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IFI governance

News

Calls for halt of World Bank’s climate initiatives

3 July 2012

NGOs have called on governments to pivot away from funding the Bank-housed Climate Investment Funds (CIFs). Concerns have also been raised about private sector delivery of climate finance and that the Bank’s efforts to push carbon markets are undermining genuine reforms in the forest sector.

Concerned about the lack of funding for the United Nations’ new Green Climate Fund (GCF, see Update 79), 117 NGOs, including the Beyond Copenhagen Coalition from India and Oxfam International, wrote to government funders of the CIFs in April calling on them to “adhere to the CIFs sunset clause and actively support the GCF as the primary international financial institution for climate finance.” The letter stated that “new contributions to the CIFs could create a disincentive for the early operationalisation of the GCF, encourage expansion of the CIFs, and prolong their operation.” It also called for “a fully independent review of the CIFs’ overall performance, as well as their programs and projects.”

The letter was sent in a context of further efforts by the Bank and donors to scale-up the CIFs, while the first meeting of the GCF continues to be postponed, now tentatively scheduled for late August. The CIF programme Scaling Up Renewable Energy Program in Low Income Countries (SREP) has officially welcomed a new pilot country, Tanzania, which is now eligible for funding. Moreover, the CIF sub-committee for the Clean Technology Fund (CTF) has agreed that it should continue to raise more resources while two new countries, Nigeria and India, were told they should begin developing projects (see CIFs Monitor 5).

Meanwhile, the CIFs continue to receive criticism. In April, a report by the UK NGO the World Development Movement criticised the CTF solar project in Morocco, expected to be one of the largest solar power plants in the world, for its export-led model rather than increasing energy access for the poor. On the contrary, WDM argues it could lead to higher electricity prices and thus lowering access for the poor.

In March, ten national and international NGOs, including debtWATCH Indonesia and the US-based Bank Information Centre, sent a letter endorsed by a further 20 organisations and four individuals to Indonesia’s Joint Forest Investment Program (FIP, a CIF programme) team, consisting of the World Bank, the Asian Development Bank, the International Finance Corporation (IFC, the Bank’s private sector arm) and the Ministry of Forestry in Indonesia, to raise concerns about the country’s draft FIP investment plan, stating that it “is far from an attempt to apply the principles of good governance, democracy and human rights in Indonesia.” The letter outlined a number of problems with the FIP process including poor availability and lack of translation of key documents, as well as short deadlines for comments, and concludes by demanding that “the whole process related to FIP be postponed until the occurrence of synchronisation with the process of establishing a clear national strategy that can actually guarantee to save the remaining forests of Indonesia and improve governance in the forestry sector.” Separate letters to the FIP team, also seeking postponement, were sent from the Indonesian NGOs Solidaritas Perempuan and Chamber of the National Forestry Council.

A response to the March letter from the FIP team stated that translation “takes time”, and clarified consultation deadlines and participatory processes. However, NGOs continued to express their disappointment in an early April letter, stating that “we cannot accept the excuse of limited time and technical difficulties, as the complexity of the issue and the variety of stakeholders are well known and should have been anticipated.” It also noted that “simply posting the document on a web page will not guarantee real involvement of the public and affected communities”, and that “two weeks are far from sufficient to ensure real consultation and participation, in particular when it comes to the involvement of affected local communities.” The letter concluded by reiterating that the FIP process should be postponed. As a result, the government of Indonesia was citing civil society criticism of the consultation process as one of the reasons why it was unable to make a formal submission of its investment plan at the FIP sub-committee meeting in May.

Other Bank related initiatives have also been under fire. In May, civil society activists in Bangladesh demanded an end by 2013 to the Bank’s role in the Bangladesh Climate Change Resilience Fund, a multi donor trust fund administered by the Bank (see Update 71), concerned that the government is planning to extend the contract for another five more years. They called for the establishment of an independent body to manage the fund democratically and transparently instead of the Bank. Ahmed Swapan Mahmud of the Bangladeshi NGO Voices for Interactive Choice and Empowerment said that the Bank had increased the agreed service charge that it receives, but failed to provide the promised in-country capacity building.

The private sector’s role in climate finance continues to receive increased attention (see Update 80). An April report by the European NGO network Eurodad raised concerns about the role of financial intermediaries in climate finance, arguing that it is often impossible to know where public money ends up. According to Eurodad, these investments “are unlikely to help those who are most in need” and “cannot be used as a substitute for providing sufficient public resources directly to countries who, through no fault of their own, are suffering most from global warming.”

The report highlights that climate investment account for 4.9 per cent of the IFC’s portfolio, of which almost none reaches low-income countries. The Multilateral Investment Guarantees Agency (MIGA, the Bank’s political risk insurance arm) is also eyeing possibilities of moving into climate finance, claiming it has the capacity to raise its current yearly provision of guarantees from $2.1 billion to $3 billion without raising further capital. Edith Quintrell, MIGA’s director of operations, said “we’ve been exploring how MIGA can take more of a role [in climate-finance investments].”

Carbon concerns

In May the Bank announced that the carbon market grew by 11 per cent in 2011, but the rigour of this figure was questioned. According to Oscar Reyes of the US think tank Institute for Policy Studies “the largest proportion of the ‘carbon market growth’ is accounted for by a change in how the World Bank counts the figures.” The IFC has also expressed doubts about the viability of the carbon market and announced in June that it will close its Carbon Facility Fund in 2013. Alexandra Klopfer of the IFC said “following a decline in carbon prices, the facility is not able to offer a structure that allows value to both participants and project developers.”

Meanwhile, the Bank’s Forest Carbon Partnership Facility (FCPF, see Update 78, 76, 75, 72) continues to attract criticism. A June letter to Benoît Bosquet, the Bank’s lead carbon finance specialist and coordinator of the FCPF, signed by 33 NGOs including Brainforest in Gabon and Greenpeace International, claims that efforts to address governance and institutional issues in forest management through the FCPF Readiness Fund are “being undermined as countries focus time and resources on building the technical capacity to access the [FCPF] Carbon Fund”. The NGOs argue that “the apparent focus on payments for carbon … is diverting scarce resources away from addressing the drivers of deforestation and degradation and improving forest governance, towards building costly measurement systems to generate carbon credits.”

Concerns over FCPF are shared by civil society organisations and indigenous peoples groups in El Salvador, who sent Bosquet two separate letters in May demanding that the country’s FCPF Readiness Preparation Proposal (R-PP) is not approved. The first letter from 18 civil society organisations, including the Salvadoran Ecological Unit, based its analysis on a “review, in-depth analysis and specific observations”, and raised concerns that “the R-PP has serious conceptual and methodological deficiencies, and if it were approved by the FCPF, it would imply adverse consequences for the Salvadoran society, increasing vulnerability and disasters frequency, and postponing the accomplishment of urgent national and international commitments related to climate change.” The second letter, from the Salvadoran National Indigenous Coordination Council, representing 23 indigenous peoples organisations, said that the R-PP “does not consider nor incorporate the concerns and needs of indigenous peoples of El Salvador.”

This sentiment was also expressed by the Indigenous Peoples Confederation of Honduras in a February letter to the Honduran government, stating that the “R-PP document was drafted without consulting with us, and without our consent”. A response from Bosquet said that Honduras had “submitted a draft R-PP for early feedback and is still in the process of formulating its R-PP, so it is expected to be engaging key stakeholders, but not yet carrying out fuller consultations.”