Economy and Financial Affairs
- Thu Dec 06 2007
Source:
Alter-Eco / TNI *
The World Bank is one of the largest public sources of funds for the fossil-fuel industry. They also are one of the largest public brokers of carbon trades. And now the Bank may help oversee the $50 billion or so that will be needed for countries to adapt to climate change. Can you say "conflict of interest"?
From 1992 through late 2004, the World Bank Group approved $11 billion in financing for 128 fossil-fuel extraction projects in 45 countries. Recent studies show the World Bank Group's investments in fossil fuels rose by 93% between 2005 and 2006.
The Bank now controls $2 billion deposited in their ten carbon funds. The “commission” the Bank charges to broker these transactions is now estimated to be 13%, which, if true, would bring the World Bank’s commission thus far to $260 million.
The Bank’s involvement in carbon trading was originally met with suspicion. Many, including U.S. Treasury officials, actively discouraged it, recognizing the temptations. Today, conflicts of interest are multiplying almost as fast as the World Bank’s growing role in both causing climate change, offsetting it with carbon trades, and pushing forward policies at the international level that directly benefit the Bank. For example, the G8 in 2005 asked the World Bank to develop a “clean energy investment framework” for the world to address the problem of climate change, despite the Bank’s continued investments in fossil fuels. Then former World Bank President Paul Wolfowitz responded graciously by ensuring the words “climate change” were stripped from the final document. Wolfowitz also declared in August 2005 that nuclear power was a clean, carbon-free energy option worthy of carbon credits.
In Bali, on Dec. 5, the European Union proposed that the World Bank, together with the GEF, play a critical role in managing the $50 billion or more per year needed to “adapt” to climate change. This despite the Africa Group stating this was unacceptable, and despite a recent resolution overwhelmingly supported by 540 members of the European Parliament for the discontinuation of World Bank and other public support for fossil fuel projects.
Early suspicions on the potential for conflict of interest regarding the Bank’s involvement in carbon markets were addressed largely by Dr. Robert Watson, former chair of the Intergovernmental Panel on Climate Change and then director of the World Bank's Environment Department. He assured nervous government officials at the inception of the Bank’s carbon trading ventures that the Bank would not develop regulations for carbon trading. (Although the IPCC, which he chaired at the time, was advising the supreme body on the Climate Convention, the Conference of the Parties, on how to develop these regulations.) On perverse incentives he admitted it was problematic, but noted that "the potential for perverse incentives is not specific to the PCF but is a general problem for any emission reduction deals that require additionality, as is required for any JI or Clean Development Mechanism project under the Kyoto Protocol."
Calculations conducted by the Institute for Policy Studies suggest these projects will lead to more than 43 billion tons of carbon dioxide emissions over their lifetimes.
The World Bank disputes IPS calculations on this issue: On December 2, 1997, Dr. Robert Watson claimed that the Bank was responsible for "only" 1.4 gigatons of carbon -not 9.5 gigatons of carbon, as IPS’s report had suggested -in the years 1992-97. This figure—1.4 gigatons—is roughly equivalent to 20 % percent of annual global greenhouse gas emission, or roughly all U.S. GHGs, (excluding land use changes) in 2004 and far exceeds any cumulative carbon “offsets” under the CDM thus far.
The Bank's claim of innocence did not appease NGOs, elected officials or other astute observers. After years of pressure, the Bank finally agreed to a review of its investments in fossil fuels and other extractive industries. The World Bank hired the former environment minister of Indonesia under President Suharto, Emil Salim, Indonesia’s chief delegate to the UNFCCC. Among Salim’s recommendations to the World Bank, drawn up after three years of global consultations with business, civil society and government officials: Stop investing in coal immediately, and phase out of oil by 2008.
The World Bank board’s response? They disregarded the fundamental critique of Salim’s review- namely, that these extractive projects did nothing to forward the Bank’s stated mission of alleviating global poverty. They feigned agreement on many of the review’s other critiques, but the “action plan” they adopted in September 2004 represented more business as usual.
The Bank’s fossil fuel investment reaches far beyond the specific projects the World Bank finances. It sets a standard for all other fossil fuel financiers: regional development banks, export credit agencies, and private banks. Over 90 percent of private banks that provide project finance in the developing world have have signed the so-called Equator Principles, which essentially means they follow the World Bank’s environmental and social guidelines. So getting the World Bank to take meaningful action on climate change potentially affects about 90 percent of all private sector project finance in emerging markets and all of the public banks that also look to the World Bank for guidance on their investments and guidelines.
There no longer is anything to lose—and the world to gain-- by exploring and creating new institutions that are truly up to the task of climate change—such as a clean energy bank and adaptation fund independent of the World Bank and IMF—while ensuring that world leaders recognize this rogue institution for what it is and begin to rein it in appropriately.
>>READ THE FULL ALTER ECO NEWSLETTER 2 (PDF)
Contents:
- The radical proposal of Ecuador communities
- The dirty truth behind the conference bikes
- Indonesian Civil Society Forum Calls for Climate Justice
- Climate activists reveal hoax
- Upcoming events
- World Bank: one stop shop for climate chaos, adaptation?
>>Go back to UN Climate Change Conference 2007
(*) Alter-Eco is published by a group of non-governmental organizations, indigenous people's organizations and social movements at the UN Framework Convention on Climate Change COP-13. The groups came together to make a unified call in support of real solutions to climate change and against the false market-based solutions to climate change that are being implemented under the Kyoto Protocol.
Organizations contributing to the first issue include: Global Justice Ecology Project, Global Forest Coalition, Carbon Trade Watch, Transnational Institute, FERN, CORE (Center for Organizational Research and Education), The Corner House.
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