FOR IMMEDIATE RELEASE
Nov. 17, 2000

CONTACT:
Teresa Schilling, EMS, 011-31-622-996-229 or
Kate Hampton, SEEN, 011-44-774-896-7323

Biggest Loophole in Climate Treaty May Come from World Bank, Export Credit Agencies

Carbon Emissions from Fossil Fuel Investments Will Outstrip Gains Under Clean Development Mechanism

The Hague - Much of the progress made in slowing climate change through the Kyoto Protocol could be rendered meaningless if public institutions like the World Bank and export credit agencies continue funding fossil fuel projects at current rates, according to a report released today.

In "Banking on Climate Change: How Public Finance for Fossil Fuel Projects is Short Changing Clean Development," the Sustainable Energy and Economy Network (SEEN) concludes that the anticipated benefits from the Protocol's much-touted Clean Development Mechanism (CDM) "are vastly outweighed by the continued transfer of public monies from industrialized countries to developing and transition economies" for fossil fuel projects.

The CDM is conceived as a means under the Kyoto Protocol for industrialized nations to finance projects in the developing world that will help reduce the threat of climate change. Meanwhile, many of the most powerful international financial institutions are doing the opposite.

"What we are looking at is the biggest loophole in the climate treaty," said Kate Hampton, who authored the report for SEEN. "These financial institutions are pouring massive investments into projects in developing nations that will exacerbate global warming, rather than avert it. Some of the worst projects may even get CDM credit."

Under the current terms of the treaty, projects funded through the CDM (excluding those involving so-called "carbon sinks" such as forests) are expected to bring reductions of global warming greenhouse gas emissions of 50-375 megatons of carbon per year between 2008 and 2012. Yet the SEEN report shows that:

• In an average year between 1992 and 1998, the World Bank alone financed fossil fuel projects in developing countries with lifetime emissions at least four, and as much as 29, times the amount expected to be reduced under the CDM.
• In an average year between 1992 and 1998, the U.S. Export-Import Bank and the Overseas Private Investment Corporation - both U.S. export credit agencies - supported projects with lifetime emissions of 1139 megatons of carbon. This is at least three, and as much as 23 times the reductions expected under the CDM.
• The European Bank for Reconstruction and Development was found to have funded fossil fuel projects that also outstrip expected emissions reductions under the CDM.

The good news is that these institutions have the power to substantially reduce their climate footprints and easily surpass expected Kyoto Protocol reductions by making relatively small adjustments in their investments.

"We calculate that if just four of the major international financial institutions divert only 20 percent of their investments away from fossil fuels and into energy efficiency and renewables, the emissions avoided each year would equal more than one and a half times the amount averted under the CDM," Hampton said.

Hampton said SEEN is not advocating the elimination of the CDM. Rather, the report is meant to show that in addition to the CDM, there is a clear need to integrate climate change considerations into policies that guide the investments by institutions like the World Bank and export credit agencies.

"We are locking developing nations into a path of fossil fuel-driven development instead of assisting in the transfer of clean technologies," Hampton concluded. "If we continue to ignore the major role played by the international financial institutions, we do so at the peril of this historic treaty and the world's climate."

Read the report.

Click here to download a copy of the report.

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