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Walking the Talk? World Bank Rhetoric on Climate Undermined by Financing It

The Bank has become increasingly visible at global climate summits and officials regularly comment on the need for reducing greenhouse gas emissions, protecting the climate and making a transition to low-carbon development. However, a sober review of its lending practices reveals the Bank is undermining the cause it purports to champion. (Photo: IPS-DC)

Walking the Talk? World Bank Rhetoric on Climate Undermined by Financing It

At least in rhetoric, World Bank leadership has acknowledged for a quarter century that "the possible risks [of global warming] are too high to justify complacency or evasion." The Bank itself has cautioned that unabated climate change threatens to reverse hard-earned development gains -- and that the poorest countries and communities will suffer the consequences first and worst.

At least in rhetoric, World Bank leadership has acknowledged for a quarter century that "the possible risks [of global warming] are too high to justify complacency or evasion." The Bank itself has cautioned that unabated climate change threatens to reverse hard-earned development gains -- and that the poorest countries and communities will suffer the consequences first and worst. The Bank has become increasingly visible at global climate summits and officials regularly comment on the need for reducing greenhouse gas emissions, protecting the climate and making a transition to low-carbon development. However, a sober review of its lending practices reveals the Bank is undermining the cause it purports to champion.

We compared World Bank energy sector financing through the International Bank for Reconstruction and Development (IBRD) and International Development Assistance (IDA) for two five-year time periods: 2000 to 2004 and 2010 to 2014.

KEY FINDINGS:

  • Overall financing for energy-related projects increased 3.5-fold, from a total of $6.8 billion in 2000-2004 to $24.5 billion in 2010-2014.
  • The good news: the number of new renewable energy and demand-side energy efficiency projects (which we will refer to as 'new renewables') is reaching parity with fossil fuel projects. Also, the dollar amount of lending to new renewables increased almost five-fold between 2000-2004 and 2010-2014 (Fig. 1, pg. 15).
  • Disappointingly, because financing for oil, coal and gas grew almost four-fold over the same period, the World Bank is still providing more than 1.5 times the funding for fossil fuel projects as for renewable energy projects (Fig. 1, pg. 15). The increased support for coal and gas projects has been especially strong.
  • Despite evidence of their negative environmental and social impacts, financing for large hydroelectric projects has enjoyed a renaissance at the Bank, growing more than 10-fold, from $373 million to $4.3 billion between the two periods. (Fig. 2, pg. 16). Hydroelectric power now amounts to 17% of the Bank's total energy funding, up from 6% a decade before.
  • World Bank energy and related infrastructure investment in the 48 Least Developed Countries increased from $1.8 billion in the first period to $5.2 billion in the second (Fig. 5, pg. 18), but the proportion of overall Bank energy financing going to LDCs dropped from 26% to 21%. Funding for new renewables in LDCs increased more than five-fold. However, while increasing more slowly, funding for fossil fuel projects in LDCs still more than doubled over the same period.

RECOMMENDATIONS

If the World Bank is serious about supporting the transition to low-carbon, sustainable development, it should:

  • Immediately end coal financing, quickly phase out oil investment, and devote more resources to renewable energy development, as per recommendations in the 2004 Extractive Industries Review. In addition, the Bank should reassess its approach to financing natural gas expansion infrastructure, considering the "lock in" effect of these projects, even those improving the efficiency of fossil fuel facilities.
  • Make specific commitments to reduce absolute (as opposed to relative) fossil fuel financing within specific timelines.
  • Calculate and make publicly available direct and indirect greenhouse gas emissions for all projects, and harmonize methodologies with other multilateral development banks and public finance institutions to the highest standard.
  • Prioritize renewable energy projects in economies in transition, and new renewable mini- and off- grid energy projects in Least Developed Countries.
  • Assess alternative renewable energy options for environmental and social, as well as economic, cost and compare them to fossil fuel options.
  • Increase clarity and transparency of data and methods, with special attention to better describing the categorization of projects by sector and how funding is allocated within each project.

Download full report.

© 2023 Institute for Policy Studies
divestmentfossil fuelsworld bank

At least in rhetoric, World Bank leadership has acknowledged for a quarter century that "the possible risks [of global warming] are too high to justify complacency or evasion." The Bank itself has cautioned that unabated climate change threatens to reverse hard-earned development gains -- and that the poorest countries and communities will suffer the consequences first and worst. The Bank has become increasingly visible at global climate summits and officials regularly comment on the need for reducing greenhouse gas emissions, protecting the climate and making a transition to low-carbon development. However, a sober review of its lending practices reveals the Bank is undermining the cause it purports to champion.

We compared World Bank energy sector financing through the International Bank for Reconstruction and Development (IBRD) and International Development Assistance (IDA) for two five-year time periods: 2000 to 2004 and 2010 to 2014.

