Last month, from Bangladesh to Kenya to Washington DC, over 40,000 activists in nearly 20 countries hit the streets calling on banks, governments and financial institutions to “#FixTheFinance” pushing the planet to the brink. 

It’s clear that we can’t address the climate crisis unless we fix the finance flows that are failing the planet. When we know that we have hardly any time left to avoid runaway climate breakdown, it’s absurd that so much of the world’s money is still being poured into fuelling climate change, while barely any is going to the solutions. 

Let’s face it – the climate crisis is really about money, and our choices to use it and make it in really stupid ways.  

G7 offers tepid response to appeal for “bolder” climate action

Many of the world’s most powerful private banks are holding their Annual General Meetings over the next weeks. Banks like Barclays, HSBC and Citibank are pumping billions into fossil fuel expansion, knowing full well that their decisions directly lead to climate chaos and devastating local pollution, particularly for communities in Africa, Asia and Latin America. At their AGMs they will undoubtedly celebrate their profits, self-congratulate on miniscule policy tweaks, and try to ignore the clamour of climate criticism.   

ActionAid research last year showed that these banks are financing an astonishing amount of fossil-fuel and industrial agriculture activities in the Global South, causing land grabs, deforestation, water and soil pollution and loss of livelihoods – all compounding the injustice to communities also getting routinely hit by droughts, floods and cyclones thanks to climate change.  

HSBC, for example, is the largest European financer of fossil fuels and agribusiness in the Global South. Barclays is the largest European bank financier to fossil fuels around the world. And Citibank is the largest US financier of fossil fuels in the Global South. The banks have so much power, and so much culpability, much more than most people realise. But they want us to forget the fact that they are working hand in hand with, and profiting from, the industries that are wrecking the planet.  

The banks can actually turn off the taps. They can end the finance flows that are fuelling the climate crisis. So to avert catastrophic climate change, the fossil-financing banks must start saying no to the corporations destroying the planet.  

But it’s not only private finance that is flawed – public funds are being misused as well. Governments are using far more of their public funds to provide subsidies or tax breaks for fossil fuels and industrial agriculture corporations, than they are for climate action. This is ridiculous – it’s hurting the planet, and its hurting people.  

Public funds instead need to be redirected towards just transitions that address climate change and inequality.  

There is growing appetite for climate action. But this just isn’t yet matched by willingness to pay for it. Or even to stop profiting from climate destruction. 

COP29 finance goal

This year’s COP29 climate talks will be a critical test of rich countries’ commitment to securing a liveable planet. The world’s poorest countries are already bearing the spiralling costs of a warming planet. So far they have only received begrudging, tokenistic pennies from the rich polluting countries to help them cope. The offer of loans instead of grants in the name of climate finance is just rubbing salt into the wounds. 

If we want to unleash climate action on a scale to save the planet, rich countries at COP29 will need to agree a far more ambitious new climate finance goal based on grants, not loans. 

Because if we want to save our planet, we will actually need to cover the costs. 

Tensions rise over who will contribute to new climate finance goal

Last month the International Monetary Fund and the World Bank held their Spring meetings in Washington DC. These institutions are powerful symbols of the planet’s dysfunctional finance systems which urgently need fixing. The World Bank is financing fossil fuels yet being extremely secretive about it. The IMF is pushing climate-devastated countries deeper into debt that often requires further fossil extraction for repayment.

Even as they brand themselves as responsible channels for climate finance, the world’s most powerful financial institutions are pushing our planet to the brink. Their stated aim to get “bigger and better” really amounts to all-out push to get “bigger” but only token tweaks to get “better”.  The Spring meetings ended with business-as-usual backslapping. But if they were taking climate change and its consequences seriously, at the very least, the IMF and World Bank would stop financing fossil fuels and cancel the debts that are pushing climate-vulnerable countries into a vicious cycle.  

Will blossom of reform bear fruit? Spring Meetings leave too much to do

All of these finance flows need fixing. At the moment, the global financial system is better designed to escalate – rather than address – climate change, vulnerability and inequality. The activists, youth and frontline communities who filled the streets last month hope that their calls to stop financing destruction will be heard in the boardrooms and conferences on the other side of the world. 

They say that money talks. This is the year that the climate movement is going to make sure it listens.  

The post How to fix the finance flows that are pushing our planet to the brink appeared first on Climate Home News.

With spring in full bloom, the world’s finance ministers, development and financial leaders, and philanthropists met for the World Bank and International Monetary Fund (IMF) Spring Meetings in Washington, DC last week.  

In their midst, Brazil, the current president of the G20, insisted on a balanced focus between ending poverty and food insecurity and combating climate change. President Lula makes no secret of his desire for a new international financial architecture, designed for different challenges, in a different century with new emerging powers at the table. 

2023 was the year leaders agreed the current architecture was no longer fit for purpose. 2024 needs to be the year the IMF, multilateral development banks (MDBs), and their shareholders rapidly implement reforms and begin the process for increasing capital. 

In Washington, the presidents of the MDBs held their first-ever “summit” – a direct response to insistence by G20 leaders and expert groups that the system must work more effectively together as one, in addition to individual bank reforms. 

Since G20 leaders last September called for a better, bolder and bigger MDB system, and the World Bank responded with its own roadmap of reform, changes are underway, especially in areas where the MDB managements have authority. Where progress is less clear is on issues requiring their shareholders to take the lead.  

Peak COP? UN looks to shrink Baku and Belém climate summits

Last week, coalitions of countries met with private finance, think tanks, philanthropy and civil society to discuss the key problems of debt, reversals on global development goals and lagging climate action. The policy proposals on what to do are manifold, and there is a deep well of goodwill to help with the current system’s obvious failures. But all eyes must be on governments.  

In one gathering of finance ministers, IMF Managing Director Kristalina Georgieva boiled down the climate change to-do list to the two things only they can do: price carbon effectively and remove harmful subsidies in the fuel, food and fisheries sectors. So how do we move from rhetoric to action? 

Geopolitical pressure and debt distress 

We cannot ignore the worsening context. Wars in Ukraine and Israel-Gaza, and their costs, threaten progress. Famine and conflict are taking their toll in many other countries too. Climate impacts are severe and intensifying, with crippling extreme heat stretching across India and closing school systems from the Philippines to Sudan.  

Many countries are suffering from debt distress and many more are channeling all available funds to service their debt at the expense of basic services, a serious impediment to investing in their much-needed climate resilience. Even more countries are suffering a crisis of liquidity.  

Whether it’s debt, debt service, or liquidity, it’s a crisis. Yet, at the Spring Meetings, the crisis response still lacked urgency. 

Protesters gather outside the IMF and World Bank’s 2024 Spring Meeting in Washington D.C., on April 19, 2024. (Photo: Andrew Thomas/Sipa USA)

Debt rescheduling was called out by the World Bank chief economist as inadequate. The details of how MDBs can use reflows of Special Drawing Rights as hybrid capital continues to be debated by the very same countries that urge climate action, and who themselves face fiscal pressure on their development and climate budgets.  

While shareholders, creditors and the institutional leadership played pass the parcel, the finance ministers of Small Island Developing States (SIDS) – whose cumulative debt is around $40bn, and who have no tools to dig out of their growing indebtedness and climate crisis – were despairing. As the urgency of a lack of inclusion coupled with climate stress grows, is it time not to tweak the system but to break it in places? 

For example, we could write off the debt of SIDS, while we begin new resource mobilization schemes from targeted forms of taxation to moral payments. If SIDS could face their short-term and existential challenges on a sounder footing, the international system could then expedite work on the problems of the next groups of vulnerable countries to mobilise investment in their resilience at scale.

Global billionaires tax to fight climate change, hunger rises up political agenda

To underline the bind countries find themselves in, during the time that MDB reform has become mainstream and Mia Mottley of Barbados and other leaders from emerging market and developing economies have called for a system reset under the banner of the Bridgetown Initiative, net flows of finance away from emerging and developing economies have grown. 

If we were grading reform mid-terms, we would be looking at Bs for management making in-roads on better and bolder, but an F for shareholders stuck on the bigger. How do they get straight As by the end of the year? 

IMF and World Bank at a crossroads 

First, we need radical collaboration among MDBs and between MDBs and development finance institutions, national development banks and private finance on the processes needed to get loans and guarantees disbursed faster. Some MDBs have moved to cooperate on procurement, and there are many suggestions on how to make country platforms work. But radical collaboration involves much deeper streamlining, due diligence, term sheets, analysis, talent, and pooled capital.  

Second, pressure must now be focused on the MDBs’ major shareholders: the G7, other OECD countries and the G20. While they work out how to mobilize more funds and endorse a US proposal for a framework for capital increases, there is room to de-fragment the many pockets of resources stuck in trust funds and facilities with too many strings attached to scale their impact. 

As donors dither, Indigenous funds seek to decolonise green finance

Thirdly, we must preserve the collaboration within the MDBs that, despite growing tension, means that the US, China, Europe and other large emerging economies are working together and can zero in on solutions to debt, growth of carbon markets, the evolution of the trade system, harmful subsidy removal, and shifting the development and climate finance systems to a world where all development is supporting adaptation and resilience.  

