November 5, 1998

Melinda Kimble
Acting Assistant Secretary
US State Department
Washington, DC

Dear Assistant Secretary Melinda Kimble,

A coalition of NGOs, including Friends of the Earth, Center for International Environmental Law, Sierra Club, Environmental Defense Fund, Greenpeace, Pacific Environment Resource Center, International Rivers Network, Ozone Action, Project Underground, Defenders of Wildlife, National Wildlife Federation, and the Institute for Policy Studies, recently called on the World Bank to reform its lending by setting benchmarks for mainstreaming the environment in their lending portfolios. Among the benchmarks called for by these NGOs is a reduction in greenhouse gas emissions in the World Bank's power, energy, and transportation portfolios of 10 percent a year beginning in 1999. "The decline in carbon emissions should be reported in an annual global carbon emissions report which would calculate carbon emissions resulting from the Bank's portfolio of all power, transport, and oil and gas projects," the letter reads. While this reduction is urgently needed, the World Bank and other international financial institutions have no accurate yardstick by which to measure what exactly the climate change impact of their lending is.

NGOs are joined in our call for a full accounting of greenhouse gas emissions in the World Bank's portfolio by the G-8 Environment Ministers, who wrote in their May 1998 communique: "We must ensure that the policies and operations of the World Bank and other International Financial Institutions (IFIs) take full account of climate change..."

Meeting the terms of this communique will not be a simple exercise. The World Bank is currently relying on the Intergovernmental Panel on Climate Change (IPCC) to guide it in calculating greenhouse gas emissions, and limiting its calculations to power plant emissions. Yet the IPCC does not have a methodology for calculating GHGs associated with IFIs--only for countries. Countries and banks are clearly very different entities when it comes to calculating their impact on the global climate: Countries are rightly requested to calculate emissions at their point of release. However, to get an accurate accounting of IFIs' impact on the global climate, it is essential to calculate carbon emissions that WILL be released from projects they help finance. This calculation of the future impact of IFI lending is necessary, both to meet the terms of the G-8 communique, and to gain full transparency and accountability in the World Bank's lending portfolio--particularly with regard to developing countries' future greenhouse gas emissions.-prior to project approval.

Our own research suggests this exercise is critical in halting the disproportionate flow of public funds toward fossil fuels in developing countries. The Institute for Policy Studies has just finished updating its latest report on the World Bank and climate change. Since 1992, the World Bank has lent over 25 times as much toward fossil fuels as it, together with the Global Environmental Facility (GEF), has disbursed on renewables. The World Bank is committing most of its energy and power portfolio to fossil fuels--$13.6 billion since 1992--and a large share toward coal. One in three of its energy/power dollars in the last year went to coal projects in China.

The good news is the World Bank is to be commended, together with the GEF, for significantly upping their investment in renewable energy and energy efficiency in the last year, up by over $350 million from mid-1997 to mid-1998 from roughly $154 million total for the years 1992-97. However, this figure is far lower than the benchmark the World Bank set for itself in an earlier draft of their "Energy and Environment Strategy" paper. That paper suggested a target of 20% of its total energy lending could and should be devoted to renewables, energy efficiency and demand side management programs. The coalition of NGOs mentioned above believe this benchmark should be reinstated beginning in 1999, and increased by 10% per year.

IPS research also found the World Bank is clearly not exploiting the renewable market to its full potential. For example, in West Africa, the Bank is promoting a gas pipeline from Chevron's fields in Nigeria to CMS Energy's new power plant in Ghana, while the Economic Community of West African States is studying the solar and wind energy potential in each of the region's 16 states. In Morocco a 50-megawatt wind farm is being developed independently near a 696-megawatt coal-fired power plant funded by the World Bank.

After global criticism peaked following the release of the report, "The World Bank and the G-7: Changing the Earth's Climate for Business" at the 1997 Earth Summit II in New York, World Bank President James Wolfensohn pledged to calculate greenhouse gas emissions associated with World Bank energy lending and "where there is cause for concern, explore other more climate-friendly options." Yet because of the lack of a clear methodology for IFIs and GHGs, less than 10 percent of all World Bank projects are being calculated for their impact on the climate. By its own admission, the World Bank will exclude from its calculations all coal, oil or gas reserves which the Bank helps open up for exploitation; our figures suggest that these projects constitute roughly 90 percent of the future emissions associated with World Bank energy lending. Instead, the Bank only calculates emissions from power projects it helps fund--and even here, takes credit for only one-third of these emissions over a 25-year lifespan for power projects. An internal OED review found that, despite an operational directive to do so, even this narrow set of calculations were conducted less than half of the time.

Little wonder, then, that the World Bank claims it was responsible for "only" 1.4 billion tons of carbon for projects funded between 1992-97 rather than the 9.5 billion tons of carbon our 1997 study showed. (By way of reference, all the world's countries released 6.5 billion tons of carbon in 1995.)

Members of the House and Senate have also questioned the role of the World Bank in creating a "self-fulfilling prophecy" of rising greenhouse gas emissions. Senator Joseph Lieberman (D-CT) wrote State Department Secretary Madeleine Albright and Treasury Secretary Robert Rubin on June 3, 1998:

"...I encourage you to make every effort to ensure that publicly supported lending institutions, both within the United States and in other developed countries, evaluate all projects in developing countries in terms of greenhouse gas emissions. They should adopt policies to ensure that project proponents consider options that will result in lower greenhouse gas emissions than would otherwise result... Developed nations, through the quality of development they invest in, will largely determine the quality of the environment in the developing world. "This approach would be consistent with the Administration's view that developing countries must continue to grow but in a more environmentally sound and sustainable way. Most importantly, the information obtained from lending institutions would help demonstrate that developing countries are moving down the path of meaningful participation. We can make real progress in this area before countries sign on to commitments under the Kyoto protocol, which would be an important way to get around the impasse in our country regarding developing world participation."

We believe the U.S. can take a leadership position in Buenos Aires in two ways: 1) By example, and 2) with the message we send in the form of our public investments in other countries. We urge you to instruct your negotiators in Buenos Aires to sign the Kyoto Protocol. As a first step toward inducing developing countries to participate in the Kyoto Protocol, we also urge you to call on the IPCC to assist the World Bank and other IFIs in providing a transparent, scientifically sound methodology for calculating greenhouse gas emissions associated with all IFI lending. We look forward to working with you in Buenos Aires toward achieving these important goals.

Sincerely,

Daphne Wysham
Institute for Policy Studies

David Hunter
Center for International Environmental Law

Kalee Kreider
Greenpeace USA

Dan Becker
Sierra Club

Andrea Durbin
Friends of the Earth

Patrick McCully
International Rivers Network

John Passacantando
Ozone Action

Bruce Rich
Environmental Defense Fund

Steve Kretzmann
Project Underground

Doug Norlen
Pacific Environment Resource Center

CC: James Wolfensohn, World Bank President
Ian Johnson, World Bank Environment Department
Robert Watson, World Bank Environment Department
Jan Piercy, US Executive Director to the World Bank
David Sandalow, White House
Bill Schuerch, US Treasury
Congressman Dennis Kucinich
Congressman Henry Waxman
Senator Joseph Lieberman