As Debt Talks Crescendo, Let's Not Give the World Bank a Free Ride
With all this talk of budget deficits and cutting programs for those in need (while unjustly keeping in place tax breaks for corporations and the wealthy), you would think that the Obama administration and Congress would want to make sure that the money they do spend is spent wisely. Well, that's not always the case, and it certainly doesn't appear to be the case when it comes to the World Bank Group.
The World Bank is supposed to be a multilateral development bank dedicated to poverty alleviation. (Many have deeply critiqued whether the World Bank actually does this, but that's for another article.) It has also tried to position itself as a climate leader, for example, by rigorously documenting the disproportionate negative impacts that climate change will have – and indeed is already having – on developing countries. As the Bank itself says, "At stake are recent gains in the fight against poverty, hunger and disease, and the lives and livelihoods of billions of people in developing countries." On this point, the Bank is right. I would add that this burden on the poor is doubly unjust given that poor countries did little to cause the climate crisis.
But regrettably for both the World Bank and the world's poor, actions speak louder than words. 2010 was a record-breaking year for World Bank funding of coal – the dirtiest of fossil fuels. Last year the Bank provided $4.4 billion in coal financing, representing a 356 percent increase over 2009. Remarkably, the World Bank voted to fund construction of one of the world's largest coal plants, based in South Africa. South African activists tried to halt this deal, arguing that the loan would actually make it more difficult for the poor to access electricity. The World Bank, they said, is exacerbating energy poverty at the same time it is contributing to the climate crisis.
Indeed, an independent study by Oil Change International found that none of the Bank's fossil fuel financing in 2009 or 2010 specifically aimed to provide electricity for the poor or ensured that energy services reach poor people. Other studies have shown that the extraction of fossil fuels is closely associated with increased impoverishment, conflict, corruption and other social ills.
It doesn't take a genius to realize that the Bank needs a diametric change in direction. The Obama administration and many in Congress now have an opportunity to help push for that change, but they seem to lack the will to seize it. For the first time since 1988, the World Bank has asked for a significant uptick in funding to increase its lending capacity for middle income countries, formally known as a General Capital Increase. The World Bank has requested $586,821,720 over five years. That's $117.4 million a year! Coincidentally, this year is the first time in more than a decade that the World Bank is revising its outdated Energy Sector Strategy. Obama and Congress can – and should – put two and two together to take advantage of the unique concurrence of these two events.
The request for a General Capital Increase provides Congress with critical leverage to help redirect the World Bank Group's energy financing to truly serve the needs of the poor in today's climate-constrained world. Recently, 48 environmental, development, faith-based and labor groups wrote a letter urging Congress to insist on desperately needed improvements. The groups assert that Congress should make provision of the General Capital Increase contingent on an Energy Sector Strategy that:
- Overwhelmingly targets energy-poor populations in developing countries with clean energy access – with quantifiable targets that prioritize decentralized renewable energy projects;
- Finances only non-fossil fuel-based clean energy technologies, as measured on a full lifecycle basis, except in extreme cases where there is clearly no other viable option for increasing energy access to the poor;
- Includes a robust definition of clean energy – one that excludes fossil fuels, large hydropower, unsustainable biomass, and nuclear energy; and
- Mainstreams and prioritizes energy efficiency at all levels of policy, financing, and project implementation.
By "leveraging the power of the purse," the letter states, "Congress can increase the chances that limited resources are effectively and efficiently used to ensure energy access for those in poverty without compromising public health and long term development."
But Obama's Treasury Department is pushing for a "clean" General Capital Increase. And by "clean" they don't mean low carbon. They mean a capital increase that is not weighed down by concerns like climate change and energy access for the poor. Sadly, it's looking like some in Congress are heeding Treasury's call. That would be a mistake. Given previous congressional initiatives to improve the Bank's environmental and social performance, members of Congress concerned about international development and environmental protection know all too well that, in almost all instances, positive change has occurred at the World Bank as a result of monetary pressure.
The last General Capital Increase was over a generation ago, when the tremendous danger posed by climate change was little known. But times have changed, and Congress must not let this once-in-a-generation opportunity slip by without demanding serious transformation of the World Bank's energy lending. And in a fiscal environment where we need to make every penny count, this is doubly important. It's time for the World Bank – and Congress – to be a part of the climate solution, not part of the problem.