28 June 2009
After an abrupt about-face, an agency frets about its footprint
Source: The Economist, Jun 25th 2009
If anyone suggested the World Bank did not take global warming
seriously, its bosses would bristle: only last October, they would
point out, the institution issued a "strategic framework" laying out
its thinking on development and climate change. This promised more
emphasis on noble things like energy efficiency and renewable power;
and more bank support for "sustainable forest management, including
reduced deforestation."
Those words intrigued green campaigners, who were up in arms over a
$90m loan by the bank's private-sector arm, the International Finance
Corporation (IFC), to the Bertin group, Brazil's leading beef exporter.
As the greens observed, cattle farming is widely seen as the biggest
threat to the Amazon's trees.
Doubts about the loan were not confined to angry tree-huggers. In a
paper that was initially confidential but leaked on the internet, the
bank's own Independent Evaluation Group (IEG)--which is supposed to
watch the secondary effects of the agency's work--had argued that the
credit posed "a grave risk to the environment".
The IFC overruled this advice, saying in January 2008 that its loan to
Bertin would help the firm "in establishing sustainable operations
throughout its supply chain, especially with its cattle suppliers in
the Amazon region." But on June 12th there was a change of heart. The
bank said it was pulling out of the Bertin project: it was no longer
satisfied that its concerns over sustainability were being met.
There were yelps of glee from greens--along with harder questions
about how possible it really is for the world's leading development
agency to promote growth, satisfy its member governments and protect
the planet all at the same time.
Defenders of the bank say that its concerns over climate change are
more than verbiage: of the $7.5 billion it lent for energy projects in
2008, a respectable $2.7 billion went to efforts aimed at saving energy
or boosting renewable power. This was twice as much as it had lent for
such projects in 2007. Admittedly, the bank does also fund coal-fired
projects, but it insists that wherever possible, it will opt for
greener forms of power.
Earlier this year, a (public) report by the IEG said the bank could
congratulate itself on promoting energy efficiency. But as it
recognised, this success did not mean everyone's heart had turned
green: rising fuel prices had made energy saving an easy sell in many
countries. And this benign atmosphere may not last. There are poor
countries that see environmentalism as a luxury that hurts their
immediate growth prospects. On June 22nd Ethiopia blamed power cuts on
the World Bank's refusal to fund a 60MW diesel generator.
David Wheeler, a former World Bank economist who is now at the Centre
for Global Development, a think-tank, says such tensions are bound to
persist. The bank's regional units are under pressure to meet lending
targets and get money out to governments. In that culture, the bank's
bureaucrats won't work too hard on goals that hold little appeal for
client countries.
Still, when countries want to act over climate change, the bank can do
a lot to assist. Mexico, for example, has sought help with cutting
energy use in city transport and producing cleaner power. The bank is
lending it $500m in low-interest credits out of a $5.2 billion Clean
Technology Fund to finance new bus networks, replacing the gas-guzzlers
that clog Mexico's roads.
Vinod Thomas, the IEG's director-general, sums up the dilemma:
"Climate change threatens to derail development, while
business-as-usual development threatens to destabilise the climate."
Managing this tension will involve a lot more reflection about the
trade-off between growth, the mitigation of climate change and
adaptation to its effects. At the bank, some thinking does seem to be
going on: that is the topic of its next World Development Report--an
annual assessment of the fight against poverty.
Whatever the report says, it will be hard to convince poor countries
that action over climate change is a necessity, not a luxury, and that
it will not impede growth. The Bertin shambles may go down as a warning
for everybody involved in a giant exercise in on-the-job learning.