In light of concerns over the World Bank’s proposed climate investment funds, this session took a closer look at some of the issues. It presented a history of the World Bank’s involvement in climate change and energy, provided a summaries and analysis of the Strategic Climate Change Fund and Clean Technology Fund and an update of the latest publications and analyses of the latest developments on this issue. These include a report by the Institute for Policy Studies, entitled World Bank: climate profiteer; briefings by Third World Network; a forthcoming report by World Resources Institute; and blogs by the Centre for Global Development, including World Bank Clean Technology Fund Would Be Cash Cow for Coal.
Lucy Baker, Bretton Woods Project, Brief overview of the World Bank, climate and energy
- World Bank has invested over £ 25 billion in fossil fuel projects since 1992, when climate convention was signed. Approx 6 per cent of Bank’s energy portfolio is for ‘new renewable’ energy.
- World Bank is the largest public broker of carbon purchases. The prototype carbon fund in 1999 to ten carbon funds at present, worth a total of $2 billion.
- Is an implementing agency in the Global Environment Facility set up in 1992, housed in Bank
- 2003/4: World Bank commissioned Extractive Industries Review recommended that “The World Bank should phase out investments in oil production by 2008 and devote its scarce resources to renewable energy resource development”.
- In its management response Bank committed to increase support for ‘renewable energy and energy efficiency’ by 20 per cent per year. This hasn’t happened
- 2005-2008: Initiated its Investment framework for clean energy and development (CEIF)
- IDA replenishment, November 2008 included a Bank paper on climate change (mostly adaptation) predicted that increase in IDA funding required to maintain net level of benefits to recipient countries at their ‘without climate change’ level range from 6 to 21 per cent of total IDA credits per year.
Steve Kretzmann, Oil Change International, Overview of the Bank’s lending portfolio
- The Bank started pushing oil and gas investment in earnest during the OPEC oil embargo in 1977. This was encouraged by the Reagan administration, which resulted in the re-writing of investment laws to make them more favourable to foreign investment.
- The Bank was openly hostile to climate change in the Extractive Industries Review.
- An informal moratorium for coal plants ended in 2006
- Since Gleneagles in 2005, Bank funding for fossil fuels has increased, and the gap between this and renewables has increased
- 80 per cent of oil projects that the Bank funds are for consumption in the north
- Question of using public funds to underwrite only marginally better energy such as coal, or using funds to stimulate and encourage up and coming renewable technologies.
Lawrence MacDonald, Centre for Global Development, Case study: Tata coal project
- Question is less about the projects and more whether the Bank can play a transformational role. For instance the Mmambula coal-fired power plant in Botswana is in an area rich in solar thermal potential.
- International public funds should be used to bridge the gap between solar thermal and coal, how can the Bank use its funds to make sure that this happens as fast as possible? As long as coal is cheaper it is unfair to expect countries to pay for the difference. Question of social justice.
- See their blog analysing the Clean Technology Fund oriented towards coal.
- The Bank is pushing super-critical coal technology with carbon capture and storage still unproven. The Tata plant will produce 25 billion tonnes of CO2, making it one of the top 50 sources.
- The CTF reflects the priorities of the current administration.
Smita Nakoda, World Resources Institute, Climate Change mainstreaming at the World Bank
- Presentation of some of the findings of WRI’s forthcoming report on this matter
- The World Bank’s Investment Framework for Clean Energy and Development which is part of the Gleneagles plan of action is mean to be about helping developing countries respond to climate change. WRI are looking at what the Bank has done.
- Prior to Gleneagles WRI carried out an analysis of World Bank Country Assistance Strategies. It considered criteria to think about the implications of intervention in climate change, e.g comprehensive green house gas accounting, incremental costs, and targets or outcomes that are linked to mitigation
- At a country-strategy level they looked at whether Bank assistance had identified the mitigation or adaptation potential e.g in making a loan to the Philippines for electricity sector reform- did they consider increasing renewable sources, greater efficiency etc?
- In 2005 WRI found that only 20 per cent of Bank’s lending did that and very few of the country assistance strategies did that in a systematic way, despite the fact that WRI’s criteria was actually quite lenient
- 3 years on post-Gleneagles WRI are now looking at the lending portfolios of Asian Development Bank, Inter American Development Bank. They have found that there is much room for progress
- More than 50 per cent of energy sector lending gives climate change consideration
- On adaptation: of 56 Country Assistance Strategies only 6 mention adaptation of which only 5 have targets or indicators. This is a massive challenge for the Bank
Janet Redman, Sustainable Energy and Economy Network, World Bank carbon finance funds
- The World Bank is in crisis of legitimacy.
- 1 tonne of carbon dioxide is the same wherever it is emitted
- Carbon trading means paying someone else to reduce emissions for you, but this won’t achieve a net zero
- WB trust funds are part of the clean development mechanism (CDM) whereby the Bank acts as a broker between two countries. It has been doing this since 1999, before Kyoto.
