World Bank and climate: new roles, old challenges?

30 September 2010

With the World Bank and IMF under consideration as significant sources of climate finance, controversy continues around the Bank’s Climate Investment Funds (CIFs) and carbon offset projects.

The UN secretary general’s High-level Advisory Group on Climate Change Financing is expected to report in November on potential sources of climate finance (see Update 70).; A March paper for the group suggested the international financial institutions could play an “important role”, including through leveraging private sector investment. IMF special drawing rights and are under consideration as a source of finance, and there are indications that the Bank’s profits could be contributed. Bank involvement in the management of climate finance has been divisive for reasons including the Bank’s inequitable governance and carbon-intensive portfolio (see Update 72). The same concerns could apply to the Bank serving as a source of climate finance.

A September briefing by UK NGO the Bretton Woods Project argues that the Bank’s repackaging of existing lending instruments for climate funds could undermine country demands for direct access to finance. Continued use of conditionality in Bank lending as well as Bank influence over trust funds pose obstacles.

The IFIs could serve as sources of climate finance

Concerns about the CIFs have continued to emerge following their meetings in June (see Update 68). Civil society observers to the CIFs and Forest Carbon Partnership Facility (FCPF) are concerned that many country proposals are being waved through with inadequate consultation and debate (see Update 68). They have also raised doubts about the extent to which critical country governance issues are taken up.

While reference to rights and safeguards was included in the operational guidelines of the Forest Investment Program, calls by civil society groups for them to require compliance with international environmental and human rights agreements were rejected. On plans to increase the number of delivery partners for the FCPF and allow them to apply their own safeguards, NGOs including the Pan-African Climate Justice Alliance and Greenpeace said “the proposed changes represent a potentially significant weakening of safeguards and standards.”

Forest peoples continued to express fundamental concerns about the impacts of the FCPF on conservation and livelihoods (see Update 65). At the FCPF June meeting in Guyana, Tony James, president of the Amerindian Peoples Association raised concerns about indigenous land rights, saying: “We have urged governments and international agencies to protect our traditional practices and help resolve outstanding land issues.”

Carbon offsets debacle

Controversy intensified over the Bank’s involvement in carbon offsetting (see Update 59) as German NGO CDM Watch released evidence that manufacturers were increasing emissions of greenhouse gas HFC-23 in order to generate more carbon credits by destroying it. In August, the executive board of the Clean Development Mechanism halted the issuance of offsets to five projects, including two with Bank funding.

Outcry greeted the April announcement that South African utility Eskom was conducting a feasibility study to establish whether its Medupi coal plant, recipient of a controversial $3 billion Bank loan (see Update 70), could be eligible for carbon credits on the grounds that it uses more efficient supercritical technology.

In June, Andrew Steer, a former Bank staffer and director general at the UK Department for International Development, was appointed as the Bank’s special envoy for climate change. He will oversee the CIFs, including co-chairing the Strategic Climate Fund, as well as working to mobilise climate finance.