Jockeying for position over World Bank's role as climate talks near

By Ama Marson, Bretton Woods Project

With roughly two months until the Copenhagen climate negotiations commence, questions loom about quantities of climate finance and which institutions will channel it, leaving speculation about the role the World Bank will end up playing.

Climate issues are expected to factor heavily in the G20 leaders summit to take place in Pittsburgh 24-25 September following a July statement from president Barack Obama that finance ministers should report on climate finance.

Among tentative proposals in a paper co-authored by the US Treasury and the Mexican finance ministry for the G20 is the conclusion that the World Bank will remain a key player, regardless of heavy criticism by developing countries. Despite a 2012 sunset clause written into the design documents of the Bank's climate investment funds (CIFs), "the reality is that they are unlikely to disappear," nor will mechanisms like the UN Adaptation Fund.

"Continued insistence for channeling finances through the World Bank reflects rich countries' desire to maintain the status quo of the global financial architecture for delivering climate finance," said Raman Mehta of ActionAid India in response. "Developing countries will continue to resist having resources routed through the Bank count toward internationally agreed financial obligations by the rich countries."

Contradictions in the Bank's role on climate

As the heat is turned up in climate finance discussions, in mid-September the World Bank launched its much-anticipated World Development Report (WDR) focussed on climate change. The report highlights that it is the world's poor who will suffer the most while developed countries with only one-sixth of the world's population are responsible for nearly two-thirds of greenhouse gas emissions. "In the next few decades the world's energy systems must be transformed so that global emissions drop 50 to 80 per cent," states the report. "The greatest challenge lies with changing behaviors and institutions, particularly in high-income countries."

At the launch of the report in London, Marianne Fay, the Bank's chief economist for sustainable development, told participants "The [Bank's] policy is to continue funding coal to the extent that there is no alternative ... and as long as it is less expensive." She added, "carbon capture and storage (CCS) is absolutely critical because no one sees getting rid of fossil fuels."

This comes parallel to the launch of the Bank's energy strategy review, scheduled for the coming year, which has raised the concerns of civil society organisations over continued support for fossil-fuels (see Update 67).

"Despite its claims to the contrary, the institution remains heavily committed to investments in carbon-intensive energy projects and reforms in energy sectors that focus on large-scale, privatised energy provision without corresponding safeguards to ensure universal access," said Md Shamsuddoha of Equity and Justice Working Group Bangladesh.

The Bank has also announced it is creating a methodology for estimating a project's associated greenhouse gas emissions. Warren Evans, director of the Bank's environment department said the Bank has not however decided how these analyses would influence investment decisions and that decisions as to whether measuring carbon footprints is included in project costs will be held off until after Copenhagen. According to Heike Mainhardt-Gibbs of US NGO Bank Information Center, there is little transparency in how such a methodology is being developed and how it will be applied.

The UN weighs in

Parallel to the World Development Report, this year's United Nations World Economic and Social Survey also focussed on climate. While it shares some of the analysis of the WDR in terms of need for action, the report highlights that "on their own assessment, multilateral development banks still do not seem to be systematically factoring climate change into their investment choices." The report further emphasises concerns about asymmetries in governance structures on the Bank's board. The Bank's bias against public-sector electricity projects "raises questions about the suitability of these institutions for administering a publicly led global investment programme."

One of its crucial arguments is that "issues of trust and justice will need to be taken much more seriously so as to ensure fair and inclusive responses to climate change." NGOs working on climate echo these sentiments, highlighting concern about the possibility of extending the Bank's climate funds rather than phasing them out as promised. "In order to build trust in the UN climate negotiations, it is critical for contributors, including the UK, which invested £800 million in the CIFs, to publicly reaffirm and honour the sunset clauses," says Liz Gallagher of UK NGO CAFOD.

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Published: 22 September 2009 , last edited: 2 October 2009

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