Indian environment ministry rejects Climate Investment Funds

News|Bretton Woods Project|27 November 2008

The Indian ministry of environment and forests rejected the World Bank's recently finalised Climate Investment Funds (CIFs) (see Update 61), a snub that may prove damaging, since India would have been a significant client. However, it is unclear whether the Indian government as a whole has rejected the proposal, as the ministry of finance has also been involved in talks with the Bank, though details are yet to emerge.

This follows the G77 and China's demands at climate change talks in Accra in August that developed countries should directly transfer resources to developing countries to help them combat climate change.

Despite this, India is amongst the seven potential recipient countries listed as members of the Clean Technology Fund (CTF) board which has the remit of investing in projects and programmes in developing countries "that contribute to the demonstration, deployment, and transfer of low-carbon technologies". Trust fund committees are responsible for approving the strategic use of funds as well as programming priorities, additionally, they provide guidance to the CIF Partnership Forum.

Countries pledge support

On September 26 ten countries pledged $6.1 billion towards the CIFs. After the US, UK and Japan, the largest contributors were Germany and France. Maria Athena Ballesteros of the World Resources Institute said that "compared to the trillions of dollars of investment needed in the energy sector in developing countries, $6.1 billion is a small sum of money".

At the first CIF partnership forum, in Washington in mid-October, NGOs and representatives from civil society were vastly outnumbered by officials from the World Bank and regional development banks. Time constraints meant that there was no opportunity for participants to discuss proposals or raise concerns. Janet Redman of the Institute of Policy Studies, said that "it was unclear (and still is) how the response to these questions will be integrated." The meeting ended without even a decision being made on how often the partnership forum would meet.

Climate conditionalities

Financing for the CIFs will follow the Bank's operational policies and procedures for investment lending, meaning mostly loans, not grants, with conditionalities attached. World Bank conditionalities have long been criticised for undermining democracy by reducing policy space and for pushing controversial policies (see Update 60, 58)

A June Friends of the Earth briefing; Why the World Bank Climate Investment Funds should be stopped, branded the concept of concessional loans for climate adaptation in developing countries as "unethical" given that "industrialised countries are historically responsible for climate change."

The Bank has so far resisted calls from think tanks, academics and NGOs that it should include carbon costs when accounting for the projects it funds. David Wheeler of the Washington-based think tank Centre for Global Development (CGD) reports that China and India have also resisted such calculations, fearing a restriction on the use of Bank funds.

At a high level consultation convened by the CGD in September experts argued that by revealing the true cost of carbon-intensive projects, the Bank would be compelled to channel resources into low-carbon renewable energy such as wind and solar power. Bank officials expressed concerns over the technical and political obstacles to carbon accounting, such as determining a carbon shadow price.

Read more... Sphere: Related Content