- Its carbon funds are now issue specific e.g community development, bio carbon (forestation, REDD)
- Its total carbon finance funds are worth $ 2 billion which in financial terms is small but still significant
- It provides lower transaction costs for developed countries so they can meet their Kyoto commitments
- There is a real lack of transparency. Price of carbon negotiated every time and kept secret. Also sub-contracts with different kinds of agents in the developing countries.
- Less than 10 per cent of money spent so far going to new renewable energy.
- Less than 10 per cent linked to funds going to community developments.
- 75-85 per cent is for chemical gas and coal concrete industries. For instance a coal mining plant in China will be paid to capture the methane. But could then use the money it gains to merely increase its operations.
- The GHG footprint of these projects is not calculated.
Katherine Silverthorne- US Climate Action Network Overview of UNFCCC negotiations and international climate discussions
- The UN meeting in Bali November 2007 was important for two reasons: 1) For the first time the parties looked at technology transfer, adaptation and finance as well as mitigation. 2) Progress was made on the UN Adaptation Fund. This was originally established under Kyoto using a 2 per cent levy on CDM, but stalled because of disagreement over governance. In Bali he board was set up under the Convention of the Parties, composed of two countries from each of the 5 regions: 2 from annex 1, 2 from non-annex 1. Also a rotating fund was established. There is the presumption that meetings will be open. WB acting as trustee on interim basis and GEF to provide a role, but the board remains the decision making body.
- In Bangkok a multinational climate change fund was proposed by Mexico which would focus on all theses issues. It would be predictable, scalable and transcending ODA. Criteria would be based on emissions, ability to pay and population. But that way some developing countries would have to contribute.
- The World Bank’s on-going participation in the Gleneagles dialogue is based on the Investment Framework for Clean Energy and development. At this year’s G8 it will report back from Gleneagles dialogue.
- Bush administration does not want quantification of long-term emission reduction target. US hasn’t put forward authorising legislation.
Kristen Hite, Proposed Clean Technology Fund and Strategic Climate fund
- WB has two big umbrella funds as a critical component of their strategic framework. Will go to official approval by October 2008 and to the G8 in July 1) Clean technology fund 2) Strategic climate fund. There are many ambiguities in the documents and plenty of unintelligible jargon.
- Clean Technology Fund:$10 billion, pre-post 2012 fund, 3 to 5 year implementation. There is a sunset provision to allow for post 2012. There will be the opportunity for evaluation and review every three years. “Positive incentives for scaled up action, low carbon growth, sustainable development”. It will blend with Regional Development Banks and Export Credit Agencies as part of a new business model.
- Theoretically not a bad thing. A lot of money needed very quickly, but its focus is on coal. ‘Clean’ still has to be described.
- Links to UNFCCC are not clear.
- Technology transfer will require any party receiving money to have a national low carbon strategy. It scales up and replicates lessons of the GEF.
- Strategic climate fund: It will provide increased financing through CTF and other funds
- Will be targeted towards shorter term initiatives as post 2012 prelude. It has 5 pillars: 1) Pilot programme on climate resilience; 2) Ecosystem services; 3) Pre-commercial technology; 4) Forest investment; 5) Greening access agenda for SSA
- Governance of these funds:
There will be a trust fund committee; a support unit (analysis and WB, advises trust fund committee); administrative units; a participants forum (NGOs and others a chance to say things). World Bank will be trustee. In essence WB will be administering money and recommending how money gets administered and charging a fee.
- 5 donor recipients and 5 donor countries: 1 WB official and 1 regional development bank official. No mention of NGO. Voting mechanism is to be confirmed. It requires coordination with all the regional development banks that will be tasked with all the monitoring. The Bank won’t take responsibility. Trust fund committee will be subject to periodic evaluation.
- We are talking about vast amounts of public money- no one institution is equipped to manage this. Need to decide how the Bank and others should be involved. Guiding principles are needed on structure, co-operation, monitoring and evaluation etc. A much broader stakeholder input and oversight is required.
Ilana Solomon, Action Aid, Proposed Adaptation Funds
- There are many big questions still unanswered
- Key component of this fund is the ‘pilot programme for climate resilience’.
- It involves mainstreaming climate risk management into national planning and budgeting within 5-10 countries. There are 2 overall concerns: 1) donor driven, processes through US and UK with World Bank staff. 2) Too little, too late (timing is nearly impossible) and serious threat to UN climate negotiations.
- UN structure for adaptation has an independent board with considerable negotiating power and greater voice for developing countries.
- Rationale UNDP says $86 billion is needed for adaptation. There is a huge need for scaling up- do we need more or better money? We need both. But the money on table is not quality.
- Overall objectives: providing developing countries with technical and financial support.
- On governance: the document says that there will be strong participation from developing countries, but it doesn’t say that they will have decision making power. Consensus- small discussions happen behind closed doors. Questions around this. 1 recipient from each of the pilot country programmes.
- It will be a blend of grants and concessional finance.
- Country eligibility- must be in compliance from WB conditionalities- ec policy reform.