World Bank’s lending for fossil fuel skyrockets as it positions itself as the “climate bank”

Heike Mainhardt-Gibbs

Bank Information Center - 3 July 2008 | Washington, DC

Original URL

As the World Bank prepares to launch two new climate investment funds at the upcoming G8 summit, and positions itself as the "climate bank," new statistics developed by the Bank Information Center show that the World Bank's private sector arm, the International Financial Corporation (IFC), increased its lending for fossil fuel projects by a staggering 165% in FY2008. Taken as a whole, the World Bank Group increased its fossil-fuel lending by 60% in the same period.

New statistics developed by the Bank Information Center show that the World Bank Group’s private sector arm, the International Financial Corporation (IFC), increased its lending for fossil fuel projects by a staggering 165% in FY2008[1]. Taken as a whole, the World Bank Group increased its fossil-fuel lending by 60% in the same period.

“While the World Bank appears to have slowed down lending for fossil fuels, at least in FY08, the IFC has shot way up,” said Heike Mainhardt-Gibbs, a consultant with BIC who generated the statistics. “Not only did the IFC increase its lending for oil and gas, but in 2007 and 2008 huge investments have been made in coal.”

Total World Bank Group financing for fossil fuel projects is estimated to have been nearly US$2.3 billion in 2008. Of this, IFC projects accounted for approximately US$2.2 billion.[2] (See spreadsheet below for detailed data.) Included in IFC’s fossil-fuel investments are two large coal power plant projects, totaling US$750 million – the controversial Tata Ultra Mega project in Gujarat, India (4,000 megawatts), and the Calaca Power project in the Philippines. These two projects alone account for 33% of total World Bank Group fossil-fuel financing for the year.

Other large-scale projects in FY08, all financed by the IFC, included a $550 million oil and gas project in Argentina, the highly controversial Peru LNG gas project ($300 million) and the Cairn India II oil project ($250 million). By comparison, the largest World Bank project was the Natural Gas Connections project in Egypt, worth $75 million.

On July 1, the World Bank’s Board of Directors approved the establishment of two new climate change funds just days before the Group of Eight (G8) Summit in Hokkaido, Japan. The Clean Technology Fund, for which the Bank is seeking $4-5 billion in contributions from donor countries, is intended to help emerging economies such as India and China to transition to clean energy technologies to help reduce their carbon emissions. The Strategic Climate Fund, for which there are no firm commitments of money to date, is intended to help poorer countries adapt to climate change.

The funds are part of the World Bank’s and donors’ response to climate change challenges. They will likely be launched at the upcoming G8 summit where climate change is a major theme. Thus far, the United Kingdom, the United States and Japan have made pledges of monetary commitments for the Clean Technology Fund. Any U.S. contribution to the Funds must first pass budgetary approval by Congress.

“We think the CIF will have a significant impact in generating even more financing for climate action,” said World Bank President, Robert Zoellick, “but also in demonstrating new approaches to address the current and future effects of climate change. These approaches will range from agriculture to water management, from transport to urban development, and from biodiversity to energy access.”

The funds have come under intense criticism from environmental and civil society groups. In early June, over 120 civil society groups issued a statement during the United Nations Framework Convention on Climate Change (UNFCCC) meeting in Bonn, Germany, stating that the World Bank needs to explicitly define “clean technology.”

"The Clean Technology Fund has no definition of clean technology," said Kenny Bruno, International Program Director for Oil Change International, one of the signatory groups. "What they are really proposing is a 'slightly less dirty' technology fund, which will include financing of coal plants that are somewhat less polluting than the dirtiest plants out there.”

Ironically, as the Bank positions itself as the “climate bank” the data show that the World Bank, and increasingly its private sector arm, continues to fund, and has in fact significantly increased it’s investment in large-scale, polluting, carbon-intensive projects.

“Even if the IFC claim for supporting coal power plants is the use of “supercritical” technology, this technology only provides marginal improvements in efficiency over conventional coal powered plants,” said Mainhardt-Gibbs. “Furthermore, it is today’s standard to use this technology in Greenfield projects and is not related to the IFC’s involvement. Given current concerns about climate change, it seems irresponsible of the Bank to provide such large assistance to the coal industry.”

[1] World Bank fiscal year runs from July 1 to June 30. Figures for FY07 and FY08 are based on funding amounts approved by the Board of Directors. These statistics may be revised based on the World Bank Group’s annual reports.

[2] The data include financing for both fossil fuel projects and extractive industries. Fossil-fuel lending figures include the fossil fuel-based extractive industries of oil, gas, and coal mining plus fossil fuel-based power generation. The extractive industries figures include oil, gas, and mining projects involving production, exploration, processing, pipelines, ports, and development policy lending. BIC has conducted this comparative research for the past four years.

World Bank GROUP extractive industry and Fossil-fuel financing statistics, FY05-08

World Bank Group Financing for Extractive Industries and Fossil Fuel-based Development FY05-FY08. Bank Information Center, July 3, 2008 (Acrobat pdf, 79 KB)

World Bank Group Extractive Industries and Fossil-fuel Financing, FY05-FY08. Bank Information Center, July 3, 2008. (Excel spreadsheet, 74 KB)

Read more... Sphere: Related Content