World Bank “short-sighted and cross-eyed” on fossil fuels

26 June 2013

As the World Bank released a new report on the impacts of climate change and is due to discuss its energy focus, it defended its engagement in fossil fuels, including the Kosovo coal power plant.

The second report in the Bank’s Turn down the heat series, written by the Potsdam Institute for Climate Impact Research and Climate Analytics, was released in mid June focusing on regional impacts. Similar to the November 2012 report (see Update 83) it lacks in policy recommendations, however, in the press release the Bank confirmed that it is “developing a climate management action plan, informed by the Turn down the heat reports, to direct its future work and finance through a climate lens.”

The Bank board’s informal discussion on “Towards a sustainable energy future for all – Directions for the 2013 World Bank Group’s energy sector” (see Update 85) has been rescheduled for mid July. In a leaked paper Bank staff stopped short of proposing a ban on funding coal power, keeping the option open for “rare circumstances”, despite recognising that “coal’s share of power generation is near a historic high” and “rising”. According to the paper, the Bank aims to expand its engagement in natural gas and hydropower. In line with its push for infrastructure (see Update 86), the Bank “will seek market solutions and help governments foster private sector participation and investment”, including carbon pricing, and called the “regional trade dimension of energy” key. Furthermore, the Bank will “address underpricing of energy” coupled with “providing social safety nets for the poor and vulnerable.”

The Bank claims the paper “mirrors the objectives of the Sustainable Energy for All [SE4ALL] initiative.” SE4ALL, co-chaired by UN secretary-general Ban Ki-moon and World Bank president Jim Yong Kim, aims to achieve universal energy access, double the use of renewable energy and improve energy efficiency by 2030 (see Update 83). Its ten member executive committee, headed by Charles O. Holliday, chairman of Bank of America, was announced in April and includes Rachel Kyte, World Bank vice president for sustainable development; Brian Dames, CEO of South African electricity utility company Eskom (see Update 81, 80, 70); and Andrew Steer, former Bank staffer and current president of NGO the World Resources Initiative. In late May, SE4ALL released its first global tracking framework on progress toward its aims. The report calls for policy measures, including fiscal, financial and economic incentives, phasing out fossil fuel subsidies and pricing carbon, broadly in line with the Bank’s goals (see Update 85).

In a May response to an April NGO letter to the Bank on its engagement with fossil fuels (see Update 85), Kyte referred to the Bank’s engagement in SE4ALL, but urged the signatories to “reconsider your suggestion that Bank Group support for all fossil fuel projects be stopped”. Noting that “providing energy access to the millions without it in the world’s poorer economies … cannot be judged by climate criteria alone” she conceded that the Bank does “engage with governments and companies on oil and gas development”. She asked for consideration of “distinctions among fossil fuels” and argued for “the increased use of renewables with natural gas”, stating that “unlike coal, [natural gas] is pollution-free”. Furthermore, Kyte considered the calls for improvements to national electricity systems to specifically target access by the poor “unrealistic and counterproductive”. She compared grid-based electricity systems to roads, as “public goods used by all”, which “rely on large-scale off takers, including business and industry, to be sustainable”.

However, several of Kyte’s statements were challenged by Elizabeth Bast of US-based NGO Oil Change International. She said that the Bank indeed can separate out pro poor investments: “We know that distributed renewables are a much more efficient way of delivering energy access, so if that’s really the Bank’s goal, then it should put its money where its mouth is.” She also questioned Kyte’s statement on natural gas: “Depending on assumptions about the leakage rates of methane, natural gas can in fact be a worse greenhouse gas emitter than coal.” Red Constantino of Philippine-based NGO Institute for Climate and Sustainable Cities said: “When it comes to energy lending, the Bank is both short-sighted and cross-eyed. Whichever way you look at it, the Bank’s fossil fuel-biased operations do not match its professed goal to provide energy access.”

No sustainable energy for Kosovo

Kim came out in defence of the proposed Kosovo coal power plant (see Update 83, 82, 80, 77) during the Bank’s spring meetings in April: “from my perspective, the climate change and the coal issue is one thing, but the humanitarian issue is another, and we cannot turn our backs on the people of Kosovo who face freezing to death if we don’t move in.” The statement was reiterated by the Bank executive director (ED) covering Kosovo, Gino Alzetta, during a recent visit to Kosovo. In response a mid June letter to Alzetta and other European EDs, the Kosovo Civil Society Consortium for Sustainable Development, said: “If the World Bank and the Kosovo government aim to alleviate poverty and create better conditions for people not to ‘freeze to death’, they can choose to help Kosovars through energy efficiency programmes for better insulation of their homes, to invest in eliminating energy losses, to reduce greenhouse gas emissions”. Moreover: “The addition of the new coal plant will continue to contribute to the devastating consequences of coal-fired power generation that has plagued the country for years.”

Furthermore, according to a June report by Bruce Buckheit, formerly of the US Environmental Protection Agency, commissioned by US-based NGO Sierra Club, the Kosovo project will not employ the best technology available, but “is simply supporting the construction of yet another polluting coal plant in a country with substandard pollution controls”. According to Justin Guay of the Sierra Club the plant “will be far dirtier, and therefore far deadlier, than a new coal plant would be in the US, let alone the heart of the EU.” During the spring meetings activists projected “No new coal for Kosovars, we deserve clean air!” on the World Bank building in Washington DC.

The executive secretary of the UN Framework Convention on Climate Change, Christiana Figueres, said in April that the Bank’s portfolio of coal investments “is one of the very serious challenges that the World Bank has”, which is “understandable from a historical perspective” but that now “it is no longer necessary to do that, because we have many other technologies that can come forward.” Furthermore, according to the 2013 edition of the Carbon Tracker Initiative’s Unburnable carbon 2013 report released in mid April: “Between 60-80 per cent of coal, oil and gas reserves of publicly listed companies are ‘unburnable’ if the world is to have a chance of not exceeding global warming of 2°C.”

Despite this, the Bank, including its private sector arm, the International Finance Corporation (IFC), continues to support fossil fuel infrastructure and exploration around the world, including in the Eastern Europe, the Caspian Sea and MENA region. According to a May report by US-based NGO Crude Accountability, the Bank has considered investing in an expansion of the Turkmenbashi Port, threatening a nearby nature reserve and supporting oil and gas developments. Other fossil fuel related investment in the pipeline include a $50 million loan to the Ireland-based oil and gas exploration company Circle Oil plc for further exploration in Morocco and to accelerate exploration in Tunisia and Oman. The IFC is also considering a $30 million investment in Oman based Renaissance Services SAOG, a company focused on providing services to the oil and gas industries in MENA and the Caspian region, to support its marine business. Furthermore, in March the IFC’s accountability mechanism, the Compliance Advisor/Ombudsman, received a complaint from a local community in Albania regarding negative impacts of the IFC’s investment in Bankers Petroleum Ltd, a Canadian oil and gas company operating in the country (see Update 86).