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IFI governance

Background

Climate change and the World Bank: dubious green credentials

12 September 2005

The G8 communiqué in July bestowed the World Bank with a leadership role “in creating a new framework for clean energy and development, including investment and financing”. Such a role could be considered ironic: one year on from the Extractive Industries Review (EIR), Bank support for renewable energy is a mere 6 per cent of its total energy-related lending; and its lead role in the Clean Development Mechanism (CDM) has been subject to severe scrutiny.

The Bank wants to bring together nations split over the Kyoto Protocol to work out a new plan that would remain effective after Kyoto expires in 2012. Ian Johnson, vice president of the Bank’s environmentally and socially sustainable development department, said the Bank will serve as a “global mediator on climate change”, bridging the differences in approach between developed and emerging countries, including India and China.

The UK appears set to play a key role: at the upcoming annual meetings, UK secretary for international development Hilary Benn has invited the Bank to host a side-event at the annual meetings to discuss follow-up work on G8 climate change initiatives, with Bank president Wolfowitz to co-chair. A meeting on climate change in London to be headed by prime minister Tony Blair is planned for November.

A letter to the G8 leaders signed by 120 civil society organisations pointed out that the Bank has financed over $25 billion in oil, gas and coal contracts since the UN framework convention on climate change was signed in 1992. Eighty per cent of all Bank oil projects are for petroleum production for wealthy countries, rather than to meet the energy needs of the world’s poor. Strong civil society criticism of this perpetuation of fossil-fuelled economic expansion was reflected in a number of reports:

  • Drilling into debt, Oil Change International: Oil exporting countries have fallen into “a nightmare of crushing debt, civil conflict and stagnant economies”, as compared to the expectation of economic plenty that oil production would bring perpetuated by the Bank in the 1970s and 80s. Bank programmes designed to increase northern private investment in southern oil production have drastically increased debt, as explored in case studies from Nigeria, Ecuador and Congo-Brazzaville.
  • Hoodwinked in the hothouse: The G8, climate change and free-market environmentalism, Carbon Trade Watch: The Bank has played a major role in developing carbon-intensive projects in the developing world. The report challenges the “carbon offset culture”, and the assumption that the market’s “invisible hand” rather than radical reductions at source will contribute to a genuine reduction of emissions. It criticises the Bank’s involvement in carbon trading emissions schemes, in particular the Prototype Carbon Fund, which merely allows northern governments and industry to postpone making the desperately needed cuts at home.
  • Mainstreaming climate change considerations, World Resources Institute: The Bank’s response to climate change over the past five years has been inadequate. Country assistance strategies have failed to comprehensively address climate change, and over 80 per cent of the Bank’s publicly disclosed lending in the energy sector 2000-2004 did not consider climate change issues in project appraisals. The report recommends that Bank country sector strategies explicitly integrate climate change considerations, and that developed countries support the additional costs of green house gas accounting as part of their obligations under the UN climate convention and Kyoto protocol.
  • Africa up in smoke?, Working group on climate change and development: The African continent’s vulnerability to climate change is exacerbated by factors such as widespread poverty, recurrent droughts and floods, and further complicated by the burden of un-payable debt. G8 nations have failed to ‘join-the-dots’ between climate change and Africa and urgent action must be taken.

Carbon broker

The UN climate change convention and the Kyoto protocol envisage an important role for the World Bank with respect to financing technology transfers to mitigate green house gas emissions. A recent report by the Sustainable Energy and Economy Network reveals the Bank’s plans to operate as a self-appointed broker – from which it would reap profits of between 8 and 10 per cent of each transaction between northern and southern parties on carbon transactions, through such schemes as the prototype carbon fund and the clean development mechanism (CDM). The Bank leads other multilateral development banks in the CDM, which assists industrialised countries to comply with Kyoto emission limits and “developing countries to achieve sustainable development”. However, its genuine contribution to renewable energy development is doubtful, given its financing for projects such as the case of the Plantar project in Brazil (see 35).

West Africa gas pipeline: spurious claims

The World Bank-funded West Africa Gas Pipeline (WAGP) has been presented as a clean energy project which should qualify for credit under the CDM. Management of the pipeline is split between the members of a consortium lead by Chevron Texaco, and includes the Nigerian National Petroleum Corporation (NPCC) and Shell. The request for the CDM credit is predicated on the claim that the pipeline project would contribute to the reduction of gas flaring in the Niger Delta. However, Chevron, the World Bank and the Nigerian government have failed to demonstrate how gas flaring will be reduced as a result of the pipeline. Moreover Chevron was part of the Global Climate Coalition, an oil industry lobby group opposed to the Kyoto Protocol. In May 2005 Shell announced that it would not meet its commitment to eliminate routine flaring of associated gas from its oil fields in 2008. .

The “Enron” of global carbon trading

An analysis by NGO International Rivers Network (IRN) has exposed as fictional World Bank claims that it is helping China reduce its green house gas emissions by three million tons through buying carbon credits from the Xiaogushan dam. The Bank has applied for the credits to be certified by the CDM. IRN state that the large dam is due to be completed in 2006 regardless of whether or not it receives carbon credits. The CDM is only supposed to issue credits for projects that would not be built if they did not receive carbon credits. IRN’s Patrick McCully called the World Bank the “Enron of global carbon trading, shamelessly manipulating the market behind the scenes whilst painting itself as the good guy”.