V. From Rio to Buenos Aires: World Bank Fossil Fuel Lending

In 1997, the Institute for Policy Studies and the International Trade Information Service, in association with the Campagne per la Riforma della Banca Mondiale (Reform the World Bank Campaign, Italy), and the Halifax Initiative (Canada) produced a 135-page, in-depth report documenting a little known and less understood fact: The World Bank, home to the only institution created at the 1992 Rio Earth Summit to mitigate the problem of climate change, and charged with the role of poverty alleviation and sustainable development, was both seriously aggravating the problem of global climate change and overlooking the needs of the 2 billion poorest in the global South by investing billions in fossil fuels. Among our report's findings:

Since the first Earth Summit in 1992 to mid-97, the World Bank Group funded $9.5 billion in oil, gas, and coal projects in the South and East which will eventually add carbon emissions to the Earth's atmosphere equivalent to one and a half times ALL current annual GLOBAL fossil fuel emissions.

The poorest one-third of the planet got less than one-tenth of the World Bank's energy investments while absorbing most of the environmental and social costs of fossil fuels.

The World Bank was investing 100 times more money in fueling climate change than in averting it.

This report was posted on the worldwide web (http://www.seen.org), with executive summaries available in Japanese, Italian, German, and English.

When our partner NGO, "Reform the World Bank Campaign" in Italy, released our report in the Italian Parliament, they did so with the endorsement of the director of World Wildlife Fund Italy and the Club of Rome. The press attention resulted in hearings being held on our report's findings in the Italian Senate (all members of the Italian Senate were given copies of the report) with former Prime Minister Romano Prodi and the Minister of the Environment, Edo Ronchi present. The Prime Minister, in an unprecedented speech to the Senate, stressed, among other things, that the World Bank should increase its support to renewable energy sources.

Following these hearings, the Italian Senate passed a unanimous resolution "to advocate a review of World Bank activities in the energy sector, with the adoption of a binding policy that envisages the progressive reduction of funding for non-renewable energy sources to the advantage of renewables, as well as the establishment of a department for energy efficiency." It went on to say, "The World Bank will have to support developing countries in the implementation of sustainable energy strategies and adopt binding and transparent guidelines and procedures aimed at evaluating the impact of its projects on the global climate."

The Dutch Greens raised a number of questions in the Dutch Parliament based on our report's findings, and brought the report to the attention of their Prime Minister. Press attention began to gain momentum in Europe and North America.

All of this pressure and political attention resulted in World Bank President James Wolfensohn making the following remarks at the Earth Summit II in New York in June:

"...The World Bank will routinely calculate the potential impact of all its energy projects on climate change and, where there is cause for concern, assist developing country clients to finance more climate-friendly options..."

In response, IPS produced a global sign-on letter to Wolfensohn, requesting further clarification on this pledge, first in June and then, when there was no response, again, in November.

Concerns raised in our report were echoed in the 1998 "Study of the GEF's Overall Performance" (March 2, 1998) commissioned by the GEF Secretariat. This report was unequivocal regarding the World Bank's efforts on climate change:

"The Bank has not succeeded in systematically integrating global environmental objectives into economic and sector work or into the CAS [Country Assistant Strategy] process; nor has it taken meaningful action to reduce its traditional role as financier of fossil fuel power development...It has not yet undertaken any programming based on global environmental objectives...Continued financing by the World Bank for such projects (as conventional fossil fuel generation) is inconsistent with mainstreaming of the global environment in the Bank's regular operations."

At the May 1998 Summit of the Eight in Birmingham, England, the following language appeared in the Environment Ministers communiqué, and was endorsed by the G-8 countries in their final communiqué:

..."We must ensure that the policies and operations of the World Bank and other International Financial Institutions take full account of climate change..."

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 around the world. Congressmen Dennis Kucinich (D-OH) and Henry Waxman (D-CA) wrote President Bill Clinton on June 19, 1998 drawing from our research:

..."We are interested in your views on how the United States has been using its economic leadership at...the World Bank...to address the challenge of global warming and provide incentives for developing nations to increase their participation in this critical global effort. Since 1992, the World Bank has helped finance 87 fossil-fuel based projects. These projects are expected to produce one and a half times more C02 emissions than today's annual global total. Has there been a comprehensive review of these projects undertaken to determine whether renewable or clean energy technologies could be substituted as energy sources?"