Shareholders could start by strengthening the quality of governance and ensuring that the ambition leaders show when they meet at the G20 is echoed in the way MDB board members articulate interests. This would support management to act more boldly and thwart push-back against the reform agenda among senior officials. 

In their 80th anniversary year, the IMF, the World Bank, and their owners and borrowers, are at a crossroads. The analysis of the last two years has confirmed they are necessary institutions. Yet, if they are to retain their relevance – and not face competition from new institutions and capital pools as frustration at the system’s inertia grows – reform must go deeper and faster to rise to the challenges of tomorrow, starting today. 

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Many countries in the Global South are burdened with huge public debts. These rising debts are a drain on public resources that are urgently needed for sustainable development programmes, and further pressure Southern governments to prioritise debt service over climate actions. 

Global South countries allocate more funds for debt service – 65% in lower- income countries and 14% in lower-middle-income countries – than their combined budgetary spending for education, health and social protection.  

Included among the public debts of Global South countries are those from projects tainted with fraud and whose negative impacts on people, economies and the planet far outweigh the benefits, if any. Furthermore, many debts arose from projects that did not involve democratic consultations nor the free, prior and informed consent of affected communities including indigenous peoples. Prime examples of these debts are those arising from or related to fossil fuel projects. These debts should be seen and treated as illegitimate.   

World Bank climate funding greens African hotels while fishermen sink

For several decades, international financial institutions and public finance institutions have lent hundreds of billions of dollars to Southern governments to support fossil-fuel energy projects. Many of the loans extended by the World Bank, Asian Development Bank (ADB), and other public finance institutions such as the Japan Bank for International Cooperation (JBIC), remain part of the current outstanding public debts. 

There is already a clear consensus among governments and many public financial institutions that fossil fuel energy – from its extraction, production and consumption – is the main driver of climate change.  

This is evidenced by outcomes from the Conference of Parties (COPs) summits of the UN Framework Convention on Climate Change, calling for the phase-out or transition away from fossil fuels, as well as outcomes from G7 and G20 summits committing to the phase-out of fossil fuel subsidies. Individual governments including China and Korea, have announced decisions to stop their financing of overseas coal projects. Further evidence is in the decisions made by public financial institutions to stop or phase out financing of coal and fossil fuels.   

These decisions, commitments and policy shifts should be taken as acknowledgement of their co-responsibility in the promotion of fossil fuels and the harms fossil fuel projects have caused to people, communities, the environment and climate systems. 

Owning up to their co-responsibility for fossil fuel projects and their impacts, and consistent with their avowed commitments to combat climate change, governments and public financial institutions, including international financial institutions, should cancel all outstanding public debts that arose from fossil fuel projects. These outstanding debts may be transformed into grants for renewable energy systems.  

UN climate chief calls for “quantum leap in climate finance”

The same can be said for private banks, financial and investment institutions and corporations that have lent money to governments for fossil fuel projects. Many have also recognised fossil fuels as the main drivers of climate change and have shifted their policies towards reducing or phasing down their lending and investments in coal and fossil fuels.   

From April 17 to 19, the IMF and the World Bank (IMF-WB) will hold their Spring Meetings in Washington D.C. These meetings take place amidst an ever-worsening debt crisis, most harshly felt by 3.3 billion people living under governments that spend more on interest payments than education or health.  

Bankruptcy risk from climate spending  

A new report released on the eve of the meetings found that developing countries will pay a record $400 billion to service external debt this year. It said climate spending could bankrupt developing countries due to huge debt costs and called for debt forgiveness for those most at risk. The report from the Debt Relief for Green and Inclusive Recovery Project (DRGR) warned 47 developing nations would reach external debt insolvency thresholds in the next five years if they invested the necessary amounts to meet the 2030 Agenda and Paris Agreement goals.

Spring Meetings can jump-start financial reform for food and climate

It is deplorable that the IMF-WB continues to push loans as the solution to multiple crises facing developing countries, including loans for climate action. At the height of the COVID-19 pandemic, when financial resources were most urgently needed, they supported and promoted the debt relief schemes of the G20 and Paris Club for the mere postponement of debt payments. These have all but proven flawed and futile. The suspended payments fall due in 2025 – by which time debt accumulation will have sped up even more. Private and commercial lenders, who now hold over 60% of sovereign debt, remain free to refuse participation in debt reduction. 

Total public debt, domestic and external, reached $92 trillion in 2022, increasing five-fold since 2000. Southern governments account for almost one-third of the total debt and are accumulating debt much faster than their richer counterparts. The number of countries with public debt levels exceeding 60% of GDP continues to rise, from 22 in 2011 to 59 in 2022. The long-term public external debts alone of low- and middle-income countries, excluding China, amount to a staggering $3.3 trillion. 

The consequences of World Bank projects, coupled with IMF neoliberal, policies have been devastating for vulnerable communities in the Global South. Large-scale infrastructure projects financed by the World Bank have led to displacement of communities, loss of livelihoods and destruction of ecosystems, and in the process, deepened inequality and impoverishment. Its fossil fuel subsidies and project loans impacted communities already struggling to survive economic hardships and environmental degradation. It also continues to subsidise the fossil fuel industry through direct and indirect financing, estimated at $885 million in 2022 and at least $194 million in 2023.  

The World Bank and the IMF, now in their eighth decade of committing to fight poverty, have yet to account for loans that are clearly illegitimate and must be canceled outright, nor for harsh loan conditionalities that have deepened inequality and impoverishment.

The post Fossil fuel debts are illegitimate and must be cancelled  appeared first on Climate Home News.

Just a few kilometres further south, however, local fishermen in Mbour, the country’s second-largest fishing port, are struggling. The beaches where they keep their boats are being progressively eaten away by rising seas that also threaten their homes.

The stark contrast between the neighbouring coastal areas highlights how global funding for climate projects – largely taxpayers’ money from rich countries – often fails to help those shouldering the burden of warming impacts, especially when it is being used to mobilise more private investment for green aims.

“They prioritise Saly because the hotels are wealthy,” said Saliou Diouf, a retired fisherman who lost his house in Mbour to encroaching waves. “The World Bank should help the most vulnerable.” 

Map showing the location of the neighbouring communities of Saly and Mbour on Senegal’s coast (Graphic: Fanis Kollias)

Le Lamantin is one of a dozen upscale hotels in sub-Saharan Africa acquired by Mauritius-based Kasada Hospitality Fund LP – whose investors are Qatar’s sovereign wealth fund and multinational hotel giant Accor – which it is revamping in accordance with EDGE, a green building certification created by the World Bank.

Kasada was granted over $190 million in guarantees by the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA), and loans of up to $160 million by its private-sector lender, the International Finance Corporation, to help it snap up hotels across Kenya, Nigeria, Ivory Coast, Rwanda, Namibia and Senegal, and spruce them up as Accor brands like Mövenpick.

The Mövenpick Resort Lamantin Saly, where a standard hotel room costs about £220 a night (Photo: Jack Thompson)

MIGA, the little-known insurance arm of the World Bank Group, has counted its backing for the hotels as part of its climate efforts for the past three years, according to annual sustainability reports.

The five-star resort in the West African nation of Senegal, where rooms cost at least £220 a night ($270), is being refurbished to consume at least 20% less energy and water than other comparable buildings by its owner Kasada, which expects it to obtain EDGE certification this year.

Teresa Anderson, global lead on climate justice for ActionAid International, told Climate Home it is “shocking that what little funds there are for climate action are benefiting luxury hotels”.

 

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Una publicación compartida de Mövenpick Resort Lamantin Saly (@movenpicklamantinsaly)

“Climate finance must be used to help those most vulnerable – not to help the world’s wealthiest add a climate hashtag to their Instagram posts by the pool,” she said.

MIGA told Climate Home its support for Kasada is primarily aimed at developing Senegal’s tourism sector and creating jobs, adding that refurbishing hotels can also have beneficial climate impacts and play an important role in decarbonising the hospitality industry.

Mbour, just a few miles from the pristine beaches of Saly, is the second-largest fishing hub in Senegal with 11,000 fishers. (Photo: Jack Thompson)

‘The money is missing’

In nearby Mbour, however, the fishing community feels left behind.

“I was born here, I grew up here – when I was a child, the sea only came up to the last pole,” Diouf told Climate Home, pointing to the remnants of a Portuguese-built pontoon used to moor colonial ships in the 1800s. 

In just one generation, he said, the sea has gobbled up more than 100 metres of beach in Mbour, forcing 30 families to abandon their houses and threatening hundreds more. A quarter of the Senegalese coastline – home to 60% of the population – is at high risk of erosion.

Mbour’s fast-disappearing shore is a crisis for its 11,000 fishers as big swells destroy their boats, crammed into the remaining patch of sand.

But in Saly, it’s a different story. Here, between 2017 and 2022, under a separate project, the World Bank invested $74 million in beach protection, building 19 stone walls, groynes and breakwaters to reclaim 8-9 kilometres of hotel-lined beachfront, popular with tourists.

The World Bank Group said the project helped preserve around 15,000 direct and indirect jobs by saving tourism infrastructure, while also protecting two fishing villages in Saly.

