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News Flash World Bank: Global Warming matters

October 8th, 2008 · No Comments

Examining the World Bank’s investment portfolio (pdf), one could be excused for thinking that the Bank is somehow part of the global warming denier branch of the flat-earth society and does not believe that climate change is the critical issue facing the globe.

Relying exclusively on the World Bank’s own figures, our analysis shows World Bank Group lending to coal, oil and gas is up 94% from 2007, reaching over $3 billion. Coal lending alone has increased an astonishing 256% in the last year.

Note to Bank leaders: coal is not a climate-friendly option.

In the face of triple-digit increases in fossil-fuel funding, renewable energy and energy efficiency project funding went up less significantly: 87% but most of that went to the traditional hydropower systems.

Only $476 million went this year to support “new renewables”. That represents only a 13% increase over last year’s $421 million, according to the Bank’s own numbers.

Sigh. Being on the wrong side of smart energy policy has too long been a World Bank tradition, a tradition that the WB leadership seems hesistant to abandon.

Now, “energy efficiency” investments are up significantly, from $262 million to $1.192 billion.

The Bank’s definition of energy efficiency includes both supply and demand side – so a lot of these loans on the supply side are likely retrofits of hydropower and coal plants. These sorts of supply side changes are not necessarily a bad thing, although they prolong fundamentally dirty or harmful energy sources. Scarce funding resources would be better used to encourage and promote fundamental changes in energy pathways and energy access in the face of climate change.

Writ large, across the Bank’s portfolio, demand-side and end-use efficiency is on the lower end of the game in terms of priority even though, quite clearly, these are the absolutely fastest payback opportunities in the global energy portfolio. And, the WB should be working strongly so that high-end efficiency is built into all investment portfolios to help developing countries to leap frog past the wasteful, fossil-fuel intensive development path of the “developed” world.

In a conference call to discuss the World Bank’s practices in advance of the World Bank annual conference, a question raised: What is keeping the World Bank from undertaking energy smart lending practices. In response, the consensus is that there is not “an obstacle”, but that the obstacles to Energy Smart practices at the World Bank are multifold and, in no small part, structural challenges within the World Bank. First, there is the challenge that the World Bank is structured toward large, mega-projects. Often, energy efficiency projects fall into the ‘too small’ for us vision of many at the Bank. Second, some at the Bank have a “twisted logic” that clean development requires economic development which requires energy, thus fossil fuel development is a bridge source (for 50 years?) to then enable clean development. And, a third issue that there are within the Bank stovepiped bureaucratic challenges with perhaps one group looking toward energy efficiency/renewable energy with favor not having any influence or control over another group. In addition, there is the serious issue of financial stakeholders who might greatly profit from fossil-fuel intensive development, whether fossil-fuel industries, engaged local people, or World Bank donors whose economies will profit from export the technologies or fossil fuels themselves.

Climate change is the central issue, even if the World Bank’s bureaucratic structure creates obstacles from the funding acting in recognition of that. While we might hope that this World Bank meeting will undertake action to turn the WB toward a more prosperous and climate-friendly development path, it is hard to believe that it will occur. The next US Administration must work with other leading donors to help drive change in the World Bank’s policies, change that will help solve, rather than worsen, the challenges we face today and the decades ahead.

NOTE:Dirty is the New Clean will be available at Thursday.

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Tags: climate change · coal · Energy · environmental · financial policy · world bank