In the midst of climate talks in Nairobi and the release of the Stern review on the potential catastrophic economic impacts of climate change, the World Bank has been touting the most recent draft of its investment framework on clean energy and development, and stepping up its role in devising market-based solutions to climate change. Critics have decried the hypocrisy of the Bank’s role in funding fossil fuel projects, and the perverse rationale behind carbon trading.
The latest draft of the World Bank’s investment framework for clean energy and development was published at the World Bank/IMF annual meetings in Singapore in September (see Update 51). The framework now includes an “Africa action plan for improved energy access” and is based on three ‘pillars’: energy for development and access for the poor; transition to a low carbon economy; and adaptation to climate change.
the Bank's failure to challenge the responsiblity of northern polluters
It encourages a cost-effective and “sustainable” transition to a low-carbon economy, “without hindering the growth of developing countries and mitigating the incremental costs to them”. Emphasising the need to broaden “energy sector policy reform to attract private sector investments and additional public sector financing”, it also calls for additional concessional support for energy needs in Sub-Saharan Africa. It proposes new financial instruments, notably the clean energy financing vehicle and the clean energy support fund; makes suggestions for the role of the Global Environment Facility (GEF); and advocates for “sound country energy policies” and “regulatory frameworks.”
Many criticisms of the first draft of this report published in April still stand, including the Bank’s promotion of large hydropower, nuclear and coal-fired power projects as ‘clean’ alternatives, and the failure to challenge the responsibility of northern polluters. A coalition of NGOs, including the Bretton Woods Project elaborated these issues in a report entitled How the World Bank’s energy framework sells the climate and poor people short . It points out that despite laudable statements on energy poverty, and the adverse effects that climate change can have on poor peoples’ livelihoods and development aid, the new framework is still fundamentally flawed. The report urges the Bank to redirect dirty energy financing to renewable technologies and energy efficiency projects via an appropriate multi-lateral framework. Pantoro Tri Kuswar of Friends of the Earth Indonesia/WALHI said “the Bank’s focus on fossil fuel projects will not bring electricity to the poor but instead lead to more pollution, conflict and corruption and do little to stop climate change”.
Reliable and comparable data on World Bank energy spending is elusive. According to New Renewable Energy & Energy Efficiency: World Bank Group Exceeds Previous Year’s Commitments By 48 Percent, the World Bank says that it financed $ 871 million in renewable energy and energy efficiency in fiscal year 2006. A recent analysis by Friends of the Earth pulls this claim apart. Not only do these figures include environmentally damaging large hydropower projects but also projects funded by the GEF or by carbon finance funds, which are technically separate from the World Bank. Of the $ 4.4 billion that the Bank claims for all of its energy sector investments in fiscal year 2006, only four per cent actually went to renewable energy projects like wind, solar, and geothermal production. More than 82 per cent of World Bank financing for oil extraction has gone to projects that export oil back to wealthy northern countries. “World Bank investments are a mere drop in the ocean compared to what is needed to promote renewable energy and energy efficiency in developing countries” said Elizabeth Bast.
Trade yourself neutral
The World Bank is the largest public broker of carbon purchases. Its investment framework places considerable emphasis on market solutions. The Bank and IMF proudly announced that their annual meetings were ‘carbon neutral’. The assumption that the problem of climate change can be traded away, while maintaining the economic status quo is undermined in a recent book edited by Larry Lohmann called Carbon trading: a critical conversation on climate change, privatisation and power. It demonstrates how current carbon-trading policies “favour the further exploitation of fossil fuels, and also create and perpetuate social inequalities”. The book points out that despite the World Bank’s involvement in carbon trading initiatives such as the Clean Development Mechanism and Prototype Carbon Fund (see Update 47), from 1992 through 2004 it approved $11 billion in financing for 128 fossil-fuel extraction projects in 45 countries. These projects will ultimately lead to more than 43 billion tonnes of carbon-dioxide emissions, “a figure hundreds of times more than the emissions reductions that signatories to the Kyoto Protocol are required to make between 1990 and 2012”.
Ditch Dirty Development
A campaign recently launched by the UK student network People & Planet challenges the contradiction between UK government targets to tackle climate change by cutting greenhouse gas emissions, and the continued use of UK development aid- earmarked for poverty reduction- to support fossil fuel extraction projects that generate energy for consumption in the north. DFID’s White Paper states that “climate change poses the most serious long term threat to development and the MDGs”, yet it continues to contribute to climate change through multilateral funding for oil and gas extraction projects, opposed the phase out of World Bank investment in oil extraction as recommended by the Extractive Industries Review, and does not monitor the impact of its funding on the climate. People & Planet are calling on DFID to phase out all support for fossil fuel extractive projects, and massively increase support for new renewable energy sources to address the growing energy needs of emerging and developing economies without concurrent increases in carbon emissions. “Spending development aid on fossil fuel projects is completely at odds with the poverty alleviation mandate of DFID and the World Bank,” said campaigner Bronwen Thomas.
An international campaign called “end oil aid” has also been set up recently, to address the issues at the intersection of oil dependence, climate change, and international debt.