Satellite data shows the changing coastline in Saly (north), where protective infrastructure was developed, and Mbour (south), which has none. (Photo: Modified Copernicus Sentinel data [2024]/Sentinel Hub)

The World Bank Group (WBG) said its units work together to avoid trade-offs. “It’s not to either support hotels and the tourism sector as a driver of development, or to enhance the resilience of local communities – the WBG does both,” it said in a written response to Climate Home.

But fishermen in Mbour – which was outside the scope of the Saly coastal protection infrastructure project – are not benefiting from that approach, and even say the works in Saly have exacerbated erosion in their area. The Mbour artisanal fisheries council has devised a climate adaptation strategy to address the problem. 

One of its coordinators, Moustapha Senghor, said seawalls and breakwaters are needed, but there are no funds for what would amount to “a colossal investment”. “We know exactly what we need to do, but the money is missing,” he said.

Sea level rise is threatening beach-side homes and swallowing coconut trees that protect the coastline in Mbour, Senegal. (Photo: Jack Thompson)

Private-sector trillions

Governments and climate justice activists are putting pressure on the World Bank to significantly step up its role in funding climate projects, especially to help the most vulnerable countries and communities. 

For the past three years, a group of countries led by Barbados’ Prime Minister Mia Mottley has called for reforms so that the bank can better address climate change.

At the same time, wealthy nations have been reluctant to inject more capital into its coffers, while attempts at tinkering with the balance sheet to squeeze out more climate cash only go so far. 

For World Bank Group President Ajay Banga, the real solution lies in greater private-sector involvement, using scarce public money as a lever to help mobilise huge dollar sums for climate and development goals this decade.

“We know that governments and multilateral institutions and philanthropies all working together will still fall short of providing the trillions that we will require annually for climate, for fragility, for inequality in the world. We therefore need the private sector,” Banga told media ahead of this week’s annual Spring Meetings of the World Bank and the International Monetary Fund.

MIGA’s guarantees can be a key driver of climate investments in developing countries. (Graphic: Fanis Kollias)

Following suggestions from a group of CEOs convened by Banga, the World Bank Group announced in February a major overhaul of its guarantee business to enable “improved access and faster execution”. The goal is to triple issuances, including those from MIGA, to $20 billion by 2030, with a significant proportion of that expected to support green projects.

MIGA – as a provider of guarantees aimed at encouraging private capital into developing countries – may not be the obvious choice to help low-income communities like Mbour’s fishers. 

But, in its 2023 sustainability report, the agency wrote: “because the poorest are the most vulnerable to climate change, MIGA is working to mobilize more private finance to scale up climate adaptation, resilience and preparedness”.

Last year, less than one percent of MIGA’s total guarantees directly supported climate adaptation measures, according to its annual report.  

The guarantees generally act as a form of political risk insurance, making an investment less risky and giving companies access to cheaper loans as a result.

MIGA’s 2023 sustainability report showcases the Kasada-owned hotels as an example of its efforts to “rapidly ramp up” private capital for climate action, with the agency providing its highest volume of climate finance last year.

Struggle to fund adaptation

But some experts argue the World Bank Group should be targeting its efforts more closely on communities who are struggling to survive as global warming exacerbates extreme weather and rising seas. 

Vijaya Ramachandran, a director at the Breakthrough Institute, a California-based environmental research centre, said projects like the Kasada-backed hotels are “not where the dollars are best spent from a climate perspective”.

Ramachandran, a former World Bank economist, co-authored a study last year analysing the climate portfolio of the bank’s public-sector lending arms, which exclude MIGA. It found a lack of clarity over what constitutes a climate project and showed that hundreds of projects had been tagged as climate finance despite having little to do with emissions-reduction efforts or adaptation.

Ramachandran told Climate Home that, in the case of MIGA’s backing for the African hotels, Kasada “should just be doing the energy saving itself as part of its own efforts to address climate change”. 

Holidaymakers enjoy a spacious, ocean-side pool at the five-star Le Lamantin resort in Saly, Senegal. (Photo: Jack Thompson)

Olivier Granet and David Damiba, managing partners of Kasada Capital Management, told Climate Home the hotel investment fund had always planned to be “a leader in energy and water efficiency in its properties”. 

But, they added, the financial and technical support of MIGA and the IFC had helped them implement their strategy “further and more easily”, especially during the COVID-19 pandemic. Eight Kasada-owned hotels have already been certified under EDGE and the rest are expected to achieve the standard this year, they noted.

Ramachandran said making hotels energy-efficient is a good thing – “but from a public finance perspective, for poorer African countries the focus should be on adaptation and making them more resilient”.

Developing countries need an estimated $387 billion a year to carry out their current adaptation plans, but in 2021 they received only $24.6 billion in international adaptation finance, according to the latest figures published by the Organisation for Economic Co-operation and Development.

MIGA to miss climate target?

Once regarded by campaigners as the “World Bank’s dirtiest wing” for its support of fossil fuels, MIGA has come under mounting pressure to shift its subsidies in a greener direction, in line with broader institutional goals.

In response, the agency has committed to throw more of its financial weight behind projects that aim to cut greenhouse gas emissions or alleviate the impacts of climate change. 

In 2020, it revealed a plan to dedicate at least 35% of its guarantees to climate projects on average from fiscal year 2021 through 2025, embracing a target set by the wider World Bank Group. 

MIGA conceded at the time this would be “a challenge” – and it now looks likely to fall short of the goal. In 2023, climate finance represented 28% of its guaranteed investments.

According to the agency’s 2023 sustainability report, 31 out of 40 projects it supported with guarantees last year had a climate mitigation or adaptation component, but it did not disclose what percentage of each was counted as climate finance.

Meanwhile, over the last three years, MIGA has backed three gas-fired power plants in Mozambique and Bangladesh, while it is also planning to support an additional one in Togo. 

In monetary terms, MIGA’s annual provision of climate guarantees has risen from just over $1 billion in 2019 to $1.5 billion in 2023, pushing up the total size of its climate portfolio to $8.4 billion. But the headline numbers only paint a partial picture, clouded by a lack of transparency in the data.

MIGA’s portfolio of climate investments has grown in the past six years. (Photo: MIGA Climate Change)

In response to Climate Home’s request for a full list of MIGA’s climate projects, the agency said it could not disclose the information for confidentiality reasons. 

“Our clients are private-sector investors or financiers, and we do not have agreement to release disaggregated information about their investments and financing,” a MIGA spokesperson said.

The only clues about the make-up of MIGA’s climate portfolio come in its glossy annual sustainability reports, which highlight a handful of initiatives. 

Climate Home News reviewed these reports from the last three available years – 2021, 2022 and 2023 – and tracked highlighted projects, which are framed as positive examples of climate finance. 

Motorways and elite universities 

They show that support for renewable energy made up a quarter of MIGA’s climate guarantees in 2023. 

But its track record of climate investments raises questions about the agency’s criteria for designating projects as climate finance and how it allocates those resources to help people most in need, experts said. 

Karen Mathiasen, a former director of the multilateral development bank office in the US Treasury, said MIGA should not be using its resources to expand investment in things like luxury hotels and then counting them as climate finance. 

“There is a real problem in the World Bank Group with greenwashing,” added Mathiasen, who is now a project director with the Center for Global Development.

World Bank approves green reforms, appeals for more money

MIGA said it calculates the climate co-benefits from its projects using the same methodologies as other multilateral development banks, and applies them consistently according to a “rigorous internal consultation and review process”. 

Large infrastructure projects feature heavily in MIGA’s climate portfolio. 

For example, a group of international banks, including JP Morgan, Banco Santander and Credit Agricole, have received a total of €1.4 billion in guarantees to bankroll the construction of a new motorway in Serbia, in an area prone to severe flooding. 

The 112-km dual-carriageway, in the West Morava river valley, is implementing measures to reduce flood risk, including river regulation – and so was counted as climate finance.  

In 2022, MIGA’s largest climate guarantee – worth €570 million ($615 million) – helped finance the construction of a new campus in Morocco’s capital Rabat for the Mohammed VI Polytechnic, a private university owned by mining and fertiliser company OCP Group and frequented by the country’s elite.

According to MIGA, the project would seek to obtain LEED (Leadership in Energy and Environmental Design) green-building certification “for key facilities”, and include hydraulic structures to enhance the climate resilience of the campus.

Similarly, support for a new hospital in Gaziantep, Turkey, was tagged as 100% climate finance because it features energy efficiency measures and flood drainage works. 

In 2023, just under half of MIGA’s climate guarantees went towards “greening” the financial sector in mainly middle-income countries like Argentina, Colombia, Hungary, Algeria and Botswana. 

These guarantees are intended to help local banks free up more capital and boost loans to climate projects, although in some cases they are only expected to do so on a “best effort basis” involving no strict obligation, according to MIGA’s annual reports.

MIGA said this clause is included for regulatory reasons and requires banks to “take all necessary actions to provide climate loan commitments” as far as is “commercially reasonable”.

UN climate chief calls for “quantum leap in climate finance”

Call for clarity 

Ramachandran of the Breakthrough Institute said MIGA should demonstrate the outcomes of its climate finance projects “in terms of reduced emissions or of improved resilience, (and) what the overarching strategy is to make sure the money is best spent”. 