The Fly in the Ointment: The Byrd Resolution

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Shortly after the Earth Summit II, a far less progressive response to the problem of climate change than that emerging from European parliaments was issued by the U.S. Senate: On July 25, 1997, in what has become known as "the Byrd Resolution" (after its chief sponsor, Democratic Senator Byrd, who represents the coal mining state of West Virginia), the Senate resolved that the United States should not sign any agreement for new binding restrictions on greenhouse gas emissions at the upcoming third Conference of the Parties (COP-3) of the UN Framework Convention on Climate Change (UNFCCC) in Kyoto, unless it included "new specific scheduled commitments to limit or reduce greenhouse gas emissions for Developing Country Parties within the same compliance period." Underlying this non-binding resolution were concerns that an agreement at COP-3 would cause a loss of American jobs to China, India and other developing countries.

When the Clinton Administration negotiators went to Kyoto, they had to walk a fine line between the Byrd Resolution, public opinion polls that showed a majority of the American public wanted strong action on climate change, a Vice President who had written a book on the subject, and the global community who expected the U.S., as the largest greenhouse gas emitter, to take serious action on the issue. When the Clinton team tried to advance the platform embodied in the Byrd Resolution in Kyoto before pledging to reduce the U.S.'s own significant emissions, they were roundly criticized by the representatives of the nations gathered there.

The Global Climate Coalition

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What few realized until Kyoto was that a well-financed lobbying campaign, whose first success was the passage of the Byrd Resolution, was underway with the intent of scuttling any action by the U.S., and thus, by the rest of the world on climate change. The group, the "Global Climate Coalition," is the lobbying arm of the American Petroleum Institute and other U.S.-based oil, gas and coal companies. Since Kyoto, the GCC has become increasingly visible as it is exposed using tactics such as spreading disinformation and trying to buy off scientists to support their cause.

GCC members have also been actively promoting a strategy of exploiting and attempting to widen the divide that exists between rich and poor countries. In October 1997, speaking at the 15th World Petroleum Congress in Beijing, GCC supporter and Exxon chairman Lee Raymond urged China to use more, not less fossil fuels, and said nature was to blame for most global warming. Raymond also heads up the American Petroleum Institute. Simultaneously, the GCC was lobbying the U.S. Congress to take no action on climate change until China and other key developing countries do. This perfect formula for stasis guarantees business as usual for the oil, gas and coal industries while the Earth's climate grows warmer and more out of balance.

While developing country participation in the Climate Convention is certainly a worthy goal, as this report documents, it is hypocritical for the U.S. to call for such participation while, at the same time, investing billions in taxpayer dollars via the World Bank each year in fossil fuel projects in developing countries. The reason for the hypocrisy, as this report shows, is economic: World Bank and other taxpayer-financed development loans are good for big business, especially in the U.S. Much of the money flows into coal-fired power plants and oil and gas fuel fields developed by U.S. and other G-7-based transnational companies, including members of the GCC, such as Amoco, BHP, Chevron, CMS Energy, Exxon, Mobil and Texaco. These investments line the pockets of the GCC as predictably as they line the pockets of politicians in the G-7 countries and Third World bureaucrats.

According to a recent report by Greenpeace, oil and gas interests have donated $ 53.4 million since 1991 to U.S. political candidates and their parties. This report found that $20.8 million was donated in the 1995-96 period alone of which 77% went to the Republicans. Eight major oil companies, together with the Petroleum Marketers Association, donated $12.5 million to Congressional candidates and the parties in the last 6 years; 75% of this donation went to Republicans. Atlantic Richfield (ARCO), Chevron, Exxon, Enron and Amoco (all members of the GCC) alone gave more than a million dollars each during this period, with ARCO topping the league table with $3.4 million in donations.

So it is no surprise the fossil fuel lobby is successfully urging politicians not to budge on restricting greenhouse gas emissions until China and other key developing countries do, while convincing China to stay the course. They know full well that developing countries won't budge as long as their lobbying dollars and our development dollars continue to steer both us and them down a fossil fuel energy path.

