Organisers: Recourse, Trend Asia, CAN-I, FARN, PowerShift Africa, ACCESS Coalition, Big Shift Global, FoE US, BWP, Urgewald
- Fran Witt, Recourse
- Andri Prasetiyo, Trend Asia
- Leandro Gomez, FARN Argentina
- Grace Ronah, ACCESS Coalition
- Dean Bhebhe Bhekuminizi, PowerShift Africa
- Genevieve Boyreau, World Bank
- Alexandrina Platonova-Oquab, World Bank
Fran Witt: In UN Secretary General Antonio Guterres’s 5-point plan for MDBs released yesterday, he noted that, ‘Emissions must stop rising, and decrease 45 per cent in the next decade’. We will be asking panellists to explain what this means in their specific country contexts.
Most of you will know that the World Bank’s Climate Change Action Plan released in 2021 committed the WBG to align with Paris Agreement by July of next year (see Observer Summer 2021).
However, the WBG apparently missed the 2022 Spring Meetings deadline to share the Paris alignment framework with its executive board.
Andri – could you start out by explaining why is Paris Agreement alignment important in the context of your country, Indonesia?
Andri Prasetiyo: If you look at Indonesia, if it keeps giving mixed signals on the energy transition, it will crowd out renewables, and give an enabling environment for coal and ‘green’ gas.
The World Bank’s 2021 Country Partnership Framework (CPF) for Indonesia supports boosting gas as a bridging fuel (see Observer Autumn 2021). In coal we are major producer – we also have plenty of geothermal potential.
We are currently using only one per cent of our renewable energy potential, and renewables are only 11 per cent of our energy mix; the focus on gas as a transition fuel may crowd out renewables from the future energy mix.
Geothermal and other renewable energy sources can be used as baseload – although we have to be careful about how geothermal energy is developed.
Direct investment by the World Bank should focus only on renewable energy – that should be the focus.
Fran Witt: Thanks, Andri. Grace, could you answer the same question – about what Paris alignment means in your country context in Kenya?
Grace Ronah: We are very exposed to climate shocks in Kenya, and very dependent on fossil fuels in our energy mix.
The WBG needs to put a very clear road map in place on how solar, geothermal and other resources can be used – there are a lot of resources we can exploit as a region to cover our energy needs.
We need to help the communities who are off the grid to access energy. We need to look at how can we can reach these communities, and how we can structure policies and plans that can help developing countries transition to green energy.
Fran Witt: Thanks. Let’s move on to our second question – why do you consider gas not to be a transition or bridging fuel? Dean and Leandro could you answer this one?
Dean Bhebhe Bhekuminizi: Gas will not tackle Africa’s energy access crisis: Expanding fossil fuel-based access will be costly, and will fail to reach last-mile communities. The WBG needs to consider the significance of this.
Gas will not foster democratic access to energy in Africa. It also undermines continent’s efforts to reach climate goals – this would contribute to further climate impacts on the continent. Doing this would be a betrayal of the struggle for climate justice by African civil society.
Leandro Gomez: We have to take into account a just energy transition – we have to take into account that we cannot just swap one energy source for another, given the processes involved in the extraction of minerals needed for renewable energy technology.
In the case of Argentina, it was decided to develop fracked gas in Vaca Muerte in a way that was not very democratic.
We also have to consider the gas lifecycle in terms of the climate impact – which includes the leakage of methane emissions that have an impact on global heating that is 80x greater than CO2. Fracking is a technique to extract shale gas, which results in greater methane leakage than conventional methods.
Fran Witt: Thanks both. And now I have a question for the WBG panelists: What are your reflections on the use of gas as a transition fuel?
Genevieve Boyreau: Paris alignment for us is very much to get development within a climate lens: Both through the operations being informed by climate experts but also the analytics.
We are working on the Paris alignment framework, and we are developing notes and guidelines for our staff.
Paris alignment will also help us, while still focusing on development outcomes, to maybe improve those development outcomes in a resilient and sustainable manner.
I think we are all learning as we go, and we welcome your feedback.
For us, it is always renewable energy first, and that is across the board. There are situations that need to be carefully looked at when responding to energy demands. There are situations when gas could be considered when providing energy for households and there is no other renewable option that is possible in that situation.