“Instead the focus is simply on dollar amounts,” she added – a criticism rejected by the World Bank Group. 

MIGA said it supports projects in all sectors that contribute to development and enables the inclusion of emissions-cutting and climate adaptation measures in their design and operation. 

Former U.S. official Mathiasen believes MIGA could be a powerful engine to mobilise more private money for climate action, but said it needs a cultural change to focus more on results rather than numerical targets which give staff an incentive to “pump up the numbers”. 

“A little bit of an add-on – that is not a climate project. There needs to be clear, transparent criteria of what constitutes a climate project,” she said. 

(Reporting by Jack Thompson in Senegal and Matteo Civillini in London; additional reporting by Sebastian Rodriguez; editing by Megan Rowling, Sebastian Rodriguez and Joe Lo; graphics by Fanis Kollias)

This article was amended on April 17 to clarify that the Qatar Investment Authority and Accor are investors in the Kasada Hospitality Fund. It is run by Kasada Capital Management.

The post World Bank climate funding greens African hotels while fishermen sink appeared first on Climate Home News.

Set against the global backdrop of poverty, hunger, climate change, debt and conflict, it can feel hard to be hopeful at present. But there is a real win-win opportunity – as well as a deep moral obligation – to heal geopolitical divisions, foster peace, alleviate poverty, ensure food and nutrition security, address the climate crisis, and deliver a better, fairer future for people and planet. It lies in the reforms of the global financial architecture necessary to deliver the additional sum of at least $3 trillion required to support countries to meet the Sustainable Development Goals and the Paris Agreement on climate change.

Last year’s international meetings in Paris and Nairobi – leading to the Paris Pact for People and Planet, and the Nairobi Declaration – have made the case for debt relief, enhanced international taxation and global financial architecture reform. These reforms will be centre-stage at next week’s Spring Meetings of the World Bank and the IMF in Washington DC.

Here the world must urgently come together to articulate and deliver a clear plan for how to end hunger and build resilient food systems, backed by real leadership, enhanced coordination, accountability and finance. The task at hand is to connect the global imperative to act on food security, sustainable agriculture and malnutrition with the broader efforts underway to drive a reform agenda and to replenish the World Bank’s concessional lending arm, the International Development Association (IDA).

At UN climate talks in Dubai last year, 159 world leaders committed themselves to action on food security and climate change by signing the COP28 Emirates Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action – the first of its kind. The commitments in this declaration now need to be linked with the emerging global plan for increased finance.

Is water provision in drought-hit Zambia climate ‘loss and damage’ or adaptation?

African potential

Africa is ground zero for the climate crisis, but is also the continent where solutions will have the most impact. Of the 9.8 billion people expected to live on the planet by 2050, a quarter will be African. Financial reforms must unlock climate-positive green industrialization and transform food systems across the continent in a way that is compatible with sustainable and inclusive economic growth. But the ultimate test will be whether the funds released reach the communities who need them most, when they need them, producing the desired results of ending poverty, building climate-resilient infrastructure, saving nature and biodiversity from extinction, and delivering prosperous lives for all.

This goal is within our reach – with evidence and farmers’ testimonials showing the success of innovative models such as the Arcos community-led scheme in Rwanda, which has empowered smallholder farmers to preserve and restore forests and agricultural landscapes. To date, 12,000 community members have grown 4.2 million trees, including fruit trees for boosting income and nutrition, nitrogen-fixing species to improve soil health, fodder species for livestock and indigenous species for biodiversity, on more than 20,000 hectares. The farmers have also built terraces across the hilly landscapes to reduce soil erosion and prevent pollution of lakes and rivers.

Nigeria’s path to net zero should be fully lined with trees – and fairness

Across much of the Global South, there are numerous such inspiring examples of where communities and societies have established social safety nets, fostered rural development, and promoted gender and social equity. These approaches have enhanced  communities’ capacity to plan for and respond to more extreme weather, to continue to deliver their crops to market despite climate change and other challenges, and to provide nutritious food for their families.

Smallholder farmers produce a third of the world’s food, yet receive only 1.7 percent of climate finance. Globally, there must be a major shift in financial flows to change that, including efforts by international development partners such as the World Bank and the philanthropic sector. National government leadership is a prerequisite to success, including revising agricultural subsidy programs to ensure they incentivize farming practices and behaviour that will help the world close the hunger gap while reducing greenhouse gas emissions, protecting biodiversity and restoring degraded lands.

Global momentum growing

This year there is a golden opportunity to make progress on financing for food systems. As a result of consistent advocacy – including from Barbados Prime Minister Mia Mottley, Kenyan President William Ruto and World Bank President Ajay Banga – an additional $300–400 billion in low-cost concessional finance and lending has been promised over the next decade by the multilateral development banks (MDBs) to low- and lower-middle income countries.

This recalibration of the international finance institutions’ balance sheets is a welcome development to build on – and demonstrates that climate and development commitments can be honoured. The social, economic and environmental case for making these kinds of investments in food security is unequivocal. Well-designed investments deliver four-fold benefits: they strengthen food security and nutrition; reduce greenhouse gas emissions; support nations and communities to adapt to a changing climate; and protect and restore nature.

The Brazilian government has committed to put zero hunger, sustainable agriculture and food systems centre-stage at the G20 this year, through its Global Alliance Against Hunger and Poverty, and has committed to work closely with Italy and the rest of the G7 on this agenda. President Lula has also rightly placed the ongoing deeper reboot and replenishment of the multilateral development bank system at the heart of his G20 agenda. His leadership – in partnership with African governments and the G7, and harnessing such key moments as the UN Summit for the Future – could drive major progress at this critical time, starting at the Spring Meetings this April.

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In his first major speech since taking office, President Ajay Banga said a set of measures to stretch its balance sheet could allow the bank to increase lending by up to $15.7 billion a year.

The extra funding would support the implementation of the bank’s new vision statement approved by its governing body on Thursday.

The historical objective to “end poverty” should now be achieved “on a livable planet”. The new mission will give the lender the formal mandate to tackle a whole range of global challenges, among which climate change is seen as the most urgent one.

Banga said this will widen the aperture through which the bank looks at its task in the future. “If you can’t breathe and cannot drink clean water, there is little point in eradicating poverty,” he added.

Year-long reforms

Announced at the lender’s annual meetings in Marrakech, Morocco, the changes come a year after a group of its biggest shareholders, led by the United States and Germany, called for its fundamental shake-up to deliver more climate finance.

The overhaul quickly picked up pace. Former chief David Malpass resigned early, after sparking an outcry with climate sceptic comments, and was replaced by Banga, a former Mastercard CEO, who promised far-reaching reforms.

Banga is seeking to create a “better and bigger” bank capable of plugging a few more of the huge gaps in the provision of climate finance to developing countries.

But a lack of appetite to inject fresh funds into its coffers directed the focus on financial tweaks to make the existing capital go further. The reforms mainly concern the International Bank for Reconstruction and Development (IBRD), the lending arm for middle-income countries.

Accounting tweaks

The first concrete step came in April when the bank lowered its equity-to-loan ratio from 20% to 19%, freeing up $4 billion a year.

The lender is also creating a programme of guarantees backed by shareholders, which would step in to cover potential losses if borrowers cannot repay their loans. The measure would offload some of the risk currently shouldered by the World Bank to its donors, allowing the bank to channel those reserves into more new lending.

Another option under development is the launch of a hybrid capital mechanism, which allows shareholders to inject new funds by investing in special bonds issued by the World Bank.

US Treasury secretary Janet Yellen at the World Bank annual meetings in Marrakech. Photo: World Bank / Franz Mahr

Taken together, this suite of tools could boost the bank’s lending capacity by $157 billion over the next decade, Banga said on Friday.

He added that the plans have been “met with enthusiasm and generosity”. But, crucially, their potential will only be realised if shareholders fork out the money.

Saudi Arabia, Russia urge World Bank to keep funding fossil fuels

The US government favours the guarantees plan and wants Congress to approve $2.1 billion in new funding that could unlock $25 billion in new loans. Germany has become the first country to pledge 305 million euros ($321 million) of “hybrid capital”.

Cheaper energy loans

Another element of Banga’s blueprint is the extension to middle-income countries of the cheap loans that are currently exclusively offered to low-income ones. The concessional resources currently available “are insufficient to deliver on the new vision and mission”, a paper outlining the bank’s reforms said.

The rollout of clean energy in high-emitting countries is one of the primary areas the lender would be targeting with these measures.

“We’re investigating if we can reduce interest rates to incentivize exiting from coal as part of energy transitions,” said Banga, “and find ways to encourage a renewable energy transition by increasing concessional finance in the mix.”

A thermo-solar power plant supported by the World Bank. Photo: Dana Smillie / World Bank

Danny Scull, an analyst at E3G, said this is a welcome step as incentivising countries like India and Brazil to take out cheaper loans for climate action will benefit the whole world.

Amid all the optimism, the World Bank chief added words of caution on how far his organisation can go without external help.

An influential panel of experts commissioned by the G20 said in July that development banks need to triple their lending levels by 2030 if they want to make a serious dent in the trillions of dollars of climate finance needed by developing countries.

