Poznan and beyond

Concern over Bank's climate funding

13 February 2009

Recent UN global climate negotiations in Poland highlighted ongoing tension over whether funds will be channelled through the United Nations or the World Bank and once again shone a light on the role of the Bank as a major investor in carbon intensive projects.

The UN conference on climate change took place in Poznan at the beginning of December, drawing 11,000 delegates, including 1,500 corporate lobbyists, to discuss the way forward on global climate negotiations. A final deal is to be made in December 2009 in Copenhagen.

While the World Bank was not spoken of directly by many delegates in the negotiations, its presence was felt in discussions about support for ‘existing funding mechanisms’ (synonymous for Bank climate investment funds) as opposed to establishing new structures. This highlights the division between the G77 and China bloc (representing 133 developing countries) which support a new, democratically governed mechanism for climate change financing through the UN as opposed to the G8 countries which, have supported channelling of investment through the World Bank.

Reflecting these concerns and others expressed by the G77, a coalition of 160 civil society organizations issued a joint statement calling for development of a Global Climate Fund under the United Nations Framework Convention on Climate Change (UNFCCC). Among the main principles highlighted are representative governance, participatory planning, capacity building, access for the most vulnerable, strengthening rights established under UN declarations and addressing root causes of climate change.

Climate policies vs. carbon emissions

Civil society participants in Poznan pointed out the contradiction in the Bank’s desire to position itself as a major player in combating climate change while continuing to back carbon intensive projects around the globe. According to a report from the World Wildlife Fund, from 1997 to 2007, the World Bank financed over 26 gigatonnes of CO2 emissions, approximately 45 times that of the UK annual emissions (see Update 62).

“It is sheer hypocrisy for the World Bank to claim any role in supposedly assisting the South in addressing the climate crisis when it continues to finance environmentally destructive projects and policies,” said Lidy Nacpil, coordinator of Jubilee South Asia-Pacific Movement on Debt and Development.

Civil society participants at the conference in Poznan also called attention to the World Bank’s offer of $5 billion to Eskom Holdings Ltd. for unspecified projects to expand power production in South Africa. While it is not yet clear if funding will be channelled solely through the International Financial Corporation (IFC), the Bank’s private sector division, the funding has been agreed in principle. Eskom’s current plans for power generation include wind power, however, at least 90 per cent of their power generation is slated to come from coal. Citing reports that the loan could support development of six coal-fired power plants, activists fear it could be the most carbon intensive project ever undertaken.

Independent Evaluation Group Report

Bank energy policies are under further scrutiny with the release of the first report in a series on the Bank and Climate Change from the Bank’s Independent Evaluation Group. It finds that “there is a general tendency to prefer investments in power generation, which are visible and easily understood, to investments in efficiency, which are less visible, involve human behaviour rather than electrical engineering, and whose efficacy is harder to measure.”

The report also highlights the need to address development models and the greatest sources of emissions by indicating that providing electricity for the world’s unconnected households, would add only a third of one per cent to greenhouse gas emissions if renewable energy sources were not employed and even less if they were.

CTF criteria flawed

In January, the Bank released criteria for its Clean Technology Fund (CTF), one of two funds established to help developing countries adapt to climate change and switch to clean-energy technologies to reduce emissions (see Update 60). Despite the World Bank’s own 2004 extractive industries review recommending an end to funding of coal, the clean technology fund criteria rely heavily on the financing of new coal-fired power plants that are carbon capture and storage (CCS)-ready and “highly efficient”. CCS technology aims to capture carbon dioxide emissions from power station smokestacks and deposit them underground.

False Hope, a report released in May 2008 by environmental non-profit Greenpeace International, argues that “CCS is unproven, risky, expensive and investing in it threatens to undermine the range of clean energy solutions which are available right now”. The organisation further points out that this technology is energy intensive, could have negative impacts on human health and ecosystems and could lead to increased greenhouse emissions from leakage.

There is further concern that the technology will not be available in time to take the most needed action, with the Intergovernmental Panel on Climate Change estimating it will not be commercially viable until 2050.

With growing international pressure for concluding a deal in Copenhagen at the end of the year and increasing development of climate related funds at the World Bank, these debates and others are likely to intensify in coming months. This not only draws attention to the need for mutual agreement between developed and developing countries, but emphasizes a need for input from civil society and those most affected by climate change to establish lasting and sustainable solutions.