KEY FINDINGS:

  • Overall financing for energy-related projects increased 3.5-fold, from a total of $6.8 billion in 2000-2004 to $24.5 billion in 2010-2014.
  • The good news: the number of new renewable energy and demand-side energy efficiency projects (which we will refer to as 'new renewables') is reaching parity with fossil fuel projects. Also, the dollar amount of lending to new renewables increased almost five-fold between 2000-2004 and 2010-2014 (Fig. 1, pg. 15).
  • Disappointingly, because financing for oil, coal and gas grew almost four-fold over the same period, the World Bank is still providing more than 1.5 times the funding for fossil fuel projects as for renewable energy projects (Fig. 1, pg. 15). The increased support for coal and gas projects has been especially strong.
  • Despite evidence of their negative environmental and social impacts, financing for large hydroelectric projects has enjoyed a renaissance at the Bank, growing more than 10-fold, from $373 million to $4.3 billion between the two periods. (Fig. 2, pg. 16). Hydroelectric power now amounts to 17% of the Bank's total energy funding, up from 6% a decade before.
  • World Bank energy and related infrastructure investment in the 48 Least Developed Countries increased from $1.8 billion in the first period to $5.2 billion in the second (Fig. 5, pg. 18), but the proportion of overall Bank energy financing going to LDCs dropped from 26% to 21%. Funding for new renewables in LDCs increased more than five-fold. However, while increasing more slowly, funding for fossil fuel projects in LDCs still more than doubled over the same period.

RECOMMENDATIONS

If the World Bank is serious about supporting the transition to low-carbon, sustainable development, it should:

  • Immediately end coal financing, quickly phase out oil investment, and devote more resources to renewable energy development, as per recommendations in the 2004 Extractive Industries Review. In addition, the Bank should reassess its approach to financing natural gas expansion infrastructure, considering the "lock in" effect of these projects, even those improving the efficiency of fossil fuel facilities.
  • Make specific commitments to reduce absolute (as opposed to relative) fossil fuel financing within specific timelines.
  • Calculate and make publicly available direct and indirect greenhouse gas emissions for all projects, and harmonize methodologies with other multilateral development banks and public finance institutions to the highest standard.
  • Prioritize renewable energy projects in economies in transition, and new renewable mini- and off- grid energy projects in Least Developed Countries.
  • Assess alternative renewable energy options for environmental and social, as well as economic, cost and compare them to fossil fuel options.
  • Increase clarity and transparency of data and methods, with special attention to better describing the categorization of projects by sector and how funding is allocated within each project.

Download full report.

At least in rhetoric, World Bank leadership has acknowledged for a quarter century that "the possible risks [of global warming] are too high to justify complacency or evasion." The Bank itself has cautioned that unabated climate change threatens to reverse hard-earned development gains -- and that the poorest countries and communities will suffer the consequences first and worst. The Bank has become increasingly visible at global climate summits and officials regularly comment on the need for reducing greenhouse gas emissions, protecting the climate and making a transition to low-carbon development. However, a sober review of its lending practices reveals the Bank is undermining the cause it purports to champion.

We compared World Bank energy sector financing through the International Bank for Reconstruction and Development (IBRD) and International Development Assistance (IDA) for two five-year time periods: 2000 to 2004 and 2010 to 2014.

KEY FINDINGS:

  • Overall financing for energy-related projects increased 3.5-fold, from a total of $6.8 billion in 2000-2004 to $24.5 billion in 2010-2014.
  • The good news: the number of new renewable energy and demand-side energy efficiency projects (which we will refer to as 'new renewables') is reaching parity with fossil fuel projects. Also, the dollar amount of lending to new renewables increased almost five-fold between 2000-2004 and 2010-2014 (Fig. 1, pg. 15).
  • Disappointingly, because financing for oil, coal and gas grew almost four-fold over the same period, the World Bank is still providing more than 1.5 times the funding for fossil fuel projects as for renewable energy projects (Fig. 1, pg. 15). The increased support for coal and gas projects has been especially strong.
  • Despite evidence of their negative environmental and social impacts, financing for large hydroelectric projects has enjoyed a renaissance at the Bank, growing more than 10-fold, from $373 million to $4.3 billion between the two periods. (Fig. 2, pg. 16). Hydroelectric power now amounts to 17% of the Bank's total energy funding, up from 6% a decade before.
  • World Bank energy and related infrastructure investment in the 48 Least Developed Countries increased from $1.8 billion in the first period to $5.2 billion in the second (Fig. 5, pg. 18), but the proportion of overall Bank energy financing going to LDCs dropped from 26% to 21%. Funding for new renewables in LDCs increased more than five-fold. However, while increasing more slowly, funding for fossil fuel projects in LDCs still more than doubled over the same period.

RECOMMENDATIONS

If the World Bank is serious about supporting the transition to low-carbon, sustainable development, it should:

  • Immediately end coal financing, quickly phase out oil investment, and devote more resources to renewable energy development, as per recommendations in the 2004 Extractive Industries Review. In addition, the Bank should reassess its approach to financing natural gas expansion infrastructure, considering the "lock in" effect of these projects, even those improving the efficiency of fossil fuel facilities.
  • Make specific commitments to reduce absolute (as opposed to relative) fossil fuel financing within specific timelines.
  • Calculate and make publicly available direct and indirect greenhouse gas emissions for all projects, and harmonize methodologies with other multilateral development banks and public finance institutions to the highest standard.
  • Prioritize renewable energy projects in economies in transition, and new renewable mini- and off- grid energy projects in Least Developed Countries.
  • Assess alternative renewable energy options for environmental and social, as well as economic, cost and compare them to fossil fuel options.
  • Increase clarity and transparency of data and methods, with special attention to better describing the categorization of projects by sector and how funding is allocated within each project.

Download full report.

divestmentfossil fuelsworld bank
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