World Bank technical assistance and policy lending lead to Jamaica gas lock-in

23 March 2021

A liquefied natural gas (LNG) carrier off the coast of the US state of Louisiana. Jamaica has begun importing US LNG, with support from the World Bank. Credit: US Coast Guard.

The World Bank’s technical assistance and development policy financing (DPF) have led to a massive investment in gas infrastructure in Jamaica, despite the fossil fuel’s ‘green’ credentials being widely debunked.

According to the Bank’s website, it has provided Jamaica with, “Technical assistance for planning and regulation of the gas sector [which] facilitated more than US$1 billion of private sector investment in LNG [liquefied natural gas],” including for two new natural gas plants and associated infrastructure.

A new import terminal for LNG was opened in Jamaica in June 2019. As reported in July 2019 by industry publication Offshore Energy, “The terminal, which is the first of its kind in the Caribbean, will provide fuel to several facilities, including the Jamaica Public Service’s (JPS) soon-to-be-completed 190-megawatt power plant in Old Harbour, through natural gas pipelines.”

Taking upstream emissions into account,...emissions from gas-fired generation are more than double those from using coal, over a 20-year timeframeOverseas Development Institute

The Bank’s technical assistance formed part of the Jamaica Energy Security and Efficiency Enhancement Project, a $15 million loan originally approved in 2011, that has resulted in reform of the country’s energy regulations.

The Bank subsequently approved a $70 million DPF loan in 2017. As noted in the World Bank’s programme document for the DPF, this financing included a ‘prior action’ that required a new electricity act, drafted via the above-mentioned World Bank technical assistance, to be approved to move forward with the loan – which provided fungible budget support to Jamaica. It stated, “With support from the proposed DPF Parliament passed the legislation in July 2015, and the Act came into operation in August 2015.”

Supporting a green transition, or continuing business as usual?

The Bank argues that the shift to LNG was designed to replace “out-of-date oil plants”, with the 2017 DPF noting, “This prior action is expected to contribute [to climate] mitigation co-benefits by introducing a legal and regulatory framework that promotes the increased use of natural gas and renewable energy sources.”

This is part of a wider strategy by the Bank that positions gas as a ‘transition’ fuel to lower greenhouse gas (GHG) emissions of energy systems in many borrower countries. The Bank’s World Bank Outlook 2050 policy note published last year – ostensibly the Bank’s ‘decarbonistation’ strategy – stated it would, “support planning of energy market reforms with natural gas trading and regional integration to improve power systems flexibility.”

However, according to research by the UK-based Overseas Development Institute, “Taking upstream emissions into account, CO2e emissions from gas-fired [power] generation are more than double those from using coal, over a 20-year timeframe [primarily due to methane release].” Given the need to reduce global emissions by 45 per cent by 2030, relative to 2010 levels, to have a realistic chance of limiting average global temperature increase to 1.5°C, the upstream GHG emissions from gas power present serious limitations to their alignment with global climate goals.

The reforms, which raise the prospect of long-term ‘lock-in’ of natural gas infrastructure on the island, are part of a wider programme of Washington-led interventions in Jamaica. As the 2017 DPF noted, since 2013, “The International Monetary Fund (IMF), World Bank, and Inter-American Development Bank (IDB) approved a large package of financial support for Jamaica, committing almost US$2 billion in combined financing (including this DPF series), anchored on a four-year IMF Extended Fund Facility (EFF) program…focused on debt restructuring, fiscal consolidation and financial sector reforms.”