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World Bank supporting coal?

Nils Zimmermann
January 30, 2017

A new report says the World Bank's Development Policy Financing programs continue to subsidize builders of coal, oil and gas projects - going directly against its own proclaimed low-carbon and pro-climate policies.

A tug tows a coal barge past the Islamic centre on August 26, 2016, at Samarinda, Kalimantan, Indonesia
Image: Getty Images/E. Wray

A new report has accused the World Bank of continuing to fund fossil fuel projects on a massive scale while simultaneously claiming to prioritize efforts to finance the shift to a low-carbon, climate-protected future.

"The World Bank has pledged to help countries adopt a low-carbon development path, specifically by phasing out fossil fuel subsidies and promoting a carbon tax,” said Nezir Sinani, Europe and Central Asia Manager at the Bank Information Center (BIC), a Washington-based watchdog group.

"However, the bank's policy lending does the opposite, by introducing tax breaks for coal power plants and coal export infrastructure," said Sinani.

The study, released Friday (27.01.2017), focuses on the World Bank's Development Policy Financing (DPF) program, which accounts for about a third of all World Bank funding.

The program extends financial support to borrowing governments in the developing world as a financial reward for adopting specific policies approved by the bank.

The BIC report, which examines seven World Bank policy operations from 2007 to 2016 totaling $5 billion in four countries - Indonesia, Peru, Egypt and Mozambique - revealed that "DPF-linked funds intended to boost low-carbon growth are instead supporting investment incentives for projects that put the climate, forests and people at risk."

Smokestacks at a coal power plant billowing smoke in Shanxi, China, in November 2016
The coal industry continues in countries around the world, including ChinaImage: Getty Images/K. Frayer

Saying one thing, doing another?

"We need a global financial system that's fit for purpose to factor in climate risks and opportunities," World Bank Group President Jim Yong Kim said in November 2016, as the Paris climate change agreement came into force.

"Ending extreme poverty and fighting climate change are inextricably linked. We cannot do one without the other," Jim Yong Kim had said.

But the new findings indicate that the World Bank is providing extensive and ongoing support for major coal, oil and gas projects.

"World Bank policy loans are creating subsidies for coal, gas and oil projects and undercutting initiatives to build wind, solar and geothermal power infrastructure and protect vulnerable rainforests - including the Amazon," BIC said.

DW was unable to get through to the World Bank for comment.

But the World Bank has apparently disputed the report's findings, which "grossly misrepresent the World Bank's engagement in these countries," a spokesperson for the World Bank told BBC News.

Brazil's Petrobras oil and natural gas plant in the Amazon jungle at Urucu, 650 km from Manaus
Oil and gas projects like this one in Brazil push into the heart of remaining rainforests, bringing roads and illegal loggingImage: picture alliance/AP Photo

Key findings

In Peru, DPF apparently supported initiatives extended subsidies to public-private partnerships for a liquid petroleum gas pipeline, three natural gas pipeline networks, and 26 new oil-and-gas drilling concessions. There was some support for hydropower, but none for solar or wind projects.

In Indonesia, DPF established subsidies for public-private partnerships on fossil fuel infrastructure projects, including four coal power plants and three coal transport railways on the islands of Kalimantan and Sumatra - and no geothermal, solar or wind public-private partnerships projects are in the works.

In Egypt, planned infrastructure projects with World Bank DPF-supported subsidies include more than a dozen oil and gas projects, new coal power plants with generating capacity of 12.5 gigawatts, and 12 pending oil and gas exploration agreements.

In Mozambique, DPF-supported subsidies will benefit four coal power plants, three coal port terminals, two coal transport railways, and a natural gas plant. One hydropower plant is due for support, but no geothermal, solar or wind projects are targeted by the subsidies.

Sinani expressed special concern over Mozambique's accelerated rate of oil and gas exploration, due to its potential to significantly reduce tax rates. "Such tax reductions are the opposite of a carbon tax, which the Bank purports to support."

Collaborating on the report were Derechos, Ambiente y Recursos Naturales (DAR) Peru, Egyptian Initiative for Personal Rights (EIPR), Greenpeace Indonesia, Friends of the Earth Mozambique, and 11.11.11 Belgium.

Medupi Power Station in South Africa
The World Bank extended $3.05 billion in World Bank funding for the Medupi Power Station in South Africa in 2010Image: AFP/Getty Images/A. Joe

Keeping it in the ground

Scientists have developed a "carbon clock" showing cumulative emissions of carbon since the fossil-fuels era began, to demonstrate how little room there is left in the atmosphere for dumping still more carbon.

According to 2014 research, more than 80 percent of the world's known coal reserves, 50 percent of natural gas reserves, and 30 percent of oil reserves need to stay in the ground in order to attain a chance at staying under 2 degrees Celsius (3.6 degrees Fahrenheit) warming - a goal to which global society agreed in the Paris Agreement.

Closing down coal-powered electricity generation worldwide as soon as possible is the single most important priority for climate stability, climate protection advocates say.

The Paris Agreement even committed participating nations to trying to prevent average global temperature rising more than 1.5 degrees Celsius, which would require extremely ambitious year-on-year reductions in carbon emissions - starting now.

BIC's Sinani underscored this, saying: "The climate crisis and staying under 2 degrees Celsius warming not only requires increasing investments in renewable energy, but also drastically decreasing fossil fuel investments."

The BIC report calls on the World Bank to support incentives for more renewable energy through DPFs, and to make "more rigorous climate- and forest-related assessments of DPFs before they are approved," Sinani said.

Peru inaugurated the Cupinisque eolic power central, its largest wind farm project ever, on the coastal desert 660 km north of Lima on September 24, 2014
A key challenge for climate protection is financing renewable energy infrastructure in developing countriesImage: Getty Images/AFP/C. Bouroncle

The World Bank, in its rebuttal, cited broad energy work involving a mix of interventions that "work together to promote climate smart growth and increased energy access."

Sinani concluded that BIC's call has resonated with several World Bank executive directors.

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