EXECUTIVE SUMMARY

"Given current population and urban growth rates over the next generation, industrial output and energy use in the developing countries will increase five-fold--with the risk of irreversible environmental damage...We must heed the warnings of the Rio Summit and act to protect the world for our children."

--World Bank President James Wolfensohn, October 10, 1995, in speech to IMF/World Bank Annual General Meeting.

Since 1992 -- the year most of the world leaders signed the Climate Convention to curb climate change in Rio de Janeiro-- the World Bank and its subsidiary organizations have administered an aggressive $9.4 billion spending program to expand international investment in and ownership of coal mines, oil and gas fields, and fossil fuel-fired power plants in developing countries. Another $4.1 billion in World Bank fossil fuel loans are pending. Each World Bank dollar paves the way for five to six dollars in additional private investment.

The World Bank's energy strategy is virtually tailor-made to undermine the Climate Convention by catalyzing the rapid expansion of large-scale fossil fuel projects in the global South. These World Bank-financed fossil fuel projects will have a significant impact on the world's climate: The total projects approved by the World Bank since the Climate Convention will contribute an additional burden of carbon emissions to the Earth's atmosphere equivalent to more than all current annual global carbon emissions from burning of fossil fuels.

About nine out of every ten projects financed by the World Bank benefits at least one corporation headquartered in the wealthy Group of 7 (or "G-7") nations. Many of the industries consuming or producing the fossil fuels have migrated from more industrialized countries where resources are growing scarce and heavy industry and power demand are plateauing.

The World Bank plays a pivotal role in ensuring this G-7 corporate involvement in fossil fuel consumption by routinely ordering the privatization of industrial sectors in a developing country; once this is achieved, it then funds the first power plant or oil field that is open to foreign investment. With privatization in place, state-run utilities can no longer control the procurement process.

The G-7's collective financial muscle is phenomenal; their collective gross domestic products (GDPs) are greater than 68 percent of the total world economy. In 1995, their seven GDPs totalled $17.2 trillion, while the global economy totalled $25 trillion.⁵ These seven nations are also among the major contributors to the World Bank; as such, they hold close to 50 percent of the Bank's executive directors' voting power, thereby wielding significant clout in approving or vetoing World Bank projects.

All seven of the G-7 are among the 164 nations who have ratified the Climate Convention; they are all among the "Annex 1" group of industrialized countries who have the highest per capita greenhouse gas emissions; all have agreed, at the behest of the Intergovernmental Panel on Climate Change (IPCC), to reduce their greenhouse gas emissions. None have made significant progress in this regard.

The G-7 and the World Bank are thereby undermining the spirit, if not the letter, of the Climate Convention in three ways:

1) by promoting, in the form of low-interest loans, guarantees, and other incentives for investment, a model of development in non-Annex 1 countries that is harmful to the world's climate, and is predicted to cause particular harm to the poorest people in developing countries;

2) by profiting from this same unsustainable model, they are thereby exploiting a loophole in the Climate Convention intended for non-Annex 1 countries to develop their own economies and eradicate poverty; and

3) by devoting insignificant resources to addressing the rural energy crisis of the 2 billion poorest of the poor-- those dependent on wood fuel, crop waste, and dung--they are thereby ensuring that deforestation as a consequence of fuelwood scarcity, soil erosion, and CO2 emissions from this sector of the population continues to grow.