FIDDLING WHILE ROME BURNS:
HOW WORLD BANK FINANCING OF FOSSIL FUELS
GLOBAL ENVIRONMENT FACILITY (GEF)
The 161 Participant governments of the Global Environment Facility (GEF) meeting in New Delhi April 1 - 3, 1998, to review and evaluate the operation of the Facility must address the serious conflict of interest that exists between the World Bank's role as the largest multilateral funder of climate change and its role as Implementing Agency for GEF climate change mitigation projects.
GEF Participants have long been aware that the enormity of the global climate change problem meant that even substantially increased GEF resources would not be able to significantly diminish greenhouse gas emissions in developing countries. Only with the systematic integration of climate change objectives and mitigation strategies into donor and institutional development assistance programmes and developing country policy and practice would significant gains be achieved. Without the commitment to integration by all parties, the GEF will be viewed historically as an admirable but futile effort. The World Bank mocks that commitment by concurrently financing and mitigating climate change.
TWO EVALUATIONS FIND WORLD BANK FAILING
While the 1994 Independent Evaluation of the Pilot Phase called on the implementing agencies to mainstream the environment, the 1998 Study of the GEF's Overall Performance is unequivocal regarding the World Bank's performance :
The Bank has not succeeded (emphasis added) in systematically integrating global environmental objectives into economic and sector work or into the CAS process, nor has it taken meaningful action to reduce the impact of 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 (conventional fossil fuel power) is inconsistent with mainstreaming of the global environment in the Bank's regular operations.
Over 6 years after the Global Environment Facility tripartite agreement was signed, the Bank has not demonstrated its ability to begin to meet the GEF's long-term objective of Amobilizing world-wide participation in sustainable actions to protect the global environment.
BANK FOSSIL FUEL INVESTMENTS DWARF GEF MITIGATION MEASURES
In fact, the World Bank is acting in direct contravention of the goals of Rio and the GEF by continuing to invest heavily in fossil fuel projects. The burning of fossil fuels is the number one cause of climate change which is increasing surface temperatures globally, causing sea levels to rise, and increasing the frequency and severity of floods, droughts and forest fires.Between 1993 and 1997, the World Bank Group committed over US$ 9.5 billion in loans, credits, guarantees, equity and other forms of financing to fossil fuel projects.The projects include 51 coal, oil, or gas-fired power plants, 20 oil or gas developments, 10 oil or gas pipelines, four coal mining programmes that involve 26 mines and two oil refineries. Over their lifetimes, these projects will emit 9.4 gigatons of carbon into the atmosphere.Approvals of an additional US$ 4.1 billion worth of fossil fuel projects are pending.
This contrasts sharply with the US$ 500 million allocated for GEF Pilot Phase and GEF I projects in the climate change focal area over that same period.
WORLD BANK CLIMATE MATH :
$US 9.4 BILLION ---- TO ENSURE CLIMATE CHANGE
- .5 BILLION ---- TO AVERT CLIMATE CHANGE (GEF)
= 8.9 BILLION NET TO ENSURE CLIMATE CHANGE
POWERFUL RESISTANCE TO CHANGE
The entrenched fossil fuel culture at the Bank resists the attitudinal shifts essential in the new energy economy and has little incentive to change. The Review noted the failure of Bank management to recognize and reward work on GEF, and that managers have no incentive to focus on opportunities for GEF when they are under pressure to produce higher volume of loans on a smaller budget. Innovative policies and programmes are given low priority and too few resources to be effective.
The study team found that climate change is Acompletely absent from discussions of energy sector and infrastructure issues in the CAS. This most glaring weakness is particularly disturbing as the CAS (Country Assistance Strategy) is the World Bank's three year lending strategy, its blueprint for investment in a recipient country.
IMPLEMENTING AGENCY MONOPOLY ENSURES STATUS QUO
The structure of the GEF effectively allows the Bank to mock the GEF's mandate with impunity. The World Bank can not effectively be held accountable for its failure to mainstream because it can not truly be punished. The Bank is part of an Implementing Agency monopoly which means Council demands to improve performance falls on deaf ears. The Bank is the only game in town.
Both the 1994 Evaluation and 1998 Performance Review stated that the GEF Implementing Agency monopoly impedes the ability of the GEF to successfully fulfill its mission. The 1994 Independent Evaluation of the Pilot Phase was critical of the monopoly held by the three Implementing Agencies. It called for more open competition among organizations...so that the allocation of resources is determined on the basis of an organization's comparative advantage The 1998 stated that competition would provide additional benefits andAcould result in an increase in the number of and types of viable GEF projects
Until this monopoly is broken, GEF requirements for mainstreaming of environmental objectives in the Bank's economic and sector work will continue to be at the Bank' s discretion.
Unless mainstreaming is made a condition of implementing agency participation in the GEF, with timetable and penalties attached, the positive environmental impacts of the facility's work on climate change, in particular, will continue to be seriously undermined.
Unless the GEF is opened up to competition to break the monopoly that currently is undermining GEF performance, there will be no incentive for the World Bank to mainstream the environment or curtail its hypocritical practices. A GEF Assembly committed to transforming the GEF into a true marketplace of ideas, innovation and implementation must insist that the World Bank be subject to the same free-market reforms the institution so staunchly advocates for its clients.
While the GEF can not reform the World Bank or stem the development of oil, gas and coal reserves worldwide, it can insist that its underlying principles are respected and that its goals and objectives are met.
GEF Participants must provide strong direction to the GEF Council that Environmental Mainstreaming and Fair and Open Competition are the key concepts for GEF II, in the words of the CEO, to ensure that the global environment will remain a top priority, long after discrete projects end.
In order to ensure that the World Bank mainstream GEF objectives, the GEF Assembly should direct the Bank to :
- Adopt public, measurable goals for the integration of global environmental objectives into its regular operations. These goals would be accompanied by a timetable for implementation and methods for regular and transparent reporting to the GEF Council and the public on implementation;
- Begin a transition from its role in financing conventional power loans to a new role in financing sustainable energy technologies. Specific measures to achieve this objective are noted in Appendix 1;
If the World Bank can not demonstrate its ability to Apromote measures to achieve global environmental benefits within the context of its regular work programs as required by the Instrument for the Replenishment of the Global Environment Facility within 2 years, it should removed as a GEF Implementing Agency.
In order to foster competition between GEF implementing agencies, The GEF Assembly should :
- Expand of the number of Implementing Agencies through an amendment to paragraph 22 of the Instrument for the Establishment of the Restructured Global Environment Facility;
- Provide specific direction to the GEF Council to undertake a review of the current Implementing Agencies comparative advantage in order to more specifically target their activities to achieve the GEF's mandate;
- Provide specific direction to the GEF Council to undertake an assessment of the structural and operational changes required to accommodate the expansion of the number of implementing agencies.