World Bank Climate Profiteering
Daphne Wysham and Shakuntala Makhijani, Foreign Policy in Focus, March 31, 2008
The World Bank's long-running identity crisis is proving hard to shake. When efforts to rebrand itself as a "knowledge bank" didn't work, it devised a new identity as a "Green Bank." Really? Yes, it's true.
Sure, the Bank continues to finance fossil fuel projects globally, but never mind. The World Bank has seized upon the immense challenges climate change poses to humanity and is now front and center in the complicated, international world of carbon finance. It can turn the dirtiest carbon credits into gold.
How exactly, does this work, you ask?
Quite simply: The Bank finances a fossil fuel project, involving oil, natural gas, or coal, 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. The World Bank kindly obliges, offering carbon credits for a price far lower than Country B would have to pay if Country B made those cuts at home. Country A gets a share of the cash to invest in equipment to make fossil fuel project slightly more efficient, the World Bank takes its 13% cut, and everyone is happy.
Everyone, that is, who is cashing in on this deal. If youre after a real solution to the climate crisis, these shenanigans can and should make you unhappy.
Aiding the Tata Group
Consider a project the International Finance Corporation (IFC) had scheduled for board consideration on March 27, but is now, according to its press office, slated for approval in April. (The World Bank Group's boards virtually never reject anything sent to them). The IFC, the World Bank's private sector lending arm, plans to back a massive coal-fired power plant in Mundra, a town in the Indian state of
To put this in perspective, Tata Motors, a division of the same conglomerate, recently announced plans to buy the luxury car companies, Jaguar and Range Rover from
Several other corporations are involved. Toshiba, for example, will supply the steam turbine generators.
Once operational, the Mundra power plant will be
In the bizarre logic of the carbon market, a market the World Bank is both shaping and investing in, yes, Country B can get credits for helping a corporation, even one of the world's wealthiest corporations such as Tata, capture a few carbon emissions, as long as these emissions are captured in a "poor" country, like India, regardless of how rich the company involved may be.
And it gets stranger still. One would hazard a guess that the IFC is lending $450 million, considering investing up to $50 million in equity as part of its exposure to the project, and possibly helping Tata obtain $300 million from other sources at favorable rates for the Tata burner because India has no other choice but to burn its own abundant supply of coal. But, no, the IFC plans to import coal from
On its website, the World Bank division offered this feeble justification for this transaction: "IFC is supporting thermal power projects which have better GHG (greenhouse gas) and environmental performance than the average plants in
Surely, if the Bank is involved, the poor, if not in
Indeed, Indonesias coal sector is the rule, not the exception, in its posture toward the poor: A three-year review of the World Banks investments in the extractive industries, the Extractive Industries Review, launched under former World Bank President James Wolfensohn, found that the poor were worse off as a result of investments in extractive industries, and recommended the World Bank get out of coal immediately. (That was back in 2004.)
The Extractive Industries Review, ironically, was developed with input from industry, government, and civil society participants, and overseen by former Indonesian environment minister under Suharto, Emil Salim, who himself sat on the board of a large coal company. Nevertheless, Salim was unequivocal that the World Bank should cease lending for coal, and phase out of oil by 2008. The World Banks board voted to overrule these recommendations.
Sadly, the IFC isnt the only powerful international financial agency backing the Mundra power project. The Asian Development Bank, The Japan Bank for International Cooperation (JBIC), and the Korea Export Insurance Corporation are also involved.
Climate Change Mitigation?
O.K. The poor are worse off, the corporations are better off, and the Bank is double-dipping on carbon trading. Bad enough. But heres a final, scary twist: The World Bank is increasingly being given a leadership role in various climate investment funds by the worlds wealthy countries. In an initiative with pledged contributions from the
Rather than a Green Bank, the World Bank is revealing itself to be a banker for the super-powerful corporate elite. In addition, its turning into a climate change profiteer. If the Bank were the only one fooled by its new identity, the image would be pathetic if not outright laughable. Unfortunately, the Bank has seemingly fooled some of the richest and most powerful countries in the world. Or maybe, when they look at the Bank, what these wealthy countries really see is not green but greenbacks.
Daphne Wysham is a fellow and Shakuntala Makhijani is an intern with the Institute for Policy Studies.