World Bank and climate change

Cloudy forecast for policy reform

6 December 2012

A new Bank report warns about the impacts of climate change, but concerns have been raised about its own track record. While the Bank has increased its renewable energy share, its continued funding of fossil fuels and focus on large scale dams remain controversial.

As the 18th Conference of Parties of the United Nations Framework Convention on Climate Change (UNFCCC) prepared to meet in Qatar in late November, the World Bank released a report on the dangers of climate change, summarising the latest climate science. In the report Turn down the heat: Why a 4°C warmer world must be avoided, written by the Potsdam Institute for Climate Impact Research and Climate Analytics, Bank president Jim Yong Kim warned that the world is heading for a four degree warming above pre-industrial climate with “devastating” scenarios, such as extreme droughts and floods, and expressed hope that it would “shocks us into action”. The report concluded that “early, cooperative, international actions” are the only ways forward.

The report follows the early November release of the Bank’s Independent Evaluation Group’s assessment of the Bank’s track record on climate change adaptation. It concluded that the Bank’s efforts have largely focused on “today’s climate variability”, but lack “a reliable compass to guide future adaptation efforts” and “systematic procedures for screening projects for climate risks”. It flagged two sectors subject to long-term climate risk but with inconsistent practices, hydropower and protected areas. The report suggested that the Bank should develop “a results framework that provides strategic guidance and enhances learning”. While the Bank broadly agreed with the recommendations, it pointed out that the evaluation “may come too early”, with many efforts at an early stage of planning or implementation.

Earlier, in June, a progress report on the Bank’s 2009-11 strategic framework on development and climate change took stock of progress to date on six “action areas”, including to “facilitate the development of market-based financing mechanisms” and “leverage private sector resources”. The report argues that the strategy has helped secure the Bank’s position “at the forefront of knowledge generation, innovation and financing for climate change”. The report claims an “increasing demand” for the Bank “to join, help forge or lead new climate action coalitions”, noting that the Bank is already actively involved in a number of initiatives, including work with the G20 on climate finance. It also outlined future ambitions of the Bank, arguing that it “can play a major role” in addressing “immediate challenges to finance climate action”, such as the operationalisation of the United Nations’ Green Climate Fund (GCF, see Update 82, 79). It included a list of “readiness support instruments” already launched, including controversial market mechanisms, such as the Forest Carbon Partnership Facility (see Update 81). Furthermore, it flagged work with the P8, a group of the world’s largest pensions funds, exploring options for climate finance.

No strategy on fossil fuels

Responding to the November report, Carroll Muffett, of US NGO the Center for International Environmental Law, asked if the report will “shock the Bank itself into action”, noting that it “does not propose the paradigm-shifting initiatives and policy changes that its findings demand”. Muffett called for the Bank to begin with “a simple, clear and unambiguous commitment to end its own investment in dirty fuels” and that the “true test of whether the Bank is ready to step up to the challenge is whether it continues to fund fossil fuel projects like the proposed coal-fired power plant in Kosovo” (see Update 82, 80).

While the Bank’s focus on renewables has increased, with the renewable energy project share of the annual energy lending portfolio increasing to 44 per cent in 2012, in September Kim took on the position as co-chair of the UN sustainable energy for all initiative. However, NGOs have criticised the Bank’s failure to stop funding fossil fuels, pointing to the inconclusive debate on its energy strategy in 2011 (see Update 78). According to Sunita Dubey of South African NGO Groundwork: “It seems too easy to blame everything on India and China these days, but the Bank management as a whole has also not shown any leadership in curbing coal funding.”

At the report launch event Kim argued that while the Bank does “everything we can not to invest in coal … we are the group of last resort in finding needed energy in countries that are desperately in search of it.” Earlier in August, a Bank response to a letter to Kim from 17 physicians from Kosovo, Canada and the US, raising concerns about the health impacts of the proposed Kosovo coal power project, agreed that “public health is critical to sustainable development”, but concluded that “Kosovo will have to continue to rely on its domestic coal resources but use coal in a cleaner and more efficient manner.” Nezir Sinani of Kosovan NGO Institute for Development Policy said: “This clearly shows that the Bank will not be considering how coal affects people’s lives, let alone the environment. I am very sceptical that the Bank will undertake the changes needed to avoid a four degree warmer world when it is more than clear that the path they have chosen is that of more coal.”

Renewable energy concerns

Furthermore, the renewable energy share includes large scale dams (see Update 82, 81). In late September, the Sosnovka Coalition of Environmental and Indigenous Peoples NGOs of Siberia and Far East, including 50 Russian CSOs, wrote to Kim expressing concerns about the inclusion of the proposed Shuren hydropower dam in the Bank’s Mongolia Mining Infrastructure Investment Support project. The letter urged the Bank to “rethink its involvement”, calling the dam an “outdated project” that affects the Selenga river and puts Lake Baikal, the largest freshwater lake in the world, at risk. It asked the Bank to instead “help Mongolia in developing a better energy development strategy that utilizes immense solar and wind potential and does not put at risk globally significant biodiversity and the livelihood of indigenous peoples.” The Bank responded in October that it will “review the proposed priority projects before agreeing on the pre-feasibility and feasibility studies to be funded under the project”. Mongolian NGOs have also opposed the project, including an October petition to the ministry of the environment urging the government “to avoid the danger of destroying the global fresh water resource, wasting taxpayer money and adding to the national debt to be paid by future generations.”

In an October meeting, Thai locals and NGOs opposed the government’s revival of plans for the Kaeng Sua Ten dam. The Bank pulled out of the controversial dam in 1994, citing “too many problems concerning environment and resettlement” after consultants were attacked by protesting villagers. Chainarong Setchua of Maha Sarakham University, said: “The World Bank is behind the dam construction. … we are replacing our teak forest and ecological system with this large dam.” Local leader Somming Muanglong said “We urge the government to rethink and opt for small- to medium-sized dams and reforestation programmes.” However, the Bank continues to push large scale projects. Also in October the Bank’s new vice president for Africa, Makhtar Diop, warned Liberia against small power projects and to focus instead on one major energy programme to cover the country’s needs.

The Bank has also caused controversy in Kenya, as it pulled its support for the Lake Turkana Wind Power (LTWP) project. A September letter from the Bank cited several reasons, including concerns that the construction of power lines would not be ready in time, meaning that surplus electricity from the wind farms would be paid for through higher consumer energy bills. However, the LTWP consortium commented that the Bank has agreed to back heavy fuel oil thermal power with the same structure, stating that: “These plants will cost approximately twice that of LTWP, will rely on the expensive fuel imports and are not expected to be fully utilised during operations.”

Continued concerns have also been raised about the role of the Bank as interim trustee of the GCF. Coinciding with the UNFCCC November meeting, a statement by 12 Latin American NGOs, including the Environmental Advocacy Center Panamá, expressed “distrust and doubt regarding the Bank’s suitability as permanent trustee of the Fund”, due to “past human rights violations and severe environmental damage stemming from some World Bank projects”. According to a November report by the German political foundation Heinrich Boell’s North America office, at the GCF’s second meeting in South Korea in October some board members expressed worries that too much information might be shared with the Bank and urged that the interim secretariat should only consult the Bank on board papers of relevance to the Bank’s function and role within the GCF. Furthermore, some members look to the Bank’s private sector arm, the International Finance Corporation (IFC), as a potential model for the GCF’s private sector facility. According to Karen Orenstein of Friends of the Earth US, “a private finance-focused GCF would seriously side-line adaptation and largely bypass the energy needs of low-income countries”, pointing to the IFC’s investment patterns as proof, where less than a third of investment went towards the poorest countries in 2012.