The World Bank accused of dodging ‘no-coal’ pledge by funnelling billions of dollars into fossil fuels
A large-scale study on hundreds of active energy projects commissioned by The World Bank Group has concluded that the body is currently financing $21bn of fossil fuel projects, compared to $7bn in the renewables sector.
Commissioned by German NGO Ungewald, the study analysed the 675 global energy sector projects which have been funded by Group and are still in operation and are listed in the body’s public databases. It found that for every dollar the Bank currently holds in the clean power sector, it holds three across coal, oil and gas.
This figure was reached through analysis of energy project loans to both corporates and countries, finance issued through larger policy based programmes, money transferred for advisory services and other financial assistance to governments in developing nations.
It does not consider The World Bank’s $7bn investment in large-scale hydropower projects, as Ungewald believes these facilities are often associated with “significant negative social and environmental impacts” away from carbon and greenhouse gas (GHG) emissions.
Significant fossil fuel projects included in the calculations include the TANAP gas pipeline in Turkey, which is supported by an $800m loan and a $1.1bn World Bank Group guarantee, and Ghana’s Sankofa offshore gas field.
A further key conclusion of the Ungewald research is that more than half ($12bn) of the $21bn allocated for projects associated with fossil fuels was made during the past five years. While none of this funding was directly allocated to the construction of new coal-fired power plants, large amounts were funnelled into “capacity expansion” at existing coal facilities. Additionally, the Bank has funded energy projects across ten countries where coal or oil is heavily subsidised since 2013.
The author of the study, Intergovernmental Panel on Climate Change (IPCC) member and US-based finance analyst Heike Mainhardt, said the findings served to evidence the fact that The World Bank is “getting around” its 2013 no-coal policy.
“It is a big disappointment to find that The World Bank Group continues to provide such vast amounts of public finance for fossil fuels – it thereby completely undermines its own efforts for renewable energy sources as well as the Paris Climate Goals,” Mainhardt added.
Ungewald is now using the findings of the study to call on The World Bank to divest from the 12 active oil and gas exploration projects it is currently involved with and to advocate for an upstream carbon tax to assist with this transition. These moves, it claims, will place renewables “at the heart” of its energy strategy.
Responding to the new accusations, a spokesperson for The World Bank told edie that Ungewald’s methodology “paints a distorted picture of [its] energy sector work”.
“By focusing on all open projects in the World Bank Group energy portfolio, including legacy projects where financing was approved many years ago, the report does not reflect the substantial changes that have happened in energy financing over the past decade,” the spokesperson said.
“Even when looking at recent years, the Urgewald report’s claim that renewable energy is a minority of our energy financing is inaccurate and misleading. In the last fiscal year alone, the Group provided a record-breaking $20.5bn in finance for climate action, meeting our 2020 target two years ahead of schedule. The resulting increase in financing for climate action has driven strong results including generating or integrating 18GW of additional renewable energy into electricity grids and mobilizing over $10bn in commercial finance for clean energy.”
The publication of the research comes shortly after The World Bank’s new chief executive David Malpass was appointed.
Green economists and activists, as well as the Bank’s own staff, had previously voiced concerns that Malpass would pursue a “profit at any cost” approach which neglected climate and ethical issues, given that he was President Donald Trump’s choice for the role. However, Malpass used his first week in the post to affirm his commitment to the environment, stating that helping developing countries with global warming adaptation and mitigation would remain central to the Bank’s mission.
The World Bank’s climate change action plan includes pledges to increase lending in poor countries vulnerable to global warming, warning that failure to act risks pushing an additional 100 million people into poverty by 2030. The institution has also publicly stated that it agrees with the “need to do the utmost” to help society align with the 2C pathway set out in the Paris Agreement.
However, the report from Ungewald is just one in a string of criticisms of the Bank’s funding history for energy and climate, with the likes of Greenpeace and Oil Change International previously claiming that it lent $1bn to projects exploring or extracting gas and oil in developing counties annually.