Off-message at the World Bank

A World Bank internal report has urged that the institution should cease investing in fossil-fuel projects. Sadly, the bank is unlikely to act accordingly.

August 1, 2004
4 min read

On a grey afternoon in Sheffield earlier this year, at the end of a day school on climate change, I heard a most remarkable thing: a review commissioned by the World Bank had recommended that the institution should stop funding fossil-fuel projects by 2008. Had the bank come to grips with its global responsibilities?

The Extractive Industries Review (EIR) was commissioned in 2001 to examine what role, if any, the World Bank has in the extractive industries (oil, gas and mining). It contained many criticisms of bank practice in this area, and suggested that in some cases World Bank involvement even made situations worse.

Predictably, the bank’s management was having none of it and advised that the EIR’s bold recommendations should be rejected. The official response is due in mid-July and is likely to pooh-pooh such utopian recommendations as spending the bulk of bank funding on renewables, rather than fossil fuels. Yet the report and the responses it has generated highlight some interesting issues. They hold some useful lessons for the G8 summit, which is taking place in the UK next year.

The EIR builds on concerns that NGOs had raised for years about bank projects. However, this time the concerns – impacts on human rights and climate change – came out of a process initiated from within the bank itself. Headed by former Indonesian environment minister Dr Emil Salim, the EIR is written in the bank’s language and makes recommendations in a context of what is possible within its working practices.

Salim may have used the bank’s language but, as far as key decision-makers were concerned, he had surely picked up the wrong hymn sheet. For the political realities of the World Bank mean that the chances of the bank ending its subsidies to fossil fuels are pretty slim.

To start with, decisions in the bank are dominated by the world’s most oil-hungry countries. The majority of oil pumped in bank-funded projects feeds demand from those countries” electorates, and most of the subsidies provided by the bank feed demand from their fossil-fuel corporations. According to the US-based Sustainable Energy and Economy Network, these companies have received World Bank-approved financial packages worth more than $10.7 billion since 1992. The bank also acts as a politically low-risk vehicle for securing new energy supplies, particularly ones outside the Middle East – a region increasingly unsafe for Western oil workers and unstable for Western markets.

Another aspect of the World Bank’s appeal as a partner for more commercial ventures is its thin veneer of moral legitimacy, for the bank has an institutional mandate to alleviate poverty. Backing up the EIR’s concerns, a recent report from the New Economics Foundation (NEF) says that countries tend to go deeper into debt as a result of global energy policies” emphasis on fossil fuels.

The Price of Power states that the infrastructure needed for fossil-fuel distribution is expensive and highly centralised, and does little for overall access to energy. Reliance on imported fossil-fuel-based energy locks countries into a dependency relationship with multilateral donors and foreign companies. Poorer countries are thus driven deeper into debt. The report concludes that even a small shift away from fossil fuels towards clean renewable energy could save millions of lives and help avert climate change.

The World Bank’s inevitable rejection of the EIR’s recommendations will not be the tragic end to this particular tale. For the most dominant decision-makers at the bank are practically the same bunch of people that will attend the G8 summit when it comes to Scotland next June. If Tony Blair has his way, this unofficial gathering of the world’s most industrialised countries will place the twin perils of climate change and global poverty at the top of its agenda.

Gordon Brown’s interest in debt relief should lead to plenty of fine words on the subject of tackling poverty. Oxfam is running a campaign “to make poverty history”; but the evidence is becoming irrefutable that unless the fossil-fuel industry becomes history, poverty will remain part of the present. Those who kicked the EIR into the long grass less than 12 months before the Scottish jamboree will be all too keen to forget this, however, leaving it to social-justice campaigners to make sure that the message is brought home.


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