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RENEWABLES: World Bank Offers More, Not Enough

Sanjay Suri

BONN, Jun 3 2004 (IPS) - The World Bank says it will double its loans for renewable energy projects over the next five years, but falls short of the total proposed by the Extractive Industries Review, a study that Bank president James Wolfensohn himself commissioned in 2000.

The World Bank has proposed doubling of its loans for renewable energy projects over the next five years from the current 200 million dollars a year.

Under the proposal, the World Bank will increase lending by around 20 percent every year until the loans reach about twice the figure by 2009.

That falls considerably short of proposals in the Extractive Industries Review that World Bank president James Wolfensohn had commissioned in 2000.

That review had said that the World Bank should "phase out investments in oil production by 2008 and devote its scarce resources to investments in renewable energy resource development, emissions-reducing projects, clean energy technology, energy efficiency and conservation, and other efforts that delink energy use from greenhouse gas emissions."

Peter Woicke, World Bank managing director and executive vice- president of the International Finance Corporation told media representatives at the end of proceedings at the International Conference for Renewable Energies in Bonn Thursday that "there are certain things in that report we have problems with that will be debated later this month".

Essentially, Woicke indicated that the World Bank was not turning its back on coal and oil as the EIR had recommended. "The World Bank shall not exit coal now and oil by 2008," Woicke said. "As much as I would personally love to see more finance for renewables, but oil, coal and gas are a major major energy source for a lot of people," he said.

About 1.6 billion people have no energy supply and they are cutting down forests to get some energy, Woicke said. "As long as we are adding value to the extractive industries (meaning mostly coal and oil) by way of cutting emissions and increasing social knowledge, the World Bank will remain strongly involved in these projects."

The World Bank commitment to extractive projects is currently about 400 million dollars a year, he said.

Woicke made it clear that renewables cannot be supported on principle alone. "Eventually, and we are not saying just now, renewables do have to meet market criteria, otherwise they will not be sustainable," he said.

"Developing countries cannot for ever depend on donors’ aid," he said. Woicke added, however, that developed countries should increase their aid commitments to raise total aid from the present 55 billion dollars a year to meet immediate needs of developing countries. Very few have met their obligation of giving 0.7 percent of their gross national income (GNI) in overseas aid, he said.

The World Bank announcement started off another round of confrontation with green non-governmental organizations (NGOs).

Friends of the Earth International, Greenpeace, the International Rivers Network and WWF International that were among a group of NGOs said the World Bank proposal was "marginal at best and does nothing to address the bank’s ongoing bias towards fossil fuels".

"They’re not even close to the EIR recommendation," Steve Kretzmann of the Institute for Policy Studies (IPS) was quoted by the groups as saying. "They’re pledging 20 percent of a cent when they were asked to give 20 percent of a dollar."

The NGO group said 82 percent of all oil extractive projects funded by the World Bank since 1992 are for export to the north, and do not meet the energy needs of the poor. It said the World Bank had financed some of the world’s most damaging projects such as the Chad-Cameroon oil pipeline and the Baku-Tblisi-Ceyhan oil pipeline from Georgia into Turkey through Azerbaijan.

Woicke did not reject all criticism. "We have made mistakes, we are human," he said. "We have learnt a lot, and we now know how to do projects better than we did ten years ago." He acknowledged also that a fair bit of World Bank funding to some projects had in the past "ended up in Switzerland".

Woicke said the way to finance renewables may have to rely substantially on privte micro-finance. The transition to cleaner energy would have to be won "project by project, village by village, and nation by nation," he told the conference earlier.

The first element in the World Bank strategy would be to ensure that renewable energy and energy efficiency "are seen as economically viable," he said.

Academic institutions, civil society, governments, business and international financial institutions must together create market-based solutions for renewable energy, Woicke said.

"This is paramount. Renewable energy must demonstrate more than the optimism of technological innovators; they should demonstrate the efficient, clean, low-cost delivery of power to the poor."

The German government welcomed the World Bank’s commitment to increase funding for renewables and energy efficiency by 20 percent a year in the next five years. Economic Cooperation Minister Heidemarie Wieczorek-Zeul, who is also a governor of the World Bank, has for months been pleading for stronger involvement of the bank in encouraging renewables.