‘No regrets’: The World Bank and climate change

Bank proposes vast expansion of its role, ignoring criticism of past record

29 September 2008

The World Bank has just finished consultations on a new strategic framework for its climate change work, which has one common thread: a massively increased role for the Bank. Yet there is little reflection on the reasons why the Bank’s record in this area is so poor, as detailed by a number of recent reports.

The consultation period for the Bank’s new strategic framework: Development and Climate Change: A Strategic Framework for the World Bank Group ended on 15 September. The 90-page document contains a raft of new proposals for an expanded World Bank role, under six broad headings:

  • support climate actions in country-led development processes;
  • mobilise concessional and innovative finance;
  • facilitate the development of innovative market mechanisms;
  • leverage private sector finance;
  • increase support to technology acceleration;
  • and step up policy research, knowledge, and capacity building.

The document doesn’t indicate clear priorities from this laundry list. Within the broad rubric that “its primary role and comparative strength [is] in helping its developing country partners achieve the MDGs [Millennium Development Goals] and grow their economies under climate constraints,” the Bank rules little out. Bank support for developing countries could be “related to both adaptation and mitigation – in energy, transport, industry, urban development, water, agriculture, forestry, biodiversity, economic management, and social and human development.” A comprehensive list of research areas is also proposed.

The World Bank has in the last decade financed over 26 gigatonnes of CO2 emissions - WWF

The framework is intended to cover all parts of the Bank, including the International Finance Corporation (IFC), but to “support – not override – operational strategies of the WBG [World Bank Group] entities.” It was submitted to the executive board at the end of September, and will be discussed at the Development Committee during the Bank’s annual meeting in October.

Who’s the leader?

Aware of criticism that the Bank is trying to usurp UN leadership on climate action (see Update 60), the document distances the Bank from international climate negotiations. It states that the Bank will “support the negotiation process and implementation of the agreed actions while not interfering in [the UNFCCC] Secretariat’s work and remaining neutral to any particular negotiating position.”

However, it also proposes far greater “cooperation” with UN agencies across a range of issues, including on climate finance, climate risk management, and capacity building. Other sections of the document are devoted to expanding Bank work with: developing country governments, who are the main target of proposed Bank advocacy work; multilateral and bilateral donors; civil society; the private sector; and research institutions.

The critics line up

A statement by a group of developing and middle income country executive directors on the draft framework was presented at an early August committee of the Bank’s board. It called the draft “asymmetrical in its treatment of countries.” Developing and middle income countries were angry that while the draft framework contains a range of prescriptions for developing countries, it fails to recognise that developed countries should uphold their responsibilities to take the lead in combating climate change by reducing their emissions.

Civil society organisations have been similarly sceptical. ActionAid’s submission argues: “Either the World Bank is serious about being part of the solution – in which case it has to radically change its energy policies – or it is not and will continue to be part of the problem.”

Ironically, the draft framework says the Bank “will make a conscious effort to support ‘no regret’ investments”, at the same time as a number of studies suggest the Bank has quite a lot to regret. Recent research by WWF-UK shows that “because of its continued funding of fossil fuel projects, the World Bank has in the last decade financed over 26 gigatonnes of CO2 emissions. This is approximately 45 times the current annual CO2 emissions of the UK.” According to the report, World Bank financing of oil and gas alone in the last three years amounted to over $3 billion.

Meanwhile, a June report by the World Resources Institute found that “almost 50 percent of lending [by the Bank] in [the energy] sector was made without any attention to climate change at all” (See Update 61). An earlier report by the Institute for Policy Studies said that the Bank “irresponsibly and recklessly continues to perpetuate the world’s dependence on climate-altering fossil fuels while profiting from carbon trading.” (See Update 59)

The draft framework has little to say about existing operations, but the Bank claims to be “leading by example” by making all its offices “carbon neutral”, though this will largely be achieved by the controversial practice of purchasing offsets rather than reducing emissions.

Will the Bank change?

The draft framework is muted when it comes to changing the incentives, procedures, and policies of the Bank: essential if the Bank’s own vision of itself as an ‘environment bank’ is ever to be achieved and the critics silenced. It proposes some screening – but only for “energy and select infrastructure (transport, urban and water) projects for [energy efficiency] opportunities starting in 2009.” Other than that, the Bank’s strategy for internal reform seems to consist of improved training for staff.

The Bank’s draft framework supports civil society’s push for “financial resources in addition to the present levels of Overseas Development Assistance (ODA)” to help poor countries adapt. However, later, the Banks priorities are made plain: “First and foremost the WBG [World Bank Group] will work towards good progress of IDA 15 and further increased levels of IDA replenishment.” Some may therefore ask whether this is really a strategy designed primarily to fill the Bank’s coffers.