World Bank and climate change: power failure

21 November 2005

In direct contrast to its newly-appointed leadership role to address climate change and finance renewable energy, a new report from Friends of the Earth (FOE) exposes the World Bank’s failure to meet its own modest commitments to shift support away from dirty energy.

The report points out that as “the world’s foremost multilateral development institution”, the Bank could be “in a key position to drive policy and financing for clean, renewable energy and energy efficiency in developing countries”. The report reveals that the Bank has failed to reach the commitment it made last year to increase its renewable energy financing by 20 per cent each year for the next five years, and has continued to pump massive amounts of low-interest loans into oil, gas and coal projects. The report finds that:

  • In 2005 only 9 per cent of the Bank’s energy financing went to renewable energy and energy efficiency projects;
  • IFC and MIGA are not included in the Bank’s 20 per cent target. The IFC devoted only 2 per cent of its total energy lending to renewables in fiscal year 2005;
  • only 49 per cent of the money for the lending targets has come from the Bank’s own funds, of which $87 million was for just one project. Much has come from carbon finance funds and the Global Environmental Facility; and
  • renewable energy and energy efficiency financing was uneven across regions e.g three projects in China received $145 million, 65 per cent of the Bank’s renewable and energy efficiency funding, while the South Asia region received only $5.6 million.

The report concludes that more funding for renewable energy is needed in both developed and developing countries and serious consideration should be given to appropriate international financing mechanisms for shifting energy investments to renewables. It questions the World Bank’s position to promote renewable energy and reduce the impacts of climate change.

MP called on the UK government to phase out development aid for the oil industry

World Bank climate strategy unclear

Statements from the World Bank at the high-level meeting on climate change in London in November, attended by ministers from developed and emerging countries and the Bank were greeted with scepticism by civil society in light of the Bank’s poor track record of meeting its own commitments on renewable energy. The role of the Bank in creating an investment framework for clean energy and to tackle climate change was agreed at the G8 summit in Scotland in July. Talks at the World Bank annual meetings in September indicated that a proposed framework document may be available by spring 2006.

A communiqué from the London meeting said that ministers would try to find ways to encourage the private sector to invest in low carbon technology with the help of the World Bank. Kathy Sierra, World Bank vice-president for environment and infrastructure said that the Bank is listening to ministers to see what will be needed to help economies move to a low carbon future. However, she was unable to provide a satisfactory response to the question of why the Bank still backs polluting fuels.

Motion to end UK aid for oil subsidies

Following the publication of the UK NGO report Pumping Poverty exploring the role of the UK’s Department for International Development in facilitating oil development (see Update 45), an early day motion in June tabled in the UK parliament by MP Michael Meacher called on the government to phase out development aid for the oil industry which is channelled through international institutions like the World Bank. The motion has already gathered 101 signatures. A number of UK environmental groups are calling on supporters to ask their MPs to sign. Sample letters and further information can be found at www.planb.org, or via the Friends of the Earth website.