The World Bank's Rebuttal

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On December 2, 1997, Dr. Robert Watson, chair of the Intergovernmental Panel on Climate Change and then director of the World Bank's Environment Department, responded to an IPS letters with signatures from NGOs from North and South, asking for a response to the 1997 IPS report's findings. (For full copies of both letters, see "For the Record" on our website) While attacking our report's findings, Watson used the Bank's own Carbon Back Casting Study to claim that the Bank was responsible for "only" 1.4 gigatons of carbon--not 9.5 gigatons, as our report had suggested--in the years 1992-97.

However, the Carbon Back Casting Study consistently underestimated emissions associated with projects it helped finance. Among the omissions:

The World Bank study did not calculate greenhouse gas emissions associated with oil or gas fields or coal mines it helped to finance but only included emissions from fossil-fueled power projects it helped finance;

The World Bank study chose to only take responsibility for one-third of the entire emissions associated with power projects it helped to finance;

The World Bank study only included emissions associated with a project it helped finance over a period of 25 years.

Furthermore, the authors of the study, the Stockholm Environment Institute, claim their study was never intended to estimate the carbon in the Bank's portfolio.

Watson's response did not dispute one of our key findings, namely that 9 out of 10 World Bank-financed fossil fuel projects benefit wealthy multinational corporations based in the G-7. The Bank did dispute our charge that the Bank is bypassing the energy needs of the rural poor. The fact sheet produced by the Bank notes the numbers of projects financed over the past 15 years, millions of dollars spent on rural electrification, and the standard-- yet unproven-- formula that equates greater energy efficiency with greater benefits for the poor. Although, privately, World Bank staffers admit that they cannot provide energy for the 2 billion poorest, nevertheless, these desperate poor become the "poster children" for the World Bank's energy portfolio: women cooking with cow dung, men cutting down trees for fuel.

Carbon Trading: Fanning the Flames?

At the Kyoto Third Conference of the Parties (COP-3) in December 1997, the U.S. proposed two controversial ideas: "meaningful participation" by "key developing countries" (such as China and India) to meet the terms of the Byrd Resolution; and "flexible" market-based mechanisms for carbon emissions trading. With little support at COP-3 for the U.S. asking poorer countries to take action until it took action at home, U.S. negotiators reluctantly admitted defeat on developing country participation; however, they did manage to get their idea for carbon emissions trading, including "joint implementation" (JI) and international emissions trading, accepted. This got absorbed into a proposal floated by developing countries for a "Clean Development Fund" (later renamed, "Clean Development Mechanism" or CDM). The CDM, which has yet to be fully defined, promised developing countries the potential for "enhanced sustainable development, increased private capital investment in energy projects and accelerated acquisition of advanced technology." It would also permit certified emission reductions from CDM projects in non-Annex 1 (developing country) Parties to be transferred to Annex 1 Parties, which would be deducted from Annex 1 Parties' commitments to reductions under the Kyoto Protocol.

Theoretically, with no ceilings on emissions trading yet proposed, the U.S. and other rich countries will be able to meet all of their emissions reductions targets (an average for all Annex 1 countries of 5.2% below 1990 levels by 2008 to 2010) by doing so in another country which has either already met its targets (such as Russia, which is already emitting fewer greenhouse gases than it did in 1990, and has begun drafting plans for trading emissions with Japan) or a developing country, which has yet to define any targets.

Market-based mechanisms such as emissions trading and JI, while they may serve the interests of large industries in the North and South by allowing greater flexibility, may in fact only aggravate the problem of poverty in the South--whose alleviation is the ostensible reason for a longer lead time in phasing out GHGs in non-Annex 1 countries. Early evidence from JI trials suggests that JI may be worse than ineffective because it invites corruption, and adds little of value to projects.

