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FINANCE: World Bank "Playing Both Sides of Climate Crisis"
By Haider Rizvi
NEW YORK, Apr 10, 2008 (IPS) - A new study released by an independent policy think tank casts further doubts on the World Bank's ability to stay neutral in the global politics of climate change.
"It is making money off of causing the climate crisis and then turning around and claiming to solve it," charged Janet Redman, the study's lead author and a researcher at the Institute for Policy Studies.
In releasing the 79-page report Thursday, Redman described the World Bank's role in the so-called carbon markets as "dangerously counterproductive" to international efforts to tackle climate change.
Carbon markets refer to commercial aspects of environmental responsibility, in which energy companies can either agree to cut carbon emissions or buy the right to keep polluting.
The report, entitled "World Bank: Climate Profiteer", shows that instead of encouraging clean energy investors, the bank is lending much of its financial support to the fossil fuel industry.
"It's playing both sides of the climate crisis," said Redman, noting that in just past two years the bank loaned no less than 1.5 billion dollars to companies investing in fossil fuels.
The scientific community has repeatedly warned that drastic reduction in the use of oil, gas, and coal is a must to avoid the catastrophic effects of climate change.
The bank claims it is an "honest broker" of carbon deals, but the study's authors say their findings do not validate that assertion.
"With little transparency around its credits and no formal accounting for its carbon debits that are accruing thanks to the World Bank loans," said Redman, "it is hard to say."
The study's findings show that out of its two-billion-dollar carbon finance portfolio, the bank has directed nearly 80 percent to projects involving the coal, chemical, iron, and steel industries.
By contrast, critics say, it has not invested any significant amount of money in projects aiming to sustainably reduce poverty. Currently, the bank's Community Development Carbon Fund (CDCF) and the Biocarbon Fund have a total capital of 219 million dollars, which constitutes only 10 percent of the total carbon-related funding at its disposal.
"The bank finances a fossil fuel project in Poor Country A. Rich Country B asks the bank to help arrange carbon credits so Country B can tell its carbon counters it's taking serious action on climate change," said Dephane Wysham, who worked with Redman on the report.
"It kindly obliges, offering credits for a price far lower than Country B would have to pay if Country B made those cuts at home," Wysham explained. "Country A gets a share of the cash to invest in equipment to make the fossil fuel project slightly more efficient."
"The bank takes its 13 percent cut, and everyone is happy," she said.
Among numerous other examples that illustrate the bank's questionable practices, the report's authors also mention its plans to fund a massive coal-fired power plant in Mundra, a town in the Indian state of Gujarat.
The complex of five 800-megawatt plants will cost 4.14 billion dollars to build, and will be owned and operated by Tata Group, India's largest multinational corporation.
Tata Motors, a division of the same conglomerate, recently announced plans to buy the luxury car companies Jaguar and Range Rover from U.S. automaker Ford for 2.3 billion dollars. Tata Power's 2007 revenues totaled 1.6 billion dollars. "It's hard not to ask how much help Tata needs from the World Bank," said Wysham.
Once operational, the Mundra power plant will be India's third-largest emitter of greenhouse gases. The bank, according to the report's authors, is also willing to give carbon credits to Tata for its coal burner.
Wysham calls it a "bizarre logic of the market".
"[It's] a market where Country B can get credits for helping a corporation," she said, "even one of the world's wealthiest corporations such as Tata, capture a few emissions, as long as they are captured in a 'poor' country, like India, regardless of how rich the company involved may be."
The report also explains at length how the bank's policy on carbon credits is affecting indigenous communities who have no say in projects aimed at reforestation.
"Trading forest carbon credits has become a burgeoning business," said Redman, noting that the bank is "encouraging" a land-use shift from subsistence agricultural cultivation to agro-industrial forestry.
The report's authors said a document leaked from the Bank in January suggests that it seeks to further expand its role in the carbon market with multi-billion-dollar plans for investment in so-called "climate adaptation" and forestry.
"This usurpation of authorities on these funds flies in the face of Bali agreement," said Redman. At the U.N. climate change conference held in Bali, Indonesia, last December, developing countries said they must be allowed to have oversight on such funds, and they won.
"The new climate funds," in her view, "institute a donor-driven governee structure that leaves developing countries without a voice."
(END)
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