Fran Witt: The next question is around the World Bank’s 2021 Climate Change Action Plan (CCAP), which said that the Bank will assess future gas plans for Paris Alignment. Andri – in light of this, should the Indonesia CPF be reformed?
Andri Prasetiyo: Yes, I think that gas is really problematic. It means that you need a long-term contract, for 25-30 years, which locks you into that energy source – so compared to coal, there is actual more flexibility for Indonesia in coal.
So, it will totally lock in countries even worse into fossil fuels if we are going to use gas as a bridging fuel. Gas has costs both upstream and downstream. Indonesia currently has an energy oversupply, so we don’t need more gas.
Yet the WBG’s recent support for new port in Indonesia could create the enabling environment for gas infrastructure development and possibly result in Indonesia being a regional hub for LNG.
Leandro Gomez: The CCAP has weak language that must be reformed: it refers to ‘low-carbon energy’, which ignores the real climate impacts of gas, and says that operations can be Paris aligned if they ‘do no harm’.
Gas may be aligned in the short-term, but since the Paris Agreement, 33% of overall overseas energy financing from the G20 went to gas, and overall the link to energy access is weak.
Many of the countries where gas is being promoted have undeveloped renewable energy resources. If you are just moving money to gas, you are postponing the renewable energy investment.
The narrative of gas as a bridge fuel is indirectly supporting Vaca Muerte in Argentina, although the main rationale is to service our external debt, rather than for climate reasons. It seems the CCAP ignored the relationship between debt and climate issues.
PPPs [public private partnerships] which are promoted by the Bank for climate projects have problems with transparency, accountability and often have higher costs than public funds: Have to go back to issue of climate and debt, and the problem of contingent liabilities that come with PPPs (see Observer Autumn 2022).
The 2025 deadline for IFC and MIGA to fully align with the Paris Agreement is going to postpone the possibility of their clients expanding to renewables.
Alexandrina Platonova-Oquab: We are really standing by the CCAP: We are on track with meeting the commitments that were set out there. And I think the plan is responding to issues raised – we need to move from green projects to green economies, and to better integrate development into climate action.
This includes at least four major pillars: (1) linking climate & development; (2) ensuring Paris alignment; (3) supporting operations of all projects being developed to support climate action; and (4) designing all projects with a low carbon footprint.
We’re also stepping up on finance, to having over 35% of our portfolio include projects with climate co-benefits. We exceeded that target in the last fiscal year, with $31.7 billion in total climate finance.
We need to concentrate action in countries and sectors that are most essential, via a sector-led approach, as laid out in the CCAP.
Based on a country-level approach, there is a clear recognition that there is much more need to plan, and provide diagnostics. On the role of gas, we need to account for common but differentiated responsibilities under the Paris Agreement, and the need for a just transition. Then the role of gas in the Country Partnership Framework is defined. Gas may be considered aligned, where there are no alternatives in the short-term.
Genevieve Boyreau: Just a word on the debt point, the indirect finance point, and the PPP point: I just wanted to share that there was a climate finance paper that was discussed recently by the World Bank’s Development Committee, which shows that all sources of finance really need to be tapped into, in order to address the climate crisis.
Alexandrina Platonova-Oquab: Leandro, you very rightly pointed out that there is methane leakage, and this is something the Bank is working on, via a new methane leakage reduction partnership.
Fran Witt: Dean and Grace, what about the context of low-income countries and energy poverty? What needs to be done to address this?
Dean Bhebhe Bhekuminizi: It’s critical that African countries receive more clean energy finance, to leapfrog fossil fuels. In particular, the increased financing of energy access is needed. We urgently need access to financing and de-risking in the current context.
The MDBs should agree a certain target of funding for energy access, including though MDBs’ energy policy reviews that are underway. Energy financing should be aligned with net zero trajectories across the private sector space.
Crowding in private sector hasn’t worked very well. We need new tools including guarantees that don’t increase debt load. We need to reform the incentive structure to make investments in distributed renewable energy more palatable than large fossil fuel projects, and provide financing through financial intermediaries.
Grace Ronah: I would like to provide a context for this, because during Covid a lot of the countries in the [East African] region were very heavily impacted, and that saw spending go to the Covid response rather than to energy access issues.