Two pioneering market mechanisms for controlling pollution are being challenged domestically by environmental justice groups. One mechanism, in Los Angeles, called RECLAIM, or the Regional Clean Air Incentives Market, has resulted in no discernible emissions reductions in the five years between 1993, when reductions were effectively suspended and 1997, according to an internal audit by the South Coast Air Quality Management District. Michael Belliveau writes the following scathing indictment of RECLAIM for Corporate Watch:

"Under RECLAIM, an estimated 40,000 more tons of industrial NOx will be released into the air than would have resulted from the regulations it replaced. This is the result of efforts by a corporate coalition, dominated by oil and aerospace companies, which successfully lobbied to inflate the baseline of allowable emissions for the 500 companies. When the Los Angeles RECLAIM program was set up, companies which formerly underestimated their emissions in order to reduce their permit fees, suddenly reported elevated rates of air pollution. Obviously, the higher the pollution levels claimed, the greater their pollution allowance".

A similar pollution trading scheme involving car-scrapping resulted in equally unjust exposure of poor communities to toxins. Belliveau writes:

... "[The car-scrapping program] resulted in working class Latino communities located near oil company terminals, which avoided pollution reductions by purchasing car scrapping credits, being exposed to much higher levels of toxic emissions...Both RECLAIM and car scrapping--programs that despite their extensive flaws are being rapidly replicated in urban areas around the United States--are supposedly aimed at solving the regional pollution threat posed by soot and smog. Yet unjust local impacts result because sources of smog pollution simultaneously emit toxic pollutants. This same defect, "the hot spot problem," will plague global trading programs in carbon dioxide, only on a larger scale."

The World Bank: Investing in Carbon

At the December Kyoto conference, the World Bank unveiled its own proposal for carbon trading, a Prototype Carbon Fund (PCF). The World Bank explains the PCF as follows:

"This Fund would facilitate exchanges of emission reduction units under the provisions in the Kyoto protocol, which provide for such exchanges between countries with emission reduction commitments (Joint Implementation or JI) and between a country with an emission reductions commitment and one without (the Clean Development Mechanism or CDM). The PCF will pool funds from governments and companies in countries with commitments and invest them in emission reductions in economies in transition (EITs) and developing countries. The PCF is developed in strict adherence to UNFCCC rules and decisions."

With binding emissions reduction targets agreed to at Kyoto, the World Bank estimates that industrialized countries "in aggregate need to reduce their energy related carbon emissions by roughly 550 million tons per annum in the first budget period through measures which have not yet been introduced." In the absence of carbon trading between industrialized countries and EITs, the Bank estimates the annual costs by 2020 to the OECD will be $450 billion. With emissions trading, this figure would be a much reduced, but still a daunting, $150 billion. The PCF would encourage bilateral project-based investments, such as the upgrading of a low-efficiency coal-fired power plant by the transfer of more efficient technology, or replacing the plant altogether with a cleaner gas-fired plant.

Conflict of Interest?

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Some suggest the PCF is only the latest in an increasingly entangled web of conflicting interests for the World Bank. In addition to its role as a leading multilateral financier of fossil fuels, it is also home to the only institution created since the 1992 Rio Earth Summit to mitigate the problem of climate change, the Global Environmental Facility. Robert Watson, who chairs the Intergovernmental Panel on Climate Change, the global institution coordinating the international technical and scientific response to climate change, is also employed part-time in the World Bank's environment department.

Internal documents on the PCF show their "win-win" strategy would have the World Bank profiting from capturing carbon emissions that are "low-hanging fruit," (i.e., carbon emissions that are relatively inexpensive to capture). (See World Bank leaked documents.) The Bank estimates it can generate roughly $100 million per year in net revenue for itself from these "low-hanging fruits" by 2005. The World Bank foresees controlling $2 billion of the global market by 2005.

NGOs and US Government officials have raised serious concerns that having the same institution capture the carbon being released from the project it helped to finance would is both a conflict of interest and would create perverse incentives to allow the lowest possible baseline for energy projects. The PCF proposal outlines potentially conflicting roles for the Bank, they argue: a development institution, a promoter of greenhouse gas reduction, a carbon market regulator (or at least designer of regulations), and an offset investor and trader. They also recognize that the World Bank has a credibility problem, having failed to implement successfully its own energy and environmental policies, downgrading them from mandatory "operational policies" to advisory "good practices" in recent years. Others raise concerns that the PCF would encourage World Bank task managers to spend even more of their scarce development dollars on fossil fuels, diverting them from the far more critical task of "greening" their energy lending with renewable energy.