Appeals for more capital

“The World Bank is merely an instrument that reflects the ambition of our shareholders,” said Banga, “the progress we aspire to achieve requires our resources and capital to be commensurate with our vision.” In other words, governments need to inject more money into the bank to fulfill this new mission.

But support for a direct capital increase is limited. The UK is the only major Western country in favour of the idea, which is strongly championed by developing nations, China and India above all.

World Bank targets dirty subsidies to fund climate action

For the US and Japan – the bank’s biggest shareholders – these discussions prompt a  headache. They would need to contribute most to a capital increase, if they are to avoid their percentage ownership of the bank being watered down, perhaps as the share of geopolitical rival China rises.

Private sector engagement

Among rich countries, the preferred solution is to get the private sector to stump up more money.

Banga agrees, saying the lender needs “the scale, resources, and ingenuity of the private sector”. But he also acknowledged that “meaningful, sustainable progress has evaded us” on that front.

To change that equation the World Bank has set up a forum with a group of CEOs from some of the world’s biggest companies.

Banga said the initiative is initially focused on increasing private investment in renewable energy and the energy transition in developing countries.

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During a meeting of the bank’s steering committee in Marrakech, Morocco, they voiced opposition to reforms which are expected to channel more money into clean energy projects.

Mohammed Aljadaan, the Saudi finance minister, said “hydrocarbons will continue to play an important role in balancing the energy mix for the foreseeable future”, calling on the World Bank to reflect “these realities” in its financing.

He added that the lender should prioritise supporting universal electricity access, which requires “tapping all energy sources”.

His calls were echoed by Bahrain’s finance minister, Sheikh Salman Al Khalifa, who intervened at the meeting on behalf of a group of countries including neighbouring United Arab Emirates and Qatar.

“All sources of energy are essential and needed for economic growth and development,” he said before going on to make the case for the “indispensable role” of fossil gas as a source of “reliable and affordable” energy during the transition process.

Gulf states are among the world’s biggest producers and exporters of fossil fuels, which contribute to the vast majority of their national incomes.

Carbon capture pitch

Both Aljadaan and Al Khalifa also urged the World Bank to boost investment in carbon capture and storage (CCS) to allow for “a wide and reliable energy mix”. Saudi Arabia is a major proponent of CCS and has a history of promoting it in international summits, including talks over the IPCC scientific reports and UN climate talks.

Countries that produce or rely on fossil fuels particularly advocate the use CCS to trap their emissions, rather than ending the use of such fuels completely. However, the technology remains expensive and unproven at large scale.

According to the IPCC’s scientists, stopping a tonne of carbon dioxide with CCS costs between $50 and $200. Replacing fossil fuels with renewables usually saves money.

The International Energy Agency recently downgraded the role of the techno-fix in its net zero scenario, saying the history of CCS “has largely been one of unmet expectations”, marked by slow progress and flat deployment.

Green agenda attacked

Another voice in favour of fossil fuels around the World Bank committee table was that of Alexey Overchuk, Russia’s deputy prime minister. In a not-so-thinly veiled attack on the lender’s new agenda, he hit out at “unbalanced” energy and climate policies.

“An accelerated ‘greening’ of the global economy without considering the social effects and economic efficiency of decarbonization measures, along with massive underinvestment in fossil fuels, undermines energy security globally,” Overchuk said.

He added that the World Bank should recognise “the potential advantages of other energy sources, including gas and nuclear”. Russia is the second world’s largest gas producer, accounting for 18% of the global gas output in 2021.

World Bank and fossil fuels

The World Bank has reduced its financial backing of fossil fuel projects over the last few years. But last year it still provided over $1 billion of direct support to oil and gas, according to research by campaigning group Oil Change International.

A separate study found the lender’s private finance arm supplied $3.7bn in trade finance to oil and gas projects in 2022. Trade finance refers to a complex set of financial instruments in which money flows through intermediaries, like commercial banks, before reaching governments and businesses.

The World Bank – along its fellow development banks – recently agreed on principles to align its activities to the goals of the Paris Agreement, which aims to limit global warming to well below 2°C and to “pursue efforts” to keep it under 1.5°C.

But analysts raised concerns over the framework which does not explicitly prohibit financing for fossil fuel activities.

Climate finance leader

The World Bank says it is the largest provider of climate finance to developing countries. In 2022, it delivered $31.7 billion for climate-related investments – 36% of its lending.

At the meeting on Thursday in Marrakech, the World Bank’s shareholders endorsed its new vision, which puts a sharper focus on climate change.

The bank has expanded its historical objective to “end poverty” by adding that this should happen “on a livable planet”.

The reason for evolving the statement is to widen the aperture through which the bank looks at its task in the future, its chief Ajay Banga said on Wednesday. “If you can’t breathe and cannot drink clean water, there is little point in eradicating poverty,” he added.

The post Saudi Arabia, Russia urge World Bank to keep funding fossil fuels appeared first on Climate Home News.

Governments around the world currently spend over half a trillion dollars a year on making the use of fossil fuels cheaper and the bank wants some of this to be spent on tackling climate change.

In response to calls from the wealthy governments that fund it, the bank is pivoting to focus more on climate change, alongside its traditional goal of eradicating poverty in the developing world.

The bank’s new president Ajay Banga told reporters on Wednesday that accounting tweaks like changes in its equity-to-loan ratio would help with this, as they would allow it to lend about a fifth more than it does now.

But, he told the bank’s annual meeting in the Moroccan city of Marrakech, “it is not going to be enough for the kind of challenges the world has ahead”.

So, he said, the bank would also “look at every other place where pools of money exist which could be used or redirected – whether it is subsidies in the world on fuel and agriculture that cause environmental issues or whether it is voluntary carbon markets.”

MDBs push against subsidies

The World Bank does not have the power to force governments to remove these subsidies but it can advise and pressure them.

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Banga’s comments follow a September 2021 International Monetary Fund (IMF) report which said governments spent about $577 billion a year making fossil fuels cheaper.

This was followed in July 2023 by the World Bank’s “detox development” report on “repurposing environmentally harmful subsidies”.

On the release of the report, the bank’s second-in-command Axel Van Trotsenburg said: “People will say that there isn’t money for climate but there is – it’s just in the wrong places.”

He added: “If we could repurpose the trillions of dollars being spent on wasteful subsidies and put these to better, greener uses, we could together address many of the planet’s most pressing challenges.”

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The report said that fossil fuel subsidies increase the use of fossil fuels, reduce the incentives to cut energy use and make it harder for renewable energy to compete.

Petrostates worst offenders

The countries that provide the most subsidies for fossil fuels are economies reliant on fossil fuel production like Russia, Saudi Arabia, Iran and Venezuela.

Big Western fossil fuel producers like the US, UK and Canada also provide billions of dollars of subsidies, as do major emerging economies like India, China and Indonesia.

IMF research shows that in countries like Saudi Arabia and Iran, fuel subsidies mean that filling up cars is far cheaper than it would be if left to the free market.

The same research shows that subsidies are making gas much cheaper in a broader group of nations which includes India, Brazil, Canada and Russia.

If the social costs of fossil fuels – like their impact on climate change and air pollution – were included then the price would be even greater than their free market price, the research says.

Reforms spark protests

The G20 group of the world’s biggest economies agreed in 2009 to phase out “inefficient” fossil fuel subsidies and have repeated that promise at every G20 summit since – without major efforts to put it into practice.

The World Bank says that the subsidies benefit the rich more than the poor. But removing them has often proved politically controversial, as it pushes up living costs for many.

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A 2022 study found that over 40 countries have had riots over fuel prices in the last 20 years including France, Zimbabwe in Iran.

The study’s authors found that fossil fuel exporters are more likely to fix domestic fuel prices with subsidies.

“When these can no longer be sustained, much bigger domestic price adjustments are needed, often leading to riots,” they found.

Banga and the July 2023 World Bank report also call for the removal of fishing subsidies and $500 billion a year of environmentally-damaging agricultural subsidies.

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Ten multilateral development banks (MDBs) – including the World Bank – have defined a multi-step process to establish whether projects meet the goals of the Paris Agreement, which aims to limit global warming to well below 2°C and to “pursue efforts” to keep it under 1.5°C.

The principles, which make good on a commitment first made by MDBs in 2017, require projects to line up with national climate plans and include a list of acceptable activities.

But analysts and campaigners are sceptical whether the rules will divert public money away from polluting activities and prevent global warming. A key criticism is that the framework does not explicitly prohibit financing for fossil fuel activities.

Focus on national plans

For a proposed investment to be considered under the new principles, it needs to align with countries’ climate strategies submitted to the UN, known as nationally determined contributions (NDCs).

If an activity – even a highly polluting one – appears in the relevant NDC, it will be waved through to the next step. The exceptions to this are support for coal mining, coal power plants and peat extraction, which are not considered Paris-aligned in any circumstance .

Laura Sabogal, policy advisor at E3G, considers it “very likely” that the banks’ portfolios will actually overshoot the Paris Agreement threshold because of the heavy reliance in the decision-making process on national climate plans that are “not robust enough”.