At this juncture, the countries have been exposed, and they really need the Bank to play a role in creating packages that can help them come out of this situation.
On energy access and the energy transition, the Bank really needs to highlight these issues when doing the diagnostics, and the CPFs.
It’s very important that we support the unique circumstances of the African countries when we are addressing these issues and aligning with the Paris Agreement. You cannot apply a blanket solution to the region, including because of different renewable energy potential.
The Bank needs to draw strongly on CSOs. When we talk about the just energy transition we should not forget about energy access, as these issues go hand in hand.
There’s also a question of, ‘How do we respond to the issues of communities when we are aligning ourselves with the Paris Agreement?’ Covid really affected the spending power of communities, including in purchasing power for energy. How can we make this people centred, and in terms of leaving no one behind?
Alexandrina Platonova-Oquab: At the time we are facing currently, where there are difficult choices that countries have to be making, it’s clear that we need a country-tailored approach, including in the Bank’s Country Climate and Development Reports (CCDRs) diagnostic.
Genevieve Boyreau: I was listening to your remarks at the beginning and now, and it really made me think about CCDRs. In South Africa, it would be good to understand the pathway to a low-emissions economy, and it would be good to understand what this is about.
The CCDR approach is very much looking at development and environment as two sides of the same coin. Those are very much anchored into the country circumstances and the NDCs [Nationally Determined Contributions to the Paris Agreement]. I also know that in South Africa, the CCDR has been done with the cooperation with government and lots of other stakeholders.
At the Development Committee meeting that took place a few days ago, there was a lot of discussion among finance ministers of CCDRs, and we can see that there is a lot of demand for those reports. We are very happy and humbled that there is this demand.
Questions & Answers:
Alison Doig, Recourse: We need radical change in order to meet global climate goals. What is Bank doing to drive a new vision of a renewable energy future?
Genevieve Boyreau: The WBG has different tools – but those are very country specific, so we can’t really give you examples here.
Jon Sward, Bretton Woods Project: It’s great that Bank is participating in this session, as that hasn’t always been the case in past CSPF sessions organised by the Big Shift coalition. I have two questions: (1) Will the Bank develop a guidance note for staff on gas, that explains how they should interpret the language in CCAP that any new investments should be aligned with national climate and development plans? And, (2) will the Bank hold public consultation periods on its Paris alignment process, including for the Development Policy Financing approach, which has been lagging behind other strands of the Paris alignment framework?
Genevieve Boyreau: On the guidance note: Of course that’s what we are working on, of course there will be guidance for staff so that they can implement this, in the context of Paris alignment.
On consultation: Of course that’s something that we can do in due course, though I am not sure from where I stand what that will be exactly.
On DPF and Paris alignment: We are working on it, and there is also the joint framework that is being developed with other MDBs. We’re very happy to engage once we are ready to do so.
Alexandrina Platonova-Oquab: We’re looking at each new operation, to look at how it is contributing to Paris alignment, including looking at sectors like education or health. There is an outline of key transitions we are slated to work on. Here, we see why it’s really important to integrate the climate and development planning together, so we hope through this Paris alignment approach that we are developing, we will really strengthen the development outcomes for all.
Sonia Dunlop, E3G: As the WBG, can you confirm that you working on Paris alignment methodologies for direct financing, indirect financing, and development policy financing – and will they all be published by 1 July 2023, and will they be consulted on?
At what stage will projects be assessed for Paris alignment, as you don’t want to waste your bankers’ time in preparing projects that aren’t going to be approved, and will WBG publish the Paris alignment assessments of each individual project?
Ute Koczy, urgewald: How will you approach the governments? How can we be sure that the World Bank is always promoting renewables first, and fossil fuels second?
Genevieve Boyreau: Thank you a lot – you keep us on our toes. We are developing all sorts of guidance, within a framework on Paris alignment. Definitely there will be some sort of disclosure, and engagement. As we move forward, we will advance in the dialogue.
On disclosure of the assessment of projects, this is something we are working on: In order to be transparent, we do need to but something out there.
On second question, we are talking to countries. They lead their development – we are only here to advise and support.
Fran Witt: Thanks everyone, we are going to have to end the session there.