The IPCC's and World Bank's Rob Watson has assured government officials that the Bank would not develop regulations for carbon trading. (Although the IPCC which, he chairs, will advise the supreme body on the Climate Convention, the Conference of the Parties, on how to develop these regulations.) On perverse incentives he admits there may be a problem, in response to concerns raised by NGOs and government officials, but noted that "the potential for perverse incentives is not specific to the PCF but is a general problem for any emission reduction deals that require additionality, as is required for any JI or Clean Development Mechanism project under the Kyoto Protocol."

Privately, the World Bank is clearly worried about three risk factors in the emissions trading arena (see World Bank graphic #3): Political risk, image risk and performance risk. As this World Bank graphic outlines, the political risk the World Bank is worried about is that it may be perceived to be "getting ahead of the Convention on emissions trading," as well as "undermining GEF replenishment." The World Bank's concerns about undermining the GEF replenishment suggests that it is fully aware that the boundaries between the CDM, JI and the GEF are getting increasingly blurred--and that justifying a continued replenishment for one institution while actively pursuing World Bank involvement in another may be rightly perceived as trying to "corner the market" on emissions trading.

The World Bank's concern about its " image risk" is perhaps most telling. Although publicly Robert Watson and others claim that developing countries must rely on coal for the indefinite future, the World Bank is clearly uneasy about public exposure of the disproportionate amount of public funds being spent by the Bank on "coal sector operations."

Finally, the World Bank is admitting--albeit to itself--that there is a risk that these deals may "go sour." While the Bank is worried about the ramifications in terms of its "credibility" if it fails at capturing carbon emissions, NGOs are concerned that global action on climate change hinges on a market mechanism that is unproven, and, in this case, an institution whose expertise is economic--not scientific-- being entrusted with such a sensitive and vitally important task.

In addition to being involved in the Annex 1 carbon market, it is clear that the Bank wants to play a leading role in the emissions trading market globally. In the September 30, 1998 draft of their energy strategy paper, "Fuel for Thought: A New Environmental Strategy for the Energy Sector," the authors write: "The establishment of an international market for carbon emission offsets or credits should cut the cost of dealing with climate change, and has been agreed in principle at the recent Kyoto conference on climate change. The World Bank Group will help develop this market."

World Bank Fossil Fuel Investments: 1997-98

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While the U.S.' insistence on developing country participation irked many signatories to the climate convention, at home, it provided renewed interest in the role of U.S. investments in fossil fuels in developing countries. 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."

A similar call for accountability by the World Bank and other IFIs was issued by the G-8 Environment Ministers and endorsed by the G-8 countries in their final communiqué at the May 1998 summit in Birmingham, UK:

"...We must ensure that the policies and operations of the World Bank and other IFIs take full account of climate change."

Despite calls for reform and accountability from the G-8, from the GEF Secretariat, and from members of the U.S. Congress and from Prime Ministers, the World Bank is not listening. From late May 1997 to September 1998, the World Bank approved 19 new loans and credits totaling $4.1 billion to coal and diesel-fired power plants, gas and oil pipelines, coal mines, and fossil fuel-derived electricity transmission systems. These recent loans will eventually add at least 2 billion metric tons of CO2 emissions to the Earth's atmosphere; this is in addition to the 36 billion tons of CO2 we have tabulated in the Bank's portfolio of fossil fuel loans and credits since the Earth Summit in 1992. The Bank's contribution to climate change since the Earth Summit now stands at 38 billion tons of lifetime CO2 emissions, at a cost of $13.6 billion to taxpayers whose tax dollars underpin the Bank. The World Bank is also considering an additional $3.8 billion in loans and credit for 29 fossil fuel projects. These projects, in their lifetimes, would add an estimated 3.8 billion tons of CO2 to the Bank's climate change portfolio.

