World Bank energy strategy stalled

14 June 2011

A mid April meeting of the World Bank board sub-group, the Committee on Development Effectiveness (CODE), threw the development of the Bank’s energy strategy into disarray, while NGOs complain of a weakening of Bank commitment to consultation and continue to critique its energy investments.

CODE met to discuss the first draft of the Bank’s new energy strategy (see Update 75, 72, 68), but a rift opened up between the G11 group — nine developing countries including China, India and Brazil, as well as high-income countries Saudi Arabia and Kuwait — and the US and allies over the draft’s proposed ban on coal lending to middle-income countries.  A G11 position agreed before the meeting said “it is unacceptable for the Bank Group to discriminate between categories of countries in terms of fuel base” and that discussions with countries on Bank support for energy should take place “without excluding any energy source upfront.”

The G11 also raised concerns over the Bank’s reliance on markets and the private sector as the principle means of delivery, and said it should do more to promote technology transfer for renewable energy and energy efficiency. There was no agreement during the CODE meeting on the need for greenhouse gas accounting to assess the carbon emissions of each Bank project, and some European directors argued that the Bank should use a tighter definition of what counts as a ‘clean energy’ investment, rather than its current expansive and controversial method (see Update 71). While some board members pushed the Bank to rethink its ban on funding nuclear power, it is unlikely that this move will be successful.

Process breakdown

After the CODE meeting, Bank management backtracked on its commitment to a further round of consultation on the draft strategy, ‘deferring’ a decision on whether to do this, despite having consistently promised it throughout the pre-draft consultation period (see Update 67). In late May, more than 50 civil society organisations from across the world wrote to Bank president Robert Zoellick saying any abandonment of this commitment would be “a major step backwards”. Bank management is focussing on reaching agreement within the board and is maintaining an optimistic July date for its final decision on the strategy, which would appear to rule out further consultation.

Criticism of existing Bank energy lending

A May report by NGOs Oil Change International, ActionAid International and Vasudha Foundation, India, Access to energy for the poor: the clean energy option, found that “only nine per cent of the World Bank Group’s energy portfolio in [financial years] 2009 and 2010 targeted increasing energy access for the world’s poorest.” It also says that “not a single World Bank greenfield, or previously undeveloped, fossil fuel project targeted energy access for the poor.” The report concludes that “with less than one tenth of the energy portfolio targeting access and only 30 per cent of its energy portfolio funding new renewables and energy efficiency, the Bank is not in fact prioritising energy access and clean energy in its lending at the moment.”

World Bank, climate change and energy financing, an April report co-authored by seven NGOs, including Groundwork South Africa, Environmental Rights Action Nigeria, and Friends of the Earth, adds further weight to existing criticisms of the Bank’s energy lending (see Update 73, 72). Detailing seven case studies, the report finds that “the institution’s environmental and social safeguards are being applied to a decreasing proportion of projects”, and that “the World Bank does not seem to have incorporated the lessons of past project failings” including for high profile projects like the West Africa Gas Pipeline (see Update 62). It argues that “projects constructed in the name of alleviating energy poverty and/or transitioning to a lower carbon economy very often don’t achieve the desired outcomes, and all-too-often the opposite results.”

In addition, a May report by US NGO CO2 Scorecard takes the Bank to task for misleadingly portraying its coal investments as cleaner than other coal plants, and for failing to prioritise energy access. The report, The World Bank’s coal electricity headache, argues that recent evidence of US supercritical coal plants of the same type as those recently supported by the Bank in India, Botswana and South Africa (see Update 71, 70), shows that “more than half of the units from the 60s and the 70s perform better than the average carbon intensity of the seven units that started operations during 2009-10.” It also repeats criticism that the Bank equates energy provision with energy access (see Update 75) calculating that “a mere tenth of a per cent of generated electricity” from the Bank-backed Indian Tata Mundra plant (see Update 59) “is allocated for households with no access.” The report calls for a step-change in Bank monitoring of its energy projects, arguing that the Bank should “become aware in near real-time of its impacts on electricity consumption inequality and CO2 emissions” and that this information should be publicly available.

Meanwhile, International Finance Corporation (IFC, the Bank’s private sector arm) investment in fossil fuel projects through financial intermediaries has been brought into the spotlight, with the Compliance Adviser/Ombudsman (CAO, the IFC’s arms-length grievance mechanism) receiving its first complaint against a financial intermediary (FI): in this case an FI-financed power plant in the Indian state of Odisha (see Update76).