NEW YORK - A study released by an independent policy think-tank casts further
doubts on the World Bank's ability to stay neutral in the global politics of
climate change.
"It is making money from causing the climate crisis and then turning around and
claiming to solve it," charged Janet Redman, the study's lead author and a
researcher at the Institute for Policy Studies.
In releasing the 79-page report last week, Redman described the World Bank's
role in the so-called carbon markets as
"dangerously counterproductive" to international efforts to tackle climate
change.
Carbon markets refer to commercial aspects of environmental responsibility, in
which energy companies can either agree to cut carbon emissions or buy the
right to keep polluting.
The report, entitled "World Bank: Climate Profiteer", shows that instead of
encouraging clean energy investors, the bank is lending much of its financial
support to the fossil fuel industry.
"It's playing both sides of the climate crisis," said Redman, noting that in
just past two years the bank loaned no less than US$1.5 billion to companies
investing in fossil fuels.
The scientific community has repeatedly warned that drastic reduction in the
use of oil, gas, and coal is a must to avoid the catastrophic effects of
climate change.
The bank claims it is an "honest broker" of carbon deals, but the study's
authors say their findings do not validate that assertion.
"With little transparency around its credits and no formal accounting for its
carbon debits that are accruing thanks to the World Bank loans," said Redman,
"it is hard to say."
The study's findings show that out of its $2 carbon finance portfolio, the bank
has directed nearly 80% to projects involving the coal, chemical, iron, and
steel industries.
By contrast, critics say, it has not invested any significant amount of money
in projects aiming to sustainably reduce poverty. The bank's Community
Development Carbon Fund (CDCF) and the Biocarbon Fund have a total capital of
$219 million, which constitutes only 10% of the total carbon-related funding at
its disposal.
"The bank finances a fossil fuel project in Poor Country A. Rich Country B asks
the bank to help arrange carbon credits so Country B can tell its carbon
counters it's taking serious action on climate change," said Dephane Wysham,
who worked with Redman on the report.
"It kindly obliges, offering credits for a price far lower than Country B would
have to pay if Country B made those cuts at home," Wysham explained. "Country A
gets a share of the cash to invest in equipment to make the fossil fuel project
slightly more efficient."
"The bank takes its 13% cut, and everyone is happy," she said.
Among numerous other examples that illustrate the bank's questionable
practices, the report's authors also mention its plans to fund a $4 billion
coal-fired power plant in Mundra, in the Indian state of Gujarat. The complex
of five 800-megawatt plants will be owned and operated by Tata Group, India's
largest multinational corporation.
Tata Motors, a division of the same conglomerate, recently announced plans to
buy the luxury car companies Jaguar and Range Rover from US automaker Ford for
$2.3 billion. Tata Power's 2007 revenues totaled $1.6 billion. "It's hard not
to ask how much help Tata needs from the World Bank," said Wysham.
Once operational, the Mundra power plant will be India's third-largest emitter
of greenhouse gases. The bank, according to the report's authors, is also
willing to give carbon credits to Tata for its coal burner.
Wysham calls it a "bizarre logic of the market".
"[It's] a market where Country B can get credits for helping a corporation,"
she said, "even one of the world's wealthiest corporations such as Tata,
capture a few emissions, as long as they are captured in a 'poor' country, like
India, regardless of how rich the company involved may be."
The report also explains at length how the bank's policy on carbon credits is
affecting indigenous communities who have no say in projects aimed at
reforestation.
"Trading forest carbon credits has become a burgeoning business," said Redman,
noting that the bank is "encouraging" a land-use shift from subsistence
agricultural cultivation to agro-industrial forestry.
The report's authors said a document leaked from the bank in January suggests
that it seeks to further expand its role in the carbon market with
multi-billion-dollar plans for investment in so-called "climate adaptation" and
forestry.
"This usurpation of authorities on these funds flies in the face of Bali
agreement," said Redman. At the UN climate change conference held in Bali,
Indonesia, last December, developing countries said they must be allowed to
have oversight on such funds, and they won.
"The new climate funds," in her view, "institute a donor-driven governee
structure that leaves developing countries without a voice."
The World Bank, which held its annual spring meeting in Washington, DC, last
week, took the opportunity to announce plans for expanding its involvement in
carbon-trading, Redmond wrote in her own account of the issue.
The bank proposed to extend its managed climate funds aimed at easing the
change to a "low carbon" economy. Two proposed funds would "scale up" carbon
offset ventures that already make up a more than $2 billion carbon finance
portfolio at the bank.
Illustrating the role the bank can play on both sides of the emissions control
issues, Redmond cited the "FaL-G Brick and Blocks" project in India. Through
its Community Development Carbon Fund (CDCF) the bank contracted to buy
emissions reductions generated when 200 small brick-makers switch from
coal-fired bricks to self-hardening fly ash bricks. That, she said, would like
like a positive move both for Indian entrepreneurs and for the climate.
But fly ash is a radioactive byproduct of coal-fired power plants laden with
heavy metals, and the bricks' ingredients include lime, a waste product of
acetylene production, and gypsum, a byproduct that fertilizer companies in
India are under increasing pressure to dispose of safely.
Under the bank's carbon-trading program, these companies' pollution, which was
once a liability, becomes an asset. New revenue streams opened up by World Bank
carbon finance create incentives that benefit fossil-fuel dependent power
plants and factories.
Staff managing the CDCF implored citizen groups to understand that projects
such as those involving fly ash bricks help the poor by bringing jobs to rural
India, and, by applying social safeguards, help keep kids out of the workforce,
Redmond reports. When asked about the health risks posed to workers who will
handle toxic chemicals, one bank senior environmental specialist claimed not to
have heard these concerns before, according to her report.
Besides downplaying the serious health problems that fly ash can cause, Redmond
wrote, the bank disregards that inputs for these bricks come from greenhouse
gas emitting sources.
The UN body that regulates North-South carbon trading requested the bank
include these emissions in the projects' carbon footprint, but the bank
declined to do so, responding that this was "outside the boundaries" of the
project's scope, Redmond wrote.
At the bank's presentation in Washington last week, one non-government
organization staffer muttered under his breathe that the bank's idea of "low
carbon" alternatives - "clean" coal, large hydropower plants, landfill gas
recovery - is unacceptable. The bank representative wrapping up his PowerPoint
presentation responded, "It's not your money."
But it's not the bank's money, either, Redmond's report said. The money used
for carbon deals is at least in part the money of taxpayers in the rich North.
And the land and labor of people in the global South, who are struggling for
control over clean energy production and consumption, are being held by the
bank as collateral.
Redmond argues that the bank should pull out of financing fossil fuels
completely (as recommended by the bank's own Extractive Industries Review in
2004). As a second step, the bank should calculate the greenhouse gas footprint
of all its public finance and private investments that run through the public
institution, and weigh the costs of climate change in deciding which projects
to fund.
Finally, donors should have the amount of greenhouse gases produced from
projects they support "debited" against any emissions they hope to claim
through offsetting.
Janet Redman is a researcher at the Sustainable Energy and Economy
Network, a project of the Institute for Policy Studies, and author of World
Bank: Climate Profiteer, a report about the bank's carbon-financing work.
(Inter Press Service and Janet Redman. Extracts from Redmond's report posted
with permission from Foreign Policy in Focus)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
