By Srabani Roy, Bank Information Center
Analysis of the Bank’s most recent investment figures once again cast doubt on whether the World Bank Group is willing to give up its addiction to fossil-fuel projects that spur climate change.
In its new strategic framework on climate change (see Update 62), the World Bank clearly acknowledges that global warming is “caused by activities such as fossil fuel use and land use changes.” Yet, the reality of Bank lending fails to match its rhetoric. New statistics developed by US-based NGO Bank Information Center show that the Bank’s private sector arm, the International Financial Corporation’s (IFC), funding for fossil-fuel projects increased 165 percent in fiscal year 2008, compared with a nine percent rise for renewable projects. Taken as a whole, the World Bank Group increased its fossil-fuel lending by 60 per cent in the same period. Given that the new framework strongly emphasises the need for increased private sector involvement and investments in climate change mitigation and adaptation, this is a bad omen for the future.
“Not only did the IFC increase its lending for oil and gas, but in 2007 and 2008 huge investments have been made in coal.” says Heike Mainhardt-Gibbs, who did the research. “The institution is simply not slowing down its significant funding to fossil-fuel projects that will emit greenhouse gases for 20 to 40 years.”
the reality of Bank lending fails to match its rhetoric
In April, the IFC approved a $450 million loan for the new Tata Ultra Mega power plant in western India (see Update 59), which is expected to be fully operational by 2012. The total cost of the coal-powered project is $4.14 billion. Once running, the plant will be one of the world’s 50 largest greenhouse-gas emitters. This comes a year after Bank president Robert Zoellick pledged to “significantly step up our assistance” in fighting climate change.
In 2008, total Bank Group financing for fossil fuel projects is estimated to have been nearly $2.3 billion. Of this, IFC projects accounted for approximately $2.2 billion. The IFC also approved $300 million for the Calaca Power coal-fired power plant in the Philippines. In addition to these coal projects, the IFC funded a $550 million oil and gas project in Argentina, the highly controversial $300 million Peru liquified natural gas project (see Update 60) and the $250 million Cairn India II oil project.
One of the ‘guiding principles’ of the Bank’s new strategic framework, is increased access to energy. While the Bank states that it intends to “further increase new renewable and energy efficiency lending”, it also clearly says that it “realises that fossil fuels, including coal, will remain an important part of the energy mix for expanding energy access and energy security, in both developed and developing countries for decades to come.”
Despite its stated concern for addressing global warming, the Bank must also admit that in addition to potentially helping fulfill its poverty alleviation mandate, these plants are extremely profitable and enable the institution to increase its assets and lend more.
“The World Bank has become very dependent on fossil fuel loans in order to maintain its own financial strength,” Vijaya Ramachandran, a senior fellow at the Center for Global Development, in Washington recently told Bloomberg News.
Ironically, as the Bank positions itself as the “climate bank” the data show that the World Bank, and increasingly its private sector arm, continues to fund – and has in fact significantly increased – its investment in large-scale, polluting, anything but “low-carbon” projects. The Bank’s increased funding for fossil-fuel intensive projects, in the same year it is trying to establish itself as a leader in climate change financing, is highly questionable.