The China Syndrome

The bulk of the Bank's new emissions emanate from China. Since May of 1997, the Bank has approved over $1.35 billion dollars in loans to four massive coal-fired power projects in China. China already burns more coal than any other country. These four new projects -- Tuoketuo, Waigaoqao, Hunan and Yancheng will have a combined capacity of 9,000 megawatts, more than half of the combined power of all power plants financed by the Bank in the previous five years. These plants will emit an estimated 2 billion tons of CO2 in their first 20 years of operation. From 1992-98, the World Bank has approved over $3 billion in financing toward coal and diesel-fired power plants with a capacity over 12,090 megawatts in China alone.

According to sources inside the World Bank, the most recent Hunan Power Project was pushed through the World Bank's Board of Directors in violation of US laws and the World Bank's own policies. The US Executive Director Jan Piercy raised a number of concerns on this project, among them that the private sector was complaining that the World Bank was "crowding them out," and that the Bank was lending for projects that were independently viable.

Piercy raised concerns over the burners' use of anthracite coal. The US EPA allegedly advised Piercy the ambient sulphur dioxide and nitrogen oxide emissions were to exceed the World Bank's own guidelines. In response, the World Bank asked for--and was granted-- a waiver of its own guidelines, claiming that the environmental guidelines were not designed for this type of coal, and that the use of local coal--rather than transporting it from somewhere else--overrode the concern about noxious emissions.

Piercy also allegedly raised the issue of global environmental issues, saying this was a carbon-intensive plant, and would increase greenhouse gas emissions. However, the World Bank responded that this would result in a 100 percent increase in electricity in the region, with only an 8 percent increase in greenhouse gas emissions. (Our figures show that this plant will release 208 million tons of CO2 over 20 years.) Furthermore, the Bank claims that the conditions on this loan are that the Chinese will be decommissioning smaller, more polluting coal-fired power plants as they bring this one on-line.

Finally, Piercy raised concerns that, despite the significant environmental implications of the project, the environmental assessment had been released by the World Bank in late April--less than 120 days before Board approval, in violation of the Pelosi Amendment. Despite these and other concerns, the Hunan Power Project loan was passed by the Bank's other executive directors.

Foreign corporations are vying to own or supply equipment to each of the four China coal-fired power plant projects. National Power of the UK has been selected to build and own one of the Hunan power plants. Foster & Wheeler and Siemens are supplying the turbines and boilers for the Yancheng power Plant project, in which AES Corp. is an investor. Transnational corporate involvement in the two other major projects (Tuoketuo and Waigaoqao) is still being negotiated.

Economic Reform Over Human Rights

A proposed Nigeria to Ghana gas pipeline project would be the Bank's first fossil fuel loan to Nigeria since that country's government executed nine oil drilling opponents in 1995. The Bank, which is considering a $260 million loan toward the project, has been waiting for Nigeria to adopt economic-- not political--reforms. Now that Nigeria is privatizing many of its oil and gas facilities, the Bank is reentering the country's rich fossil fuel sector. Chevron and Shell are jousting for control over owning and feeding the new pipeline. This pipeline would supply gas to the Bank-backed CMS Energy power plant in Takoradi, Ghana.

The World Bank is also assisting the government of Thailand, who is contractually bound to consume natural gas from Burma, build four power plants with guarantees of $174 million with a combined capacity of 2400 MW, despite Thailand's over-supply of power. According to the Center for International Environmental Law, local villagers claim the gas pipeline bringing gas to Bank-guaranteed power plants was built using slave labor. The pipeline stretches through rainforests, mangrove swamps, and other ecologically fragile regions on its way to the Thai consumers.

In Privatization We Trust

As always, the World Bank's primary strategy in Thailand, Nigeria and elsewhere is to spur transnational corporate access to, and ultimately, control over, developing countries' fossil fuel and energy sectors. Many of the Bank's recent power plant loans have provided its transnational corporate partners with a base for further investments in the host country. For example, after the Bank helped CMS Energy secure the largest independent power plant in Africa -- the Jorf Lasfar project in Morocco -- CMS said it would use this as a launching pad for further power investments in Morocco. "This is an important milestone for us. We're now a major player in Africa," boasted CMS chief executive William McCormick. Thanks to power plant parlays brokered by the World Bank in Morocco, Ghana, India, and Jamaica, CMS Energy has surged from the brink of bankruptcy to the number one position among global power project developers over the past decade

