low-emission) technologies now being used in remote Kenya, Maldives, Mali, and Nepal). Its objective is “to pilot locations (like clean cooking and renewable mini-grids). and demonstrate, as a response to challenges of climate Many of these cleaner solutions have reached (or change, the economic, social, and environmental viability nearly reached) price parity with more polluting alterna- of low carbon development pathways in the energy sector tives. A recent review of access solutions finds that in by creating new economic opportunities and increasing South Africa, commercial wind is at grid parity with coal; in energy access through the use of renewable energy.” East Africa, grid-scale solar is competitive; and in Nigeria, Through a country-led process of developing and imple- solar lanterns are hundreds of times cheaper than kero- menting investment plans with the support of multilateral sene (in $/lumen-hour) and solar home systems are com- development banks (MDBs), SREP created a platform to petitive with diesel generators (Practical Action, 2015). build institutional capability and mobilize investments Scaling up these solutions will only further reduce costs. BOX 2 Bangladesh’s IDCOL as a Model for Nationally Supported Solar Home Programs Using donor funding, Bangladesh’s Infrastructure The tremendous success of this program in deliver- Development Company Limited (IDCOL) is a public– ing low-cost solar electricity access to the poor and private partnership that provides subsidized financing disconnected (more than 2.6 million units bring energy (grants and soft loans) to sellers and installers of solar service to 12 million people) argues for replication of home systems, along with certifying equipment, ven- this approach. This could be done by expanding this dors, and ensuring quality control, technical assis- program or undertaking similar private sector initia- tance, and monitoring after deployment of a solar tives—for example, Tanzania’s off-grid electric pro- home system (Practical Action, 2015). gram, which leverages pay-as-you-go technology and serves 60,000. T H E CLIMAT E CH ANGE–ENERGY ACCES S NE X U S   5  BOX 3 Kenya Uses SREP to Show How Carbon Finance Can Support Access Kenya had the first investment plan endorsed by the Program for tricity more affordable for the poor and increase generation Scaling Up Renewable Energy in Low Income Countries (SREP) capacity that will enable more connections and increase access. governing body in 2011. Following an extensive consultation It is expected to mobilize private sector participation in the iso- with stakeholders, the government proposed three priority areas lated mini-grids and to promote a standardized scale-up approach for SREP support: that will allow a systematic scaling-up of access to electricity. GEOTHERMAL. Kenya has an ambitious plan to develop about SOLAR WATER HEATING. This project aims to remove market barri- 5,000 megawatts of electricity from geothermal by 2030. SREP ers for the wide adoption of solar water heating systems and to support should help bring down the financing and resources risks reduce both energy use and peak demand. SREP intervention associated with the drilling of appraisal and production wells and will enhance the private sector’s engagement in this market and power generation in Menengai, so that the project structure can strengthen the banking sector’s capacity and experience to be replicated in other geothermal fields. finance renewable energy development. HYBRID MINI-GRID SYSTEMS. This project proposes to increase the The projects to be funded by the SREP are expected to bring proportion of renewable energy (solar and wind) in existing and transformative impacts on renewable energy development in planned mini-grids and to replace the current unsustainable die- Kenya and benefit millions of poor people with modern energy sel-based mini-grid electricity supply. The project will make elec- services. Plus even in cases where access technologies are not achieve electrification objectives by adding between 9 quite at price parity with more polluting alternatives, the and 22 gigawatts of new capacity through 2030. poor are now paying much higher prices for available The key finding is that universal access and electrifica- energy services (such as kerosene and cell phone tion by 2030 is possible with no increase—or a negligible charging), justifying investments that would make margin- net increase—in GHG emissions, as well as a significant ally more expensive energy choices more accessible. In decrease in black carbon emissions. But it requires smart addition, recent research (Alstone et al, 2015) demon- policies that target services that work for the poorest and strates that mobile phones and virtual financial services most remote populations (whom, it is assumed, would use can enable rapid deployment and scale-up of these tech- decentralized off-grid and micro-grid solutions). It also nologies. requires strong government support coupled with finan- These options become even more cost-competitive cial incentives that target the populations that need them. when economic analysis factors in the full economic value From a climate standpoint, it is important to note that of benefits from employment (mini-grid finance authori- this negligible change in GHG emissions is relative to a ties or distributors, energy service companies, electricians, baseline that assumes no new access policy but a rising and stove distributors or manufacturers) and avoided crop (nearly doubling) of demand and perhaps