Carbon capture

World Bank's climate actions to "breathe new life" into carbon markets

8 April 2013

The World Bank has revealed details of its new climate change strategy, including promotion of carbon markets despite concerns from indigenous groups. While new conversations about the Bank’s energy investments are anticipated, further criticisms were made over its involvement in fossil fuels and hydropower projects.

In an early April speech at Georgetown University (see Update 85) president Jim Yong Kim stated that “we can do better” on climate change, arguing that efforts to date have been “too narrowly focused, small scale and uncoordinated.” He confirmed that the Bank is working on “a revamped strategy to significantly strengthen our climate change interventions and help catalyse urgent action among global partners on the scale required” (see Update 83). Kim said that the Bank is “exploring a number of bold ideas, including new mechanisms to support and connect carbon markets; politically feasible plans to eliminate fossil fuel subsidies; increased investments in climate-smart agriculture; and innovative partnerships to build clean cities.” Furthermore, the Bank is “reviewing our work in every sector to ensure that all our projects reflect the pressing need to tackle climate change.”

The Bank’s vice president for sustainable development, Rachel Kyte, elaborated further in a March interview that the question should not be what the Bank can do differently “to try to mitigate climate change and help build the resilience of the poor” but “what are the least number of most important things that need to be done at the global level”, including “getting a global price on carbon”. Moreover, the Bank’s low-income arm, the International Development Association (IDA), has identified climate change as a priority area, noting that “IDA is well placed to contribute to bridging the climate finance gap” (see Update 85). According to Jon Strand, a Bank senior economist, the Bank should in its “new role as a ‘solutions Bank’” work on two fronts: “to continue its traditional climate finance role” but with increasing focus on “its role as a catalyst for private finance”.

highly complex, artificial market-based solutions will be difficult to regulate and can be disastrous

The Bank’s continued focus on carbon markets (see Update 81, 79, 78, 77) was re-emphasised in mid March, as a group of countries supporting the Bank’s Partnership for Market Readiness (PMR, see Update 74), met “in an attempt to breathe new life into this ailing arena”. PMR was launched in late 2010 “to help developing countries launch carbon markets that cap emissions and allow companies to trade permits in an attempt to build a global trading scheme.” The group agreed to spend $110 million of Bank funds on setting up new carbon markets in developing countries, including $3 million to Costa Rica.

Meanwhile, indigenous groups in Honduras have criticised the Bank’s Forest Carbon Partnership Facility (FCPF), a trust fund which funds developing countries’ national  Reducing Emissions from Deforestation and Forest Degradation (REDD+) plans and includes a carbon fund which facilitates the sale of forest carbon credits to investors (see Update 84, 81, 78, 75). In a February letter to the Bank, the Civic Council of Popular and Indigenous Organisations of Honduras (COPINH), representing about 200 indigenous communities, “publicly rejected the plan to implement REDD in Honduras”, calling it “another trap for indigenous peoples”. The letter labelled REDD+ as “the end of the forest, nature and life, since the purpose is to sell and speculate on carbon certificates”, arguing that if this was “a compensatory mechanism for those who have been taking care of the forests for centuries … there would be other ways of protecting the forest, such as not allowing deforestation by large timber companies.”

Sunita Dubey of South African NGO Groundwork said: “The World Bank’s over-emphasis on the carbon markets to curb impacts of climate change is not a real solution that will benefit poor communities. Creating highly complex, artificial market-based solutions will be difficult to regulate and can be disastrous to communities as well as climate mitigation.”

More troubles with energy, dams

Further focus on the Bank’s energy approach is expected (see Update 84, 83, 77), including an informal Bank board meeting on “Directions for the World Bank Group’s energy sector” in mid May. An early April letter to Kim signed by 59 organisations, including the Vasudha Foundation in India and Greenpeace International, as the Bank “again enters into discussions of its approach to energy and climate-related lending”, called on Kim “to use your position of leadership within the World Bank Group to ensure that the Bank stops financing projects that contribute to the climate problem, and to put an end to the false rhetoric that fossil fuel projects promote energy access.”

The Bank’s current renewable energy portfolio also continues to raise concerns, in particular the inclusion of hydropower (see Update 84, 83, 82, 81). In a March meeting with Bank officials representatives for indigenous and local communities in the Sindhuli district in central Nepal called on the Bank to “suspend financing” to the construction of the Khimti-Dhalkebar energy transmission line, linked to a hydropower project in Nepal, claimed that they have “been given false information since the inception plan of the project”. The group argued that the power grids “will pass through densely populated areas of indigenous communities” raising concerns about “significant socio-cultural and economic impacts on our lives that the project has not discussed with us and have already begun to experience.” They further said that “excessive police force was used” including “shooting orders issued” when they protested against the project. The Bank officials claimed they had little knowledge of the issues, and agreed to further discussions.

Also in March, local activists in India organised as Matu Jansangthan held a demonstration against the Bank-funded Vishnugad Pipalkoti hydroelectric plant (see Update 84, 82, 77). They argued that to date THDC India Ltd, the company constructing the dam, had not shown any concerns about its consequences. The activists said: “The destruction of our future will not be tolerated, we do not want dams. We have fought til today and the struggle will continue.”

Furthermore, a Bank study is expected to give a favourable assessment of the viability of the controversial Rogun dam in Tajikistan, despite concerns over social and environmental issues (see Update 75, 74), as well as regional security. The Bank revealed some of its initial assessments on the dam, which is expected to be the world’s tallest, in February, including, that the dam type is “acceptable” for the risks of earthquakes and landslides. However, it noted that climate change could “modify flood regime and river flow pattern.” The Bank clarified that its contribution is only “an input to decision-making” that “will decide neither whether the proposed Rogun dam will be built, nor the final design, should a project proceed”. It also noted that to date it “has made no financial commitment to support construction of the proposed dam”.