World Bank quashes fossil fuel funding claims

The World Bank has criticised what it believes are "grossly misrepresented" findings from the Bank Information Center (BIC), which has claimed that up to $5bn in intended low-carbon funds have instead been used to introduce tax breaks for fossil fuel developments in developing countries.

The BIC’s report alleged that the World Bank’s Development Policy Financing (DPF) programme, which offers financial support to developing countries that agree to pursue policies recommended by the Bank, was “undercutting” various initiatives aimed at deploying renewables and protecting rainforests across Peru, Indonesia, Egypt, and Mozambique.

The DPF accounts for around one third of all World Bank funding, reaching $16bn in 2016, and identifies funding opportunities to accelerate the low-carbon transition in developing countries under the Bank’s Climate Action Plan. But, the BIC report claims that from 2007 to 2016 $5bn was leveraged through the programme to the four countries and was used on “tax breaks for coal power plants and coal export infrastructure”.

In response, the World Bank has said that the report fails to capture its “boarder energy work” which covers financial loans, policy reforms and technical assistance. The World Bank is adamant that across the four countries mentioned, policy loans have not been used to support the growth of coal.

“We are deeply disappointed that after close cooperation with BIC on this report, their findings grossly misrepresent the World Bank’s engagement in these countries,” a World Bank spokesperson said.

“The report does not capture the World Bank’s broader energy work, which involves not only development policy loans, but a mix of interventions – policy reforms, investments, technical assistance – that work together to promote climate smart growth and increased energy access. In each of the countries mentioned in the report, the World Bank’s development policy loans do not promote the use of coal, but help support a shift towards a cleaner energy mix and low carbon growth.”

The report notes that DPF funds have provided subsidies for three natural gas pipeline networks and 26 new oil and gas concessions in the Amazon. Coal power plants have also been funded over the proposed geothermal plants on the forest-rich islands of Kalimantan and Sumatra in Indonesia.

BIC has suggested that the World Bank is turning Indonesia “into a major coal producer” by subsidising fossil fuels through the programme. Coal’s share of the Indonesian energy mix, BIC claims, will rise from 35% to 66% by 2025.

The World Bank has also been accused of funding more than a dozen oil and gas projects in Egypt, totalling 12.5GW of new coal capacity. In Mozambique, DPF-supported subsidies have been used on two coal transport railways. Again, BIC claim that no geothermal, solar or wind projects were targeted by the subsidies.

Broader work

The World Bank’s Climate Action Plan has deliberately focused on shifting finance away from fossil fuels in order to funnel support for low-carbon technologies across the globe over the last few years.

The Bank recently partnered with a host of private sector organisations to launch the Climate Business Innovation Network (CBIN) to help commercialise clean technologies across developing countries.

It has also made a “fundamental shift” in its role of alleviating global poverty, by refocusing its financing efforts towards tackling climate change. Last year, the Bank pledged to spend 28% of its investments directly on climate change projects, and that all of its future spending would take account of global warming.

Around the same time, the World Bank also backed a new $1.15bn global platform aimed at boosting investment and implementing sustainable practices across an array of developing cities around the world.

Matt Mace

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