The Bank's primary mission -- opening fossil fuels to foreign investment -- is also apparent in recently approved coal mining sector loans to India and Russia, and a pending loan to Ukraine's coal sector. Since the 1992 Earth Summit, the Bank has poured $2 billion into coal mining, with most of that financing coming in the last year. In September 1997, the Bank approved a $535 million loan to supply Western equipment to 24 coal mines in India, as part of a general restructuring of that country's coal industry. In December 1997, it approved $800 million toward "commercialization and privatization" of Russia's coal industry. In Ukraine, the Bank is considering a $100 million loan toward coal mining sector restructuring. The Bank's strategies in Ukraine and Russia are similar to the process further along in India: first, the Bank finances the closure of unprofitable mines, pushes the country toward privatization, then finances continued operations and expansions at the most profitable mines.

In addition to projects that directly finance fossil fuel extraction or power production by transnational corporations, it is also extending loans and credits toward privatizing nationalized electricity distributors, and forcing corresponding reforms that will allow corporations to develop new independent power projects in these countries. In the past year, the Bank has financed two such projects totaling $100 million in India and Russia. In a typical electricity sector privatization plan, in January the Bank approved a conditional $600 million loan for privatizing the Indian state of Haryana's power sector. This program, said the Bank, will open the state to "private sector participation in generation and transmission utilities." Similarly, a proposed $100 million loan to Algeria will "provide an enabling environment for private sector investment through the introduction of independent power producers." While CO2 emissions can not be tied to these types of loans, in the long term, these projects will certainly contribute to the Bank's climate change-enhancing portfolio.

New Exploration

The world's top scientists agree that to burn more than one-quarter of the existing reserves of petroleum means to risk suffering the worst impacts of climate change. Yet the World Bank is assisting the fossil fuel industry in opening up new reserves, while destroying some of the last remaining pristine and ecologically fragile regions of the planet, home to thousands of indigenous peoples.

In addition to the Nigeria gas project, the Bank recently approved $310 million towards a massive gas pipeline project running from Bolivia to Brazil. The Bolivian gas fields are to be developed by many of the world's largest fossil fuel companies, including Enron, Shell, British Gas, BHP Petroleum, and Exxon.

The Bank is also considering a $370 million-plus package for the development of oil fields in Chad controlled by Exxon, Shell, and Elf-Aquitaine, and a $200 million pipeline and oil terminal project that would tap into Bank-backed fields in Azerbaijan, in which Amoco, Exxon, and Unocal are major investors. In all, the Bank has approved over $5.3 billion in financing for coal, oil and gas extraction and distribution since the 1992 Earth Summit, with another $930 million under consideration.

Opting for Fossils While Others Look to the Sun

The World Bank is to be commended, together with the Global Environment Facility, 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, it is clearly not exploiting this market to its full potential.

In many countries, the World Bank is backing fossil fuel projects instead of renewable energy projects being developed by others. In Morocco, for example, a 50-megawatt wind farm is being developed independently near a 696-megawatt coal-fired power plant funded by the Bank. 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.

The Bank's prototype renewable energy project, the proposed Solar Thermal Power Plant in Rajasthan, India, actually would generate roughly three times more energy from fossil fuels than from the sun. The Bank argues that the venture -- owned by Amoco and Enron -- would not be economic without the fossil fuel component. The Bank sees this project as "the first step of a long term program for promoting solar thermal power in India and around the world that would lead to a phased deployment of similar systems in the country and in other developing nations." The Bank's use of the term "solar thermal" is rather deceptive. Most of the capacity of the Bank-backed plant would be fossil fuel-based, with 100 to 105 megawatts of capacity for oil, coal, or gas-fired power, compared to just 35 to 40 megawatts of capacity for solar. The Bank claims that this fossil fuel power plant shaded by a green veneer of solar energy represents a net decline in carbon emissions. "The Project is expected to result in avoided emissions of 3.1 million tons of carbon over the operating life of the solar thermal plant relative to generation from a similar-sized coal-fired power station," states the Bank in its PID. This type of double-speak only stretches the Bank's credibility and obfuscates its role in promoting "greenwash" by companies like Amoco and Enron. These companies have gained control over most of the world's most promising solar technology but continue to pour more than 99% of their investments into fossil fuel-oriented projects.