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“These documents are extremely vague, not uniform or comparable,” Sabogal told Climate Home News. “Many NDCs are not aligned with a 1.5C, or even 2C, trajectory. If you aggregate all of these investments it is very likely the banks are not actually aligning with the goals of the Paris Agreement.”

According to Climate Action Tracker, no country’s NDC is compatible with 1.5C of global warming.

The UN Environment Programme says the current pledges made collectively by countries in their NDCs put the world on track for a temperature rise of between 2.4C and 2.6C by the end of the century.

First step in reforms

MDBs hold over $1.8 trillion in assets, giving them an outsized influence over the direction of funding flows toward developing countries in particular. They have long been accused of continuing to fund polluting projects and not doing enough to support climate-friendly ones. A growing coalition of nations, gathered in Paris last week, has been calling for deep reforms.

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The new principles were agreed on by the African Development Bank, Asian Development Bank, Asian Infrastructure Investment Bank, Council of Europe Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank Group, Islamic Development Bank, New Development Bank and the World Bank Group.

Each lender will now have to adopt them into their own methodologies and use them in vetting investment proposals.

Across the ten lenders, the work to turn high-level principles into something tangible is at very different stages. At one end, the European Investment Bank says all its new investments have been Paris aligned since the start of 2021. Meanwhile, the African Development Bank hopes to reach that target by 2025.

If fully implemented, the new framework could mark a degree of progress toward more climate-friendly operations for some lenders.

Although mining and electricity generation from coal and peat are in an exclusion list of projects considered incompatible with the emission reduction goals of the Paris Agreement, this does not amount to an outright ban on investing in these activities. But experts believe it should further discourage development banks to fund them.

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Of the MDBs that signed up to this initiative, the Islamic Development Bank and the African Development Bank are the only ones without an explicit commitment to end coal finance. The African lender’s president Akinwumi Adesina pledged to scrap coal funding in 2019, but this has yet to be formally reflected in the bank’s energy policy.

Aki Kachi, an analyst at the New Climate Institute, told Climate Home News that “inevitably, it was always going to be the lowest common denominator between all the banks”.

“Some may go further and interpret it in a more ambitious way, others will use all of the flexibility to carry on almost with business as usual,” he added.

Campaigners pushing for MDBs to stop funding all fossil fuel operations were also left disappointed by the exclusion of any mention of oil and gas in the framework. “As they are not part of the exclusion list these will continue to be assessed on a case-by-case basis,” said Sabogal.

Political considerations

The document agreed on by the development banks draws a scenario in which a country is seeking funding for a fossil-fuel-powered technology. If, for instance, the country’s climate strategy states specifically that technology needs to be phased out by 2035, a project with a ten-year lifetime submitted in 2025 would not be considered aligned. But, if the NDC does not mention that fossil fuel activity at all, it will be allowed to progress to the next stage of assessment.

The other steps in the process look at the consistency with sector-specific decarbonisation pathways, the feasibility of cleaner alternatives and the risk of creating stranded assets.

Kachi said ultimately a lot would depend on the interpretation given by the banks’ officers, which is often driven by the political dynamics of their governance.

“We can’t assume this is merely a technical exercise,” he said. “It is very much a political one. The strategies are driven by political agendas within the banks’ management and shareholders. It’s only going to have an impact if the shareholders want that result.”

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The bank’s new chief Ajay Banga unveiled the measure at a global leaders’ summit in Paris as part of a raft of tools to help nations dealing with a crisis.

He said this will allow countries to “focus on what matters to their leaders when a crisis hits and stop worrying about the bill that’s going to come”.

Many countries at the forefront of the climate crisis already have some of the highest levels of debt distress, meaning they are unable to meet financial obligations.

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Today’s announcement marks an important victory for Barbados prime minister Mia Mottley and her Bridgetown agenda, as her campaign to reform global finance for the climate era is known.

Step forward

Speaking at the gathering she helped convene with French President Emmanuel Macron, Mottley hailed recent progress. “Nine months ago, no one was speaking about natural disaster clauses,” she said. “Now, we have people wanting to recognise the wisdom of it because countries do need to pause debt payments if they’re going to house and feed people who are victims of a climate crisis”.

In a press release, the World Bank said it would initially trial the clause with its most vulnerable borrowers, hoping to expand it to all clients in the future. It also announced other measures including options for countries to redirect a portion of their funds for emergency response and the provision of new types of insurance. 

About three-quarters of developing countries’ debt is to the private sector. About a quarter is to multilateral development banks like the World Bank and less than a fifth is owed to governments, mainly China and the big developed nations.

Dileimy Orozco, senior policy advisor at E3G, told Climate Home News that debt suspension “is not the holy grail, but it is a step forward as it will give countries some breathing space in case of disaster”.

Separately, the United Kingdom, the United States and France have announced plans to offer similar debt relief measures to certain borrowers.

The UK’s export credit agency is in discussion with twelve countries in Africa and the Caribbean to allow them to defer debt repayments if they are hit by climate catastrophe, the government said today.

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The US plans to begin incorporating disaster-related debt clauses in the bilateral lending done through its export credit agency by the end of the year. The measure will be applied “on a transaction-by-transaction basis, looking at where they are most needed”, Patricia Pollard, a US Treasury official, told a panel discussion in Paris.

France is also working towards integrating debt suspension clauses in the concessional loans disbursed by its development agency, the country’s development minister Chrysoula Zacharopoulou announced on Thursday.

Debt traps

Most countries facing a high risk of climate disasters are already “drowning in debt”, according to an analysis by the campaigning group ActionAid. Debt distress is affecting, for example, Mozambique and Malawi, where the passage of Cyclone Freddy killed thousands of people and caused $1.5 billion in damages earlier this year.

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Without relief measures, natural disasters can easily push vulnerable countries into a costly debt spiral, the report said, as they have to keep paying back their existing loans while taking on even more debt by borrowing the money needed to respond to the crisis.

Debt piles can rise quickly. Covering the costs of catastrophe is expensive for countries that have to pay more to borrow money because of the perceived risk of lending to them. The average cost of borrowing for a group of 58 climate-vulnerable nations is 11%, according to a study by the Boston University Global Development Center. This is much higher than borrowing costs for developed countries.

Breathing space

Pakistan has been particularly vocal about the risks of a climate “debt trap”. The South Asian country was pushed to the brink of default last year. While flooding affected nearly a third of its territory last year, it owed billions of dollars in debt repayments.

Its former climate minister Malik Amin told Climate Home the World Bank initiative “could help Pakistan in creating badly needed fiscal space when it’s needed the most to deal with the ever-increasing climate impacts it is facing such as super floods, glacial bursts and unliveable heat waves”” 

After today’s announcement, the World Bank will now need to put the scheme into practice. This means establishing which countries could qualify and setting criteria for when a debt suspension would be triggered.

Barbados’ template

Mia Mottley’s Barbados could come again to the fore as a model of how to implement a natural disaster clause. The island nation was among the first to insert payment suspension measures when it restructured its existing debt in 2019. In the case of a catastrophe, the clause will allow Barbados to free up an estimated $700 million, or almost 15% of its economy, in debt repayment for emergency response, rebuilding and recovery.

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E3G’s Orozco says the clause will also send an important signal to credit agencies, which affect borrowing costs with their assessments. “It will tell the market that debt can be caused by these external shocks, not bad economic management,” she added.

Some vulnerable countries and campaigners would like to see the World Bank – and other major lenders – go further and offer debt cancellations in case of disasters.

While these clauses can work well for climate disasters that happen suddenly, like the storms Barbados suffers from, Mottley said they may not be as suitable for disasters like droughts which happen at a slower pace. “We need to perfect it”, she said.

The article was updated after publication to include debt suspension measures announced by the United States and France.

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The Multilateral Investment Guarantee Agency (Miga) expects to gain an expanding role in providing insurance cover to carbon credits projects in a bid to facilitate large-scale investment in countries considered as high-risk.

The agency’s foray into the carbon market comes as several developing nations are moving to regulate or restrict the trade of credits generated within their borders.

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The upheaval has spooked project developers and investors in the $2 billion voluntary market. Hailing predominantly from rich nations, they have been profiting from activities like planting or protecting trees in developing nations and selling on the resulting credits.

Carbon credits – or offsets – are used by companies, governments or people to compensate for the greenhouse gas emissions they generate themselves.

A Miga spokesperson told Climate Home News, as governments around the world are starting to regulate carbon markets, the agency will be able to protect investors against risks of governments breaching agreements.

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But some campaigners have expressed concern over Miga’s plans. Teresa Anderson from ActionAid told Climate Home News that offsetting projects “have a long track record of displacing communities while worsening the climate crisis by giving polluters an excuse to avoid real emissions cuts”.

“Miga might claim to be insuring green projects, but in reality, this is about ensuring greenwash”, she added.

Greening Miga

Founded in 1988, Miga’s mission is to help foreign investment into developing countries by issuing guarantees. Its backing allows investors to obtain better financing terms, like cheaper loans, from banks.

Over the years, the agency has come under fire for heavily subsidising fossil fuel energy projects.

But, as part of its updated strategy, it has pledged to increase its support for projects that address climate change.

