Burning controversy over Bank and environment

20 November 2009

Hot on the heels of its new energy strategy review (see Update 67) the Bank has launched a review of its 2001 environment strategy, but continues to come under fire over its record on green issues.

In October, the Bank launched a consultation process for its new environment strategy, with a concept note on its website and a series of meetings planned around the world. Critics of the Bank’s environmental record (see Update 65) will be disappointed to learn that “a starting hypothesis for the new strategy is that the strategic objectives of the 2001 strategy (see Update 24) remain valid today.” The Bank proposes to follow a “twin track” approach. First it will assess internal and client demand and expectations. The second track will look at “cross-cutting priorities” including: environmental sustainability, environmental institutions and governance, safeguards and knowledge.

The first phase of consultation will run until February 2010, when a draft policy will be produced. This will then be subject to a second phase of consultation, before a final strategy is produced in advance of the Bank’s autumn meetings.

the Bank came under fire from a coalition of NGOs for its "fossil fuel addiction"

Kathy Sierra, World Bank vice-president for sustainable development angered environmentalists by making it clear that the Bank’s existing approach was unlikely to change. “For most large countries,” she said, “you need a base level, from hydropower, fossil fuels or nuclear technology.” Göran Ek from the Swedish Society for Nature Conservation countered that: “the basic assumption [of the Bank] is that traditional growth, rather than sustaining ecosystem services, is the major tool to fight poverty, and in that view the environment is not a priority.”

Environment integration “weak”

In October, the Bank’s Independent Evaluation Group (IEG) released its Annual Review of Development Effectiveness, which found that “the Bank’s record in implementing the 2001 environment strategy and advancing the results agenda is quite mixed.” The IEG reserved its strongest criticism for the Bank’s “weak” efforts to mainstream environmental work across other sectors. Similar to last year (see Update 62), the IEG found that “internal knowledge gaps, inadequate technical and operational skills to integrate environment considerations into investment and policy reform projects, and poor dissemination of evidence on effectiveness within the Bank impede effectiveness.” One key conclusion was that “internal staff and management incentives favour large projects, such as infrastructure or power, which disadvantages the typically smaller environmental projects.”

Fossil fuel addiction?

In September, the World Bank announced that renewable energy and energy efficiency commitments in the 2009 fiscal year amounted to $3.3 billion or 40 per cent of total energy sector commitments, more than double the previous year. However, Greenpeace analysis of World Bank figures showed that fossil fuel investments also remained high in 2009, at $1.9 billion.

NGOs raised concerns about how the Bank measures its energy spending. Controversial large hydropower projects are included in the Bank’s renewables figures, and by not including fossil fuel extraction projects as energy projects, the proportion of renewable projects appears larger. Janet Redman from US-based Institute for Policy Studies argued that making a new coal plant more efficient should not be counted as work that helps poor countries to transition away from “dirty” energy sources.

Further complexities of measuring the Bank’s true commitment to renewable energy were highlighted in September, when the Bank’s private sector lending arm, the International Finance Corporation (IFC), approved a $1 billion loan to Powergrid Corporation of India (PGCIL) to strengthen India’s electricity transmission system. This brings the total borrowed by PGCIL from the World Bank to $5 billion. The project is explicitly linked to the Indian government’s plan for providing “energy for all” by 2012, which is heavily focussed on coal-fired power plants, with nine currently planned or in the pipeline. This means that the IFC loan will, in effect, facilitate a massive expansion of coal-powered energy.

At the Bank’s annual meetings in Istanbul in October, the Bank came under fire from a coalition of NGOs for its “fossil fuel addiction”. The NGOs, including CEE Bankwatch, WWF Turkey and Greenpeace, analysed the Bank’s own figures, and found that between 2007 and 2009, the Bank’s annual average lending was $2.2 billion for fossil fuel projects, including $470 million for coal, compared with $780 million for renewables.

Bank and CCS

Meanwhile, newspapers reported in October that Norway and the World Bank are planning a new trust fund to help developing countries develop controversial carbon capture and storage (CCS) technology for fossil fuel energy plants. At a World Bank workshop on the topic in September, Norwegian officials reportedly said they would give around $6 million to such a trust fund. Karen Orenstein of Friends of the Earth said: “it’s difficult to understand why the World Bank or Norway would be pouring money into an unproven technology … rather than pour money into renewable technologies.”