Rajasthan is in the midst of a solar energy boom, with one company (Sun Source Ltd.) planning to build a 50 megawatt photovoltaic solar power plant and another (Energen) committed to building a 200 megawatt solar chimney. But instead of these solar-only projects, the Bank is backing the smaller-scale fossil fuel/solar hybrid plant.

Conclusion and Recommendations

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As we have seen in the flooding in Bangladesh and the hurricanes in Central America, climate change is affecting the poorest in the South most mercilessly, with homelessness, crop failure, a rise in disease, hunger and starvation among the outcomes. What few in the North understand is that, even before the fossil fuels are burned and greenhouse gases created, fossil fuel development projects already affect the poorest in the South disproportionately. World Bank energy development projects have resulted in resettlement, environmental degradation, police harassment, and other indignities, as evidenced by several recent claims filed with the World Bank's semi-autonomous Inspection Panel (Singrauli, Yacyreta, and Bio Bio).

With World Bank-encouraged privatization, energy is increasingly being consumed by energy- intensive and polluting industries, migrating South and East from the North, thus displacing energy for human needs with energy for export-oriented industrial consumption. The greatest irony is that, because energy delivery targeted at the energy needs of the poorest is not an explicit goal of the World Bank's energy strategy, a significant share of the largely fossil-fuel-based power production financed by the Bank is actually further impoverishing the poorest, who most desperately need energy for their basic survival needs--most poignantly illustrated in the gas explosion that killed 700 people, mostly women and children, in Nigeria in October. Meanwhile, World Bank loans are lining the pockets of undemocratic regimes and the richest and most powerful corporations, many of whom oppose any action on climate change.

As long as self-serving economic growth for G-7-based corporations is the de facto development assistance policy of multilateral lending institutions such as the World Bank, the replication of a development model in the global South which has been proven unsustainable in the North is inevitable. Inevitable, too, is rapid and perhaps runaway climate change.

The Next Step

The Sustainable Energy and Economy Network (SEEN)--in coalition with a broad array of NGOs and religious groups from around the world-- is calling on the World Bank to take the following steps:

Openly calculate greenhouse gas emissions which will be released as a consequence of all World Bank lending before project approval with transparent guidance for this methodology provided by the IPCC.

Set an immediate benchmark for reduction of greenhouse gas emissions associated with projects for which the World Bank provides financing of 10 percent per year.

Institute a moratorium on lending or guarantees for any project that involves new exploration for fossil fuels.

Phase out lending and guarantees for any projects that involve coal and oil extraction.

Beginning in 1999, devote 20 percent of its energy and power lending portfolio to renewable energy and energy efficiency projects, increasing the amount of finance it provides for such projects by 10 percent per year, and creating an energy efficiency unit to help bolster its energy efficiency work.

Include legally binding language to restore areas degraded by oil, gas and coal development by the corporations or public entities that are responsible.

Make public, as part of the Country Assistant Strategy, an integrated energy strategy. Each CAS should establish specific goals for improving the productivity of energy use targeted at the poorest and developing renewables and energy efficiency projects.

In consultation with NGOs, conduct a formal and transparent evaluation of the success or failure of the World Bank's energy lending in reaching the 2 billion rural poor who are without access to energy for human needs--for cooking, heating and lighting--as well as the success or failure in providing for the transportation needs of the poorest. This assessment should then be used to provide a roadmap to better meet the energy needs of the rural poor.

Where decision-making regarding methodologies for calculating greenhouse gas emissions is concerned, any member of the World Bank who is also part of the Intergovernmental Panel on Climate Change should be disqualified from voicing his or her opinion to avoid conflict of interest. Finally, SEEN believes the World Bank can no longer function in its dual roles of energy financier and emissions trader; it must avoid this and other implicit conflict of interests in an issue as critical to all of us as climate change. Instead, it must focus on providing energy to meet the basic human needs of the world's poorest, sustainably and equitably.