World Bank pressured over energy policy

By Karen Carstens

Date: 19/02/04

STEPHAN Singer will not go gently into a World Bank conference on renewable energies in Washington taking place next month.

The outspoken Brussels-based World Wide Fund for Nature (WWF) climate policy expert aims to take the biggest global anti-poverty lender to task by asking some tough questions it may rather not hear.

The World Bank Group has been less than pleased with a study it commissioned to assess its role in the oil, gas and mining sectors.

Presented to the Bank last month (23 January), the Extractive Industries Review (EIR) was conducted over a two-year-period, spans some 80 pages and includes around 40 recommendations that came as a shock to green NGOs, such as the WWF.

"We were all surprised," said Singer. "They're very good".

The review's suggestions include phasing out all World Bank funding for projects involving oil by 2008, maintaining a moratorium on supporting both the coal and nuclear sectors and increasing funding for renewable energies by 20% annually. This is a tall order, Singer emphasized, given that the Bank's budget in the energy sector is around 94% for fossil fuels compared with just 6% for renewables.

"These recommendations are out and the World Bank must now respond to them," he said.

And it has, albeit not in the way Singer and other environmental campaigners would have liked it to.

James Wolfensohn, the Bank's president, comes across sceptically in a draft copy of a management response prepared on his behalf.

It brushes aside the ambitious proposal that both the Bank and its private sector arm, the International Finance Corporation, should create a shift in its financing towards renewable energy.

"Adopting this policy would not be consistent with the World Bank Group mission of helping to fight poverty and to improve the living standards of people in the developing world," the management report stated.

Ending the financing of oil projects, it stressed, "would unfairly penalize small and poor countries that need the revenues from their oil resources to stimulate economic growth and alleviate poverty".

Moreover, the report added, imposing a strategy of using the bank as a lever to lower fossil-fuel emissions was counter-productive, as this would go against the grain of the burden-sharing approach to reducing carbon emissions enshrined in the Kyoto Protocol.

But environmentalists such as Singer, who undertook some development work in India for the German government before joining WWF a decade ago, argue that even if the bank only partly took on board some of the EIR's key recommendations, it would set a long-term pro-renewables agenda for both public and private investors across the globe.

The EIR, led by Emil Salim, a former Indonesian environment minister, also proposed that indigenous peoples should be required to give "free prior informed consent" before an oil, gas or mining project was approved. But the World Bank said this could violate local laws.

The management did, however, accept that the Bank should work to increase the transparency of oil revenues.

Yet such minor concessions will not placate green and social NGOs, which have vowed to continue to press their case when the proposals go to the Bank's executive board, even if they fear the management proposals will very likely be accepted.

Meanwhile, Salim is suspected by some in the extractive industries of harbouring an anti-mining bias, "born out of a desire to perpetually present critical alternatives to company views", as one observer put it.

The EIR consulted industry, government and pressure group representatives around the world, but the drafting of the recommendations was left entirely to Salim.

Whether any such criticism can be substantiated or not, it remains an undeniable fact that the EIR was proposed by Wolfensohn during the Bank's annual meeting in Prague in 2000 and was launched in October 2001.

So now the Bank is "under immense pressure" to take an official stance on the EIR, Singer stressed.

Salim will be travelling to several EU member states in the coming weeks, partly to plug the EIR project, and Singer said he hopes to persuade him to stop over in Brussels, just as member state environment ministers convene for their next policy pow-wow on 2 March.

The plan is to persuade EU states to back the EIR recommendations and put the pressure on Wolfensohn. Big hitters, such as the UK and Germany, with some of the more influential votes granted to rich donors in the Bank, could come out in favour of the review, Singer predicted. At the same time, the Bank's own renewables conference in mid-March will provide another opportunity to discuss the EIR, he added.

"Some countries have indicated that they like the recommendations," Singer said. "Now it's up to donors to ensure that they are taken seriously."

Meanwhile, he added, "Wolfensohn is running around in a couple of countries trying to defend a moderate strategy".

Environmentalists would have also liked to see hydropower included in the EIR, Singer said. "We can't tackle everything at once, but if the World Bank says "we're not doing any more funding for oil and coal projects", then that sends a very strong signal - these are huge steps in the right direction".