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The ‘greening’ of Miga’s portfolio is part of a sweeping set of reforms which could give the World Bank a much bigger role in enabling climate finance.

Among a long list of measures, a plan drafted by the bank’s steering committee and currently under discussion sees an expansion of Miga’s guarantees “to cover risks related to carbon rights”.

Pioneering carbon insurance

Miga plans to equip offsets developers with its political risk insurance and to develop new types of covers specifically for carbon investors.

Offset projects have often been contentious. If a dispute between developers and the host country cannot be resolved, Miga may be liable to pay compensation.

The agency funds itself through the financial contributions given by member countries. Its biggest shareholder is the United States (with 18% of capital), followed by Japan, Germany, the UK and France.

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The agency will plug a gap in a market for which private insurers have so far shown a lack of appetite. Insurance policies for carbon projects are currently very limited.

Peter Zaman, a carbon markets lawyer at HFW, says project developers don’t have any specific insurance cover normally.

“They have been in denial about the risks and so the products that would protect them have not even been produced,” he said.

Carbon markets upheaval

The risks that Zaman refers to revolve around countries’ ongoing efforts to assert tighter control over carbon rights.

Similar to intellectual property, carbon rights refer to the ability to lay claim to an amount of carbon dioxide trapped or avoided through activities like tree planting and sell it under the guise of credits.

For more than a decade private developers and investors have been setting up projects across the world operating in the loosely regulated voluntary market.

Many of these initiatives have been sharply criticised not only for exaggerating their climate benefits. But also for giving local governments and indigenous populations a small fraction of the profits.

An Indonesian ranger patrols a forest protected through a carbon credit project. Photo: Dita Alangkara/CIFOR

After years-long inaction, now a growing number of governments, especially in developing countries, are waking up to the value of these projects and stepping in to regulate them.

Zimbabwe announced last month it would retain half of all revenue from carbon projects and consider voiding all existing programs in the country.

Zimbabwe hosts Kariba, one of the world’s largest – and most controversial – forest conversation project, which is controlled by Swiss company South Pole.

Elsewhere, Papua New Guinea has suspended new projects while the government decides on new rules for future and existing projects.

Indonesia has restricted exports of carbon credits generated within the country with a view to centrally control sales in the future.

‘Low-hanging fruits’

In regulating offsetting projects, experts say governments are not only motivated by their revenue-raising potential.

Countries are also eyeing the possibility to count the greenhouse gases avoided or trapped through these programs towards their national climate goals under the Paris Agreement.

This calculation will become ever more important when the United Nations set up a new global carbon trading mechanism. The rules will prevent the same credit from being used more than once.

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Peter Zaman says carbon credits are “low-hanging fruits” to achieve climate commitments. “It is entirely logical for countries to establish control over these cheap sources of emission reductions and decide how to best use them”, he added.

Miga believes its involvement in the carbon market will spur foreign investment in riskier countries as new regulations come into place.

The agency says it will protect investors against risks of governments breaching agreements that allow investors to export credits at pre-agreed terms, or risks of governments not respecting double-counting rules.

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The International Finance Corporation’s (IFC) board was initially due to vote at its 30 April meeting on a BRL160 million ($32 million) loan to Alvoar Lacteos intended to help the company expand its operations in Brazil and support wider food security.

Alvoar Lacteos owns and manages industrial facilities in the Midwest and Northeast regions of Brazil, making products such as UHT milk, powdered milk, yogurt, cheese and sweets. The money would be used to install new equipment, renovate existing industrial units and build a new unit for cheese production, as well as for improving the company’s environmental and social standards.

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A group of 16 Brazilian and international organisations, including Friends of the Earth, the Global Forest Coalition, the International Accountability Project and the Brazilian Network for Social Justice and Human Rights, wrote to the IFC in April urging it to reject the loan, arguing it had not properly accounted for the project’s environmental and social impacts.

The decision has since been rescheduled to the end of May. Emails sent by IFC and seen by Climate Home News imply is so the IFC board can consider evidence presented by the group, although an IFC spokesperson told Climate Home “the timing of when projects are taken to the board is dependent on numerous factors”.

Neither the IFC nor Alvoar Lacteos responded to questions about the concerns raised or the delay.

Suppliers emissions ignored

Civil society groups raised numerous concerns about the loan, including a claim that it is incompatible with the IFC’s commitment to align investments with a 1.5C global warming threshold.

The only current climate-related requirement in the project’s environmental and social action plan is for Alvoar Lacteos to prepare its first greenhouse gas inventory and estimate the emissions under its direct control (scope 1 and 2) “following an internationally recognized methodology, and local regulations”.  It has until April 2024 to do this.

There is no requirement for the company to monitor scope 3 emissions from its suppliers, like the chopping down of forests to graze cattle, which comprise the vast majority of a dairy company’s climate impact. The civil society organisations argue these emissions should be “the focus of reduction and mitigation measures”.

Restrictions on energy firm’s borrowing complicates South Africa’s energy transition

Kelly Anne McNamara is a senior research and policy analyst in the international climate and agriculture finance programme of Friends of the Earth, one of the organisations that has challenged the loan. 

She told Climate Home the IFC had clarified that it was working with Alvoar on addressing its scope 3 emissions by avoiding deforestation on dairy farms and farms associated with sourcing feed. But she pointed out that no actual mitigation or reduction is required under the terms of the loan.

Paris alignment

Two years ago, the World Bank pledged to align all its financing with the goals of the Paris Agreement and it says it is on track to do this for all its new operations from July 2023. The IFC has a weaker target of aligning 85% of new operations by that date and 100% from July 2025.

However, a new climate framework for multilateral development banks is under development which the IFC will be using to assess its investments. It says that”non-ruminant livestock” are consistent with the Paris agreement’s goal but it does not mention ruminant livestock like cows and sheep.

G7 calls on all countries to reach net zero by 2050

Campaigners said the framework suggests that such projects will require evaluations against specific greenhouse gas reduction criteria but have seen no evidence that the IFC has assessed the Alvoar project in this way.

“Had IFC done so, it might understand that there is a need for a major reduction in production in the cattle sector in the [Latin America and the Caribbean] region, along with a heightened focus on measures to significantly cut the [greenhouse gas] footprint of existing operations through better management practices,” they wrote in their letter.

This, they said, could include a shift away from intensive feed and milk production, toward silvopasture and agroforestry practices that increase sequestration and do not rely on fossil fuel-based fertilisers and pesticides.

UK sued over plan to import more polluting Australian beef

International development banks, including the IFC, have spent billions supporting the meat and dairy industries over the past decade. Although the IFC stopped supporting new coal projects in April, it has made no explicit restrictions on other activities that generate greenhouse gas emissions.

The civil society groups also pointed out that Alvoar has not set itself a net zero target, and said this should be a requirement for the project.

And they criticised the IFC for not doing enough to understand other potential environmental and social issues linked to dairy supply chains, such as child and forced labour, land rights and deforestation.

Alvoar does not own any cattle farms so its milk is sourced from 5,500 farmers, including dairy cooperatives and individual farmers, as well as middlemen. Campaigners say it has no supply chain management system in place to address these.

No hard requirement

Although the IFC expects Alvoar to develop such a system if the loan is approved, campaigners note that there is no hard requirement to achieve full supply chain traceability or zero deforestation by a specific date.

Campaigners argue the IFC was wrong to conclude that any risks from the project would be short-term and localised and said it should have required a more comprehensive environmental and social assessment and mitigation plan.

Although the loan is in part intended to help Alvoar boost its environmental and social standards, critics said the onus was on the IFC to understand those risks in advance.

Lula set to improve Brazil’s climate target

Campaigners also question whether the loan will actually help increase food access for the neediest Brazilians.

IFC loans are normally approved without controversy. But last year a decision on whether to approve another agricultural project – soy and corn feed sourcing by the Brazilian arm of a major European meat producer – was also delayed after campaigners expressed doubts about its impact on deforestation.

McNamara said that, although the earlier loan was eventually approved, some IFC board directors abstained and several encouraged campaigners to keep raising concerns. In the case of the Alvoar project, however, she thinks food security arguments are likely to over-ride other considerations.

The IFC board is made up of 25 representatives of different governments.

This article was updated on 26 May 2023 to include IFC’s statement

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Speaking at a meeting of the World Bank’s steering committee, Saudi Finance Minister Mohammed Al-Jadaan urged the World Bank to “take on a prominent role in promoting CCUS [carbon capture utilisation and storage]”.

At the same meeting in Washington DC, Russia’s deputy prime minister Alexey Overchuk said CCUS was “of utmost importance to the green agenda”.

The technology is meant to suck carbon out of the atmosphere, usually from a particularly polluting source like a fossil fuel power station’s smokestack, and either use it or put it back in the ground. But it remains very expensive and largely unproven at scale.

Brownen Tucker from the campaigning group Oil Change International said more World Bank support for carbon capture and storage would be “beyond ridiculous”.

“The World Bank prioritising carbon capture and storage would just be a way to greenwash its long-time role as a piggy bank for the fossil fuel industry,” she told Climate Home.

