World Bank criticized for low support to renewables

WASHINGTON, DC, US, November 9, 2005 (Refocus Weekly)

The World Bank is not meeting its commitment to lead the global transition to renewable energies, and is actually lagging in its efforts in developing countries, according to the environmental group Friends of the Earth.

The World Bank was asked at the G8 summit in July to develop a new framework for climate change that would remain in effect after the 2012 expiration of the Kyoto Protocol on greenhouse gas emissions. Twenty countries, including all eight G8 members, are meeting in London for the first time since that summit, to discuss ‘Climate Change, Clean Energy and Sustainable Development.’

“Based on an examination of publicly available documents for World Bank Group energy lending, the Bank has failed to adequately fund and create policies to push the development of clean energy and has failed to meet even its own commitments,” concludes ‘Power Failure: How the World Bank is Failing to Adequately Finance Renewable Energy for Development.’ “This failure to adequately fund clean energy misses a tremendous opportunity to use these energy sources to promote development and poverty alleviation, and it continues the Bank's long-standing over-investment in harmful energy sources.”

Friends of the Earth says Bank funding for clean energy in fiscal 2005 was US$223 million, an increase of 7% over the previous year, but that US$14 million is less than half of the Bank's target to increase spending on renewables by 20% each year for the next five years. That target was set last year.

“The bank has not seriously considered mitigation of climate change impacts of its projects in the past and, in spite of acknowledgments by world governments that climate change is a critical problem facing developing countries, there have been relatively few subsidies for clean energy sources,” it explains.

“The energy needs of developing countries are enormous and growing,” with one out of every four people still lacking access to electricity, and one out of every three still relying on traditional biomass for cooking and heating. Global energy use is expected to rise by 34% between 2002 and 2025, and energy use in developing countries is expected to double during that period.

“Renewable energy represents an enormous and largely untapped opportunity to bring energy to many of the poorest people around the world,” it says. The World Bank, “as the world’s foremost multilateral development institution, is in a key position to drive policy and financing for clean, renewable energy and energy efficiency in developing countries.”

Of the additional $14 million in support for renewables and energy efficiency projects, most did not come from the Bank’s own funds, but from carbon finance funds and the Global Environment Facility (GEF), claims FOE. “Only $109 million, or 49%, of the World Bank’s renewable financing came from the World Bank’s own funds; of this amount, $87 million was for just one project.”

The Bank chose not to include its private sector lending arms (International Finance
Corporation and the Multilateral Investment Guarantee Agency) in its 20% target, and “the IFC and MIGA therefore have no concrete goals for increasing financing for renewables,” the report claims. The IFC devoted only 2% of its total energy lending to renewables in fiscal 2005.

Regional breakdowns show financing for renewables was very uneven, with “little attention or resources given to several regions with critical energy needs,” with three projects in China receiving $145 million (65%) of the funding for renewables, while South Asia received only $5.6 million. Lending to renewables “has been and continues to be quite small compared to its funding of GHG producing fossil fuel projects.”

“Over the years, the Bank has used its low-interest lending to pump massive amounts of money into oil, gas, and coal projects, which produce greenhouse gases that lead to climate change,” the report claims. “Providing clean, renewable energy from wind, solar, geothermal, small hydroelectric, and biomass sources, combined with improved energy efficiency, can meet our current energy needs, in addition to supplying electricity to those who The World Bank was asked at the G8 summit in July to develop a new framework for climate change that would remain in effect after the 2012 expiration of the Kyoto Protocol on greenhouse gas emissions. Twenty countries, including all eight G8 members, are meeting in London for the first time since that summit, to discuss ‘Climate Change, Clean Energy and Sustainable Development.’

“Based on an examination of publicly available documents for World Bank Group energy lending, the Bank has failed to adequately fund and create policies to push the development of clean energy and has failed to meet even its own commitments,” concludes ‘Power Failure: How the World Bank is Failing to Adequately Finance Renewable Energy for Development.’ “This failure to adequately fund clean energy misses a tremendous opportunity to use these energy sources to promote development and poverty alleviation, and it continues the Bank's long-standing over-investment in harmful energy sources.”

Friends of the Earth says Bank funding for clean energy in fiscal 2005 was US$223 million, an increase of 7% over the previous year, but that US$14 million is less than half of the Bank's target to increase spending on renewables by 20% each year for the next five years. That target was set last year.

“The bank has not seriously considered mitigation of climate change impacts of its projects in the past and, in spite of acknowledgments by world governments that climate change is a critical problem facing developing countries, there have been relatively few subsidies for clean energy sources,” it explains.

“The energy needs of developing countries are enormous and growing,” with one out of every four people still lacking access to electricity, and one out of every three still relying on traditional biomass for cooking and heating. Global energy use is expected to rise by 34% between 2002 and 2025, and energy use in developing countries is expected to double during that period.

“Renewable energy represents an enormous and largely untapped opportunity to bring energy to many of the poorest people around the world,” it says. The World Bank, “as the world’s foremost multilateral development institution, is in a key position to drive policy and financing for clean, renewable energy and energy efficiency in developing countries.”

Of the additional $14 million in support for renewables and energy efficiency projects, most did not come from the Bank’s own funds, but from carbon finance funds and the Global Environment Facility (GEF), claims FOE. “Only $109 million, or 49%, of the World Bank’s renewable financing came from the World Bank’s own funds; of this amount, $87 million was for just one project.”

The Bank chose not to include its private sector lending arms (International Finance
Corporation and the Multilateral Investment Guarantee Agency) in its 20% target, and “the IFC and MIGA therefore have no concrete goals for increasing financing for renewables,” the report claims. The IFC devoted only 2% of its total energy lending to renewables in fiscal 2005.

Regional breakdowns show financing for renewables was very uneven, with “little attention or resources given to several regions with critical energy needs,” with three projects in China receiving $145 million (65%) of the funding for renewables, while South Asia received only $5.6 million. Lending to renewables “has been and continues to be quite small compared to its funding of GHG producing fossil fuel projects.”

“Over the years, the Bank has used its low-interest lending to pump massive amounts of money into oil, gas, and coal projects, which produce greenhouse gases that lead to climate change,” the report claims. “Providing clean, renewable energy from wind, solar, geothermal, small hydroelectric, and biomass sources, combined with improved energy efficiency, can meet our current energy needs, in addition to supplying electricity to those who currently do not have access.”

“If the World Bank Group is to deliver on the potential of renewable energy to promote development and poverty alleviation, it will have to significantly shift its approach to the financing of renewable energy,” and must “dramatically increase” its funding for renewables, both in absolute terms and as a proportion of its overall energy funding. The IFC and MIGA will have to commit to renewable energy financing targets and develop clear strategies to meet those targets, and the Bank will have to adopt regional targets for renewables and efficiency financing by creating renewable energy teams to focus on specific countries and technologies.

“As recognition of the impacts of climate change and the need for energy for the world’s poor grows, international institutions, governments, and others must come together to find a way forward,” it concludes. “Significantly more funding for renewable energy must be put on the table, both in developed and developing countries. There should be serious consideration given to the appropriate international financing mechanisms for shifting energy investments to renewable energy.”


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