A Critique of the World Bank Paper, Clean Energy and Development: Towards an Investment Framework
Prepared for the Development Committee Meeting
At the Gleneagles G8 Summit held in July 2005, the World Bank was given a twin mandate. It was asked to propose a strategy that will facilitate a global transition to a climate–friendly, sustainable energy future, and that will support energy sector development for economic growth and poverty reduction. In response to this mandate, the World Bank just submitted a report, Clean Energy and Development: Towards an Investment Framework, to the Development Committee. The Bank’s new paper espouses a business–as–usual approach and will not achieve the climate and development goals of the Gleneagles mandate.
The World Bank approach will not achieve poverty reduction
Nearly 1.6 billion people do not have access to electricity. Most of them live in rural areas, and many in communities which are not connected to electric grids. An approach that concentrates on centralized, grid–based power plants will not reach these people. Decentralized, renewable sources of energy such as wind, mini–hydro, solar photovoltaics and biogas are often the least–cost solutions for off–grid areas.
The World Bank’s current lending portfolio and the proposed Investment Framework give short shrift to such solutions. The Investment Framework focuses on large–scale projects, including nuclear power, and on “allowing private ownership and financing a dominant role in energy supply.”1 The Bank’s paper admits that “renewable energy technologies – wind, mini–hydro, and biomass–electric – are the least–cost option for off–grid electrification applications,”2 but does not propose any additional funding for such options. Its Investment Framework for Clean Energy and Development will continue to neglect the rural poor.
The World Bank approach does not appropriately address climate change
Combating climate change is primarily the responsibility of the North. Per capita, poor countries use only 5% of the modern energy services consumed by the industrialized countries. The US alone accounts for nearly 25% of the global carbon dioxide emissions. In comparison, meeting the basic human needs for electricity of all the 1.6 billion people who presently have no access to modern energy would only increase global carbon emissions by 2%.3
Effectively combating climate change primarily requires action in the North, including much deeper emissions reductions under the second commitment period of the Kyoto Protocol (2013–2017). The World Bank claims that its paper “takes a global perspective and is not Bank–centric.”4 Yet is does not address the responsibility of the North at all, and does not call for any commitments under the Kyoto Protocol post–2012. Under the leadership of President Paul Wolfowitz, the World Bank lets the Northern polluters and particularly the United States off the hook when it comes to climate change.
Large dams – no solution to the world’s climate problems
The inadequacy of the World Bank’s business–as–usual approach to climate change and poverty reduction is epitomized by its position on hydropower. The World Bank has been the largest single financier of hydropower projects globally, and large hydro absorbs the biggest share of the Bank’s support for renewable energy and energy efficiency. (In FY 2005, 60% of the Bank’s supposed support for renewable energy and energy efficiency was for five large hydro projects.)
The Bank’s paper proposes large hydropower as a central pillar of its new Investment Framework, particularly for countries and regions like Brazil, India, and Sub–Saharan Africa.5 It ignores the following lessons of hydropower development:
- Most large dams have massive social and environmental impacts, but hardly benefit the poor in off–grid areas.
- Many large reservoirs cause significant greenhouse gas emissions. Calculations by International Rivers show that the World Bank’s Nam Theun 2 Project has the potential to release roughly the same amount of greenhouse gases as a combined cycle natural gas project generating the same amount of electricity.6
- Since climate change will affect the streamflow of rivers particularly in tropical regions, investing in hydropower projects will further increase the vulnerability of poor countries to climate change.
The World Bank’s proposed Investment Framework for Clean Energy and Development espouses a business–as–usual approach to poverty reduction and climate change. It continues to neglect the needs of the rural poor, and lets the Northern polluters off the hook.
When it comes to climate change, the World Bank is not the “honest broker” which it portrays itself to be. It is dominated by Northern governments, and institutionally favors solutions that depend on new investments in the South rather than policy and lifestyle changes in the North. The appropriate avenues for devising strategies to combat climate change are the Conference of the Parties of the UN Framework Convention on Climate Change and UN bodies such as the Commission on Sustainable Development, and not the World Bank.
Rather than devising strategies for other actors, the World Bank should clean up its own act. It should dramatically shift its own energy portfolio to energy efficiency and new renewable technologies such as wind, mini–hydro, solar photovoltaics and biogas. Such technologies are able to reap a double dividend of combating climate change and addressing the energy needs of the rural poor.
- Clean Energy and Development, p. 17. On p. 101, the paper postulates: “While nuclear energy production has its own environmental externalities, it offers a viable low carbon energy production alternative.”
- Clean Energy and Development, p. 91
- Robert Socolow, Princeton University, Stabilization Wedges: Mitigation Tools for the Next Half–Century, World Bank Energy Week, March 2006 (using global average carbon intensity of electricity)
- Clean Energy and Development, p. 1
- Clean Energy and Development, pp. 33, 99
- The new World Bank paper admits in Annex D (p. 93) that “emerging issues such as emissions from methane coming from the flooding of the hydro reservoir need resolution.” This recognition is not reflected in the main body of the report and the proposed strategy.
- Clean Energy and Development: Towards an Investment Framework
The World Bank, April 5, 2006 [available from International Rivers on request]
- Power Failure: How the World Bank is Failing to Adequately Finance Renewable Energy for Development
Friends of the Earth–US, October 2005
- Today a Rockstar Saved a Town
International Rivers, June 2004