a tripling of losses (reduced co-emitted methane and other air pollu- GHG emissions due to a large transition away from solid tion precursor emissions)—as well as the social value asso- biofuels that (arguably) have little impact on net GHG ciated with improved health (reduced cook smoke and emissions (it is assumed that the associated CO2 emis- offset coal plant pollution) and mitigation (less fossil fuel sions are taken up again when new biomass is grown to and deforestation). replace what is burned). This raises two important points. However, as pointed out earlier, boosting energy access First, much of the solid biomass currently used for fuel in does not mean a significant increase in GHG emissions. In regions with low energy access are not sustainably har- addition, integrated assessment modeling studies show a vested, and thus are not carbon-neutral. Second, if we are far greater improvement in air quality as a result of acceler- to limit warming to 2°C, all countries must achieve zero ating energy access policies than increased stringency of net emissions in the latter half of this century—but, as mitigation, highlighting the important benefits of policies small as the contribution of emissions due to access pro- that aim at achieving many objectives—such as climate grams is, it is still not zero in 2030. protection, clean air and energy access—concurrently, Fortunately, the answer to the second point may lie in instead of in isolation (Rogelj et al., 2014). the first one. Energy access programs coupled with strong A recent study (Pachauri et al., 2012) examines a range landscape reform programs stand to achieve access of future energy access scenarios to encourage a more objectives and potentially fund such initiatives through rapid transition away from solid fuels for cooking based on REDD+ carbon financing while making environmental price support mechanisms (such as smart subsides to progress toward sustainability goals. In addition, it might reduce the cost of less polluting fuels; grants; and make sense for the designers of grid-expansion energy micro-lending to make access to credit easier and lower access programs to consider the emissions implications households’ cost of borrowing). These scenarios also up front and make renewable energy priorities more 6    S TAT E O F E L E C T RI CI TY ACCES S R EPO RT  |  2 0 1 7 prominent in the design and financing of some programs. time, ensuring that mitigation concerns are included offers Aside from the mitigation challenge, there are more a point of engagement for climate finance by prioritizing practical reasons to factor climate change into the design renewable generation and landscape management of energy access. For example the fraction of the poor and aspects of these programs. “unplugged” that will achieve access in 2030 by means of Success in either of these challenges requires that grid expansion will need to worry (along with current elec- communities be resilient in the face of climate impacts. tricity users) about how thermal power plants will be able This means that energy access programs must be robust to achieve their cooling needs with increased droughts to temperature and weather extremes. It also means that and warmer temperatures significantly affecting the cool- mitigation strategies must account for GHG emissions that ing potential of rivers and other surface waters. Estimates are essential for achieving access objectives and include of “minimal access” demand requirements, or even “sus- sequestration options that offset any residual emissions tainable” levels of demand, may need to be revised in the during a transition to carbon-free energy access for all. face of heat waves that result in tens of thousands of The role of finance is paramount. The development heat-related deaths absent electricity to power cooling community needs to account for the broader context of stations and air conditioning access for elderly or vulnera- these multiple development objectives (access, resilience, ble populations (Hallegate et al., 2016). mitigation, public health, and ecosystem services) and identify flexible sources of finance that may not fit neatly into a single category. Governments, too, will need to RECOMMENDATIONS FOR MAXIMIZING step up embracing these programs and providing support IMPACT at the community level, enabling financiers to bundle or Given the range of issues that tie energy access and envi- cluster community-scale projects into national on-lending ronmental, climate, and sustainability concerns together, schemes. policy makers will need to deploy an optimal mix of mitiga- With careful consideration of the multiple objectives tion, access, and financial strategies. For example, the and multiple benefits associated with energy access principles of energy access require programs with strong schemes that provide climate resilience, GHG and air pol- government engagement that combine targeted subsidies lution mitigation, and sustainable environmental prac- and microcredit programs with local community engage- tices, universal energy access by 2030 can be achieved ment and support (Pauchauri et al., 2012). 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Convention on Climate Change, Wuppertal Institute for 2013, Organisation for Economic Co-operation and Climate, Environment and Energy, Döppersberg 19, Development, Paris, France. 42103 Wuppertal, Germany, 26, January, 2016. SPECIAL FEATURES To download the State of Electricity Access Report, overview, and Special Features, visit: http://esmap.org/SEAR