US Congress votes against funding World Bank climate fund

17 April 2009

In the midst of intensifying global discussions on climate change due to culminate in Copenhagen in December, the US congress voted not to fund the World Bank’s Clean Technology Fund (CTF) for 2009.

The Bank launched the CTF in July 2008 under its climate investment funds (see Update 63), strongly backed by the US and the UK. The fund was ostensibly formed to fund transformational, low carbon development in developing countries, particularly those with large greenhouse gas emissions. The Bush administration asked Congress to authorise and appropriate US funding of $2 billion over three years to go to the CTF with $400 million in 2009, the first year.

In January, the CTF Trust Fund Committee released their criteria for funding, focussing on “reducing emissions by adopting best available coal technologies with substantial improvements in energy efficiency and readiness for implementation of carbon capture and storage (CCS),” a process of capturing emissions from coal and burying them under ground (see Update 64).

“It is a point of great concern that this fund would support more efficient coal technologies while the need of the hour is a shift away from fossil fuel technologies as soon as possible and not to continue countries’ addiction to dirty technology,” said Vinuta Gopal of Greenpeace India. “For example, the World Bank is funding an ultra mega thermal coal power plant in India, which would only continue to add to our emissions, while this should have gone to fund state of the art renewable technologies.”

A coalition of US NGOs, including development and environment groups, wrote to Congress alerting them to the substantial concerns over the CTF prior to the March vote on the first year appropriation. They urged Congress members not to include coal in climate funding. They highlighted that the CTF criteria would require new coal plants receiving CTF funds to be CCSready but would not finance CCS technology, making it difficult for the technology to actually be implemented in the developing world.

They further argued that even if CCS becomes commercially viable it is only expected to improve efficiency by up to 30 per cent. “CTF coal financing is in no way transformational. Scarce public clean energy funding should be used to drive down the price of renewable energy to make it cost competitive with artificially cheap coal and provide clean energy,” the letter states.

In response to concerns over the CTF, Congress voted against dedicating $400 million to it this year and instead gave $100 million to USAID for renewable and energy efficiency technologies and $10 million to the U.N. Least Developed Countries Fund, to poor countries, which are especially vulnerable to the impacts of climate change.

“The U.S. Congress wisely nixed funding for the undemocratic CTF in the 2009 spending bill. Coal financing allowed under the fund logically troubled members of Congress concerned about financing the dirtiest of fossil fuels in the name of fighting climate change,” said Karen Orenstein of Friends of the Earth in Washington.

UN funding the way forward

At UN climate negotiations the G77 and China characterised the CTF as a donor driven initiative that undermines climate negotiations and competes for funding with UNFCCC adaptation and technology funds that have already been established and are to be operationalised this year.

Concerns as to whether the Bank is the most appropriate place for climate funds has also been expressed by members of the US Congress. This has caused some to speculate that this may be the beginning of other donor countries backing down on investment in the CTF.

Will UK also back down?

The UK remains strong in its support of the CTF and the climate investment funds (CIFs) more broadly. This is not surprising given that the UK played a critical role in their origin and design and has, along with the US, been one of the main proponents of others committing funding. The first £100m of the UK’s £800 million will be deposited this financial year, of which £60 million will be directed towards the CTF.

Officials from the UK Department for International Development (DFID) maintain that there is support for the CTF and that US funding will be re-committed in 2010. DFID officials expect that only a small proportion of the funds will go to coal projects, and that developing countries will largely pursue other low-carbon projects such as renewable technology, energy efficiency and sustainable transport.

Environmental groups are hopeful that US President Barack Obama will bring new commitment to the issue of climate change and funding for addressing the issue. However, there are rumours in Washington that Obama will ask for $600 million for the Bank’s controversial funds, including the CTF, when he presents his 2010 budget request in April.

Orenstein concludes that “Both Obama and Congress have noted the importance of clean technology cooperation to address climate change and are interested in allocating funding to it. To do so in a politically and technologically constructive manner, financing for clean energy technology can and should be provided under the UN.”

Regardless, there have been reports that the Obama administration will not be able to garner sufficient support from Congress in time to sign on to a global climate change deal in Copenhagen in December and will have to ask for an additional six months as it gains support for ambitious climate change policies domestically.