The agenda of the Development Committee and the provision of Global Public Goods

World Bank-IMF annual meetings 2007

23 October 2007 | Minutes

In her introduction, German development minister Heidemarie Wieczorek-Zeul, pointed out that the debate on global public goods (GPG) is not a new one, but has been reinvigorated in particular by the recent emphasis on climate change. She listed a variety of related issues and rhetorical questions though without great exploration and concluded that the World Bank is an institution that we have to use. Topics raised included:

  • What should the new role of the IFIs should be, given that in the case of the IMF the task is more questionable;
  • The new approach on IDA and post-conflict countries;
  • Information, knowledge, pandemics and health;
  • Environmental protection from communicable diseases;
  • On financial architecture she stated that we used to “blame” developing countries but now developed countries are responsible for the latest financial sector crisis. Certain instruments of financial securitisation have not yet reached developing countries, and we shouldn’t introduce special investment vehicles until they have;
  • In the case of trade she raised the question of phasing out export subsidies;
  • She emphasised that the World Bank’s framework for clean energy and development should be related to poverty reduction strategy papers, that grassroots capacity building has to take place and that we need to use bilateral possibilities. She pointed to the inequity of global carbon dioxide emissions. In Africa it is 2 tonnes per capita per annum; in Europe 11 tonnes per capita, and in the US 20 tonnes per capita.

In debating to what extent the World Bank could be more active in global public goods, Nancy Birdsall acknowledged that Zoellick is trying to make the Bank more flexible and nimble. She endorsed the assertion by UNDP’s Kemal Dervis in the IEG and middle income countries session earlier in the week that the Bank should aim to be efficient and robust. She believes that at an international level we need more than the UN and pointed out that Zoellick has been thinking about introducing a new pillar. If there were a $3 billion GPG trust fund, it could serve as a brain trust for the Bank. It would make it easier for instance to set up an advanced market commitment for a new solar cell for Africa.

Given that middle income countries are no longer borrowing as much, the G7 needs to help the Bank to save itself. A GPG trust fund could receive contributions from MICs as well as traditional donors. The governance of the trust fund could also be different from that of the Banks.

On climate change she stated that a paper on her organisation’s website finds that the south will soon have created enough carbon to create a global warming problem and concluded that the south needs to get rich without being as badly behaved as the north. In contradiction to the recent acknowledgement by the Bank of the links between poverty and climate change, Birdsall cautioned that Zoellick has pointed out that if the World Bank makes a big push on climate change it will be a distraction from its poverty reduction mission.

Questions from the floor asked for a clear definition of a “global public good” given that this is hardly language that NGOs use. In a rather unsatisfactory and slightly confusing response, Birsdall stated that a firm that pollutes doesn’t pay for this unless it is taxed. In this sense pollution is a public bad and the externality is where the price doesn’t reflect costs or benefits. The market alone won’t solve the problem, hence we need tax and regulation. On a more simplistic level Heide-Marie compared the exclusive act of an individual eating an apple, to a group of people watching a film.

Kirsten Hite from Environmental Defence Fund stated that public goods such as clean, air water, and forests have tremendous benefits but no economic value. The Bank carries out its poverty evaluation through economic growth and does not account for the contamination of GPGs which are not limited to Bank time frames. Korinna Horta, also from Environmental Defence Fund pointed out that the Global Environment Facility, introduced in 1990s was also a GPG trust fund of sorts. It was to mainstream environmental issues into the Bank’s work. The Bank still needs to ensure that investments do not undermine GPGs.

Nancy Birdsall responded that the GEF and IFC lack coherence. If a trust fund was set up, staff would need to decide how to allocate the money. Shareholders would need to decide on a mechanism to do this. Chinese do not want Russian countries building power plants. The overall portfolio should first “do no harm”.

In response to a point from the floor on the IFC’s increasing support for fossil fuels Nancy Birdsall at first expressed incredulity, then said that “it needs to be fixed”. She also called for subsidies to fix the problem. Heide-Marie stated that renewable energy will create jobs, but there is first a need to rationalise because oil producing countries and firms are not interested. Nancy referred the audience to an upcoming piece of work being carried out by the Center for Global Development called carbon monitoring for action, which will reveal emissions at the level of the firm.