Saudi’s CCUS pitch

At this week’s spring meeting of the World Bank, Al-Jadaan said the bank’s support for CCUS has been “insignificant” so far.

He added that the technology has “great potential to serve the climate mitigation agenda while contributing to affordable universal energy access”.

At the World Bank Group Development Committee meeting in Washington DC, I stressed the importance of continuing the Group’s commitment to ending extreme poverty and boosting shared prosperity and the Sustainable Development Goals of the United Nations.#WorldBank #SpringMeetings

— محمد عبدالله عبدالعزيز الجدعان | Mohammed Aljadaan (@MAAljadaan) April 12, 2023

Saudi Arabia is a major proponent of CCUS and has a history of promoting it in international summits, including talks over the IPCC scientific reports and UN climate talks.

‘Costly distraction’

Carbon capture and storage remains expensive and unproven at large scale.

According to the IPCC’s scientists, stopping a tonne of carbon dioxide with CCUS costs between $50 and $200. Replacing fossil fuels with renewables usually saves money.

There are currently only 35 commercial facilities applying CCUS with a total annual capture capacity of 45 Mt CO2, according to the International Energy Agency (IEA). Most are in North America and in the gas processing industry.

Many climate campaigners have called it a “distraction” that gives fossil fuel companies a licence to keep extracting more climate-harming coal, oil and gas.

But the IEA’s head Fatih Birol disagrees, calling it “critical for ensuring our transitions to clean energy are secure and sustainable”.

‘Absolutely essential’

In its current climate change action plan, the World Bank says CCUS “may be an important lever for decarbonization”.

In 2009 the World Bank set up a dedicated trust fund looking to support developing countries exploring CCUS potential.

Supported by the UK and Norwegian governments, the fund has provided grants worth a few million dollars.

It has supported technical assistance for the development of technology in Mexico, South Africa, Botswana, and, most recently, Nigeria.

Developing countries call for new government funds for World Bank

Speaking at a seminar last year, World Bank specialist Natalia Kulichenko said the trust fund would be closed in December 2023.

But she added the support was “absolutely essential to continue” in other forms, as the World Bank had been receiving more interest on CCUS from developing countries.

Kulichenko talked about the possibility of providing loans to governments and guarantees to the private sector as part of existing programs.

Russian backing

Alongside CCUS, Russia’s Overchuk listed gas, nuclear energy and measures to reduce the burning of gas as a by-product of pumping it up, known as flaring, as important green projects.

Russia is the second world’s largest gas producer, accounting for 18% of the world’s gas output in 2021.

Following Russia’s invasion of Ukraine, countries, especially in the European Union, have dramatically cut imports of Russian gas.

A gas field in the Yamal Peninsula in Russia. Photo: Russian Government

Russia is also the eighth biggest shareholder of the World Bank, where voting rights are linked to financial contributions.

The World Bank has provided over $1.5 billion in support for gas projects since 2020, according to an analysis from the campaigning group Oil Change International.

Gas commitments

In 2017, the bank said it would end its financial support for oil and gas extraction within the following two years.

But at Cop26 in Glasgow, it did not join five fellow development banks and 20 countries in signing up to a commitment to halt any new financing for oil and gas projects internationally by the end of 2022.

Green hydrogen rush risks energy ‘cannibalisation’ in Africa, analysts say

Russian Deputy prime minister Overchuk also urged the international community, including the World Bank, to find a common solution to ensure energy access and tackle poverty in Africa.

“Developing natural gas projects in African countries, abundant with natural gas, is a part of this solution,” he said. Several African leaders have said the same, criticising the West for stopping gas finance.

Overchuk opposed “additional reiteration and redistribution of resources” towards tackling climate change. Those efforts, he believes, are already well funded by the World Bank.

World Bank’s private sector arm to stop supporting new coal

The World Bank has committed to aligning all its operations with the Paris Agreement by July 2023.

However, the draft methodology to be used for this process indicates that some support for Paris-unaligned oil and gas projects will continue, according to the National Resources Defence Council.

The lender claims to be the world’s largest provider of climate finance to developing countries. It says in 2022 it delivered $31.7 billion for climate-related investments, taking up 36% of its overall lending.

The post Saudi Arabia, Russia push for more World Bank money into carbon capture appeared first on Climate Home News.

A change in the equity-to-loan ratio from 20% to 19% doesn’t sound like much, but it will free up $4 billion a year for the bank to invest – about a third of which should go to climate projects.

Tweaks like that won’t fix the climate crisis though and reformers want more. Some want the ratio to go down further, although powerful credit rating agencies will have to be kept onside.

And developing countries want to go beyond just accounting tweaks. They called for governments to give the bank more money.

But rich nations aren’t keen. The foreign minister of Switzerland blamed “scarce public resources” this week while the US and co are thought to fear China will increase its voting power at the bank by giving it the most money.

This week’s stories

• “Life or death”: Weather-watchers warn against Elon Musk’s Twitter changes
• Developing countries call for new government funds for World Bank
• World Bank steering committee and US urge for reforms on climate lending
• Green hydrogen rush risks energy ‘cannibalisation’ in Africa, analysts say

Elsewhere, Elon Musk’s Twitter continues to embarrass itself. It is now charging users to post lots of automated tweets and will make no exceptions, not even for urgent weather warnings.

The US National Weather Service said it would have to tweet warnings manually which could take minutes and “for every warning issued, seconds could make the difference between life and death”.

We asked Twitter to comment but, like all journalists these days, we just received an auto-response email. All it contained was an emoji of a lump of faeces with a face on it. Charming!

The post World Bank’s baby steps – Climate Weekly appeared first on Climate Home News.

As governments and bank staff discussed green reforms this week, China, India and others welcomed accounting tweaks which would allow the bank to take more risk and invest more of its money.

But they said these tweaks did not go far enough and the bank needs more money in its coffers, not just to make better use of what’s already there.

Rich nations, who are expected to provide most of the money, either rejected these calls, ignored them or said that the private sector should do more, not governments.

A coalition of wealthy and climate vulnerable nations, led by Barbados’s prime minister Mia Mottley, has called on the bank to do more to tackle climate change.

Accounting tweaks

The World Bank gets its money from governments and from borrowing on the international markets. It claims it invests about a third of its money, roughly $30 billion a year, in climate programmes.

World Bank steering committee and US urge for reforms on climate lending

Among Barbados’s proposals, the one that has picked up the most support is lowering the equity-to-loan ratio of the bank’s biggest subsidiary, the IBRD, from 20% to 19%. The bank says this would allow it to lend $4 billion more a year.

The governments most enthusiastically pushing the idea – like Barbados and Germany – have said this should be just a first step and the ratio should go lower, although not so low as to risk the bank’s credit rating and therefore its ability to borrow and lend cheaply.

But, at this week’s spring meeting of the World Bank, a host of developing countries called for governments provide more money to the bank, boosting its lending power without risking its credit rating.

More money

In a written submission, China’s vice finance minister Dongwei Wang said it supported “balance sheet optimisation”, an umbrella term for measures like the changes to the equity-to-loan ratio.

But, Wang said, “capital increase is a most efficient way to address the [World Bank’s] resource shortage”.

Green hydrogen rush risks energy ‘cannibalisation’ in Africa, analysts say

Brazil’s finance minister Fernando Haddad said that “balance sheet optimisation has limited capacity, and other options, including new contributions from donors and a capital increase, should be considered later on [in] this process”.

The broad thrust of these calls was echoed by submissions from India, Thailand, Sudan and the Democratic Republic of Congo.

The bank’s last capital increase was in 2018, when governments paid in $13 billion.

But, at the bank’s spring meeting in Washington DC, most wealthy nations either failed to mention a capital increase or rejected it outright.

Not on the table

Japan’s finance minister Shunichi Suzuki was most explicit. He said that “a future capital increase is not eligible for discussion”.

The US finance minister Janet Yellen did not mention capital increases in her submission but recently told the US Congress she wanted “better mobilisation of private resources alongside World Bank investments” but added “we’re not requesting a capital increase at this time”.

As the bank’s two biggest shareholders, the US and Japan would need to contribute most to a capital increase, if they are to avoid their percentage ownership of the bank being watered down, perhaps as the share of geopolitical rival China rises.

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European nations like Germany did not directly address a capital increase but placed their emphasis on the private sector and on balance sheet optimisation.

The foreign minister of Switzerland, the sixth richest country in the world, said that “in light of scarce public resources”, the bank should “make the most of” its existing capital.

Political issues

Avinash Persaud advises Barbados’s leader Mia Mottley on World Bank reform. He told Climate Home that the World Bank needs to lend $100 billion a year.

“We think we can get part of the way by better leveraging existing capital,” he said, “but to get all the way we will need more capital”.

“We don’t want perfection to be the enemy of the good and there are political issues that make progress on this more difficult and perhaps near term,” he said.

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“But we must also do this and there are ways to get round the politics such as using non-voting shares so there really are no excuses for those who truly want to respond to the real and present dangers facing the planet,” he concluded.

Non-voting shares would allow governments to contribute to the World Bank’s capital without changing the balance of power at the bank. The US and its allies have historically dominated the bank, with the US picking its latest president Ajay Banga. They don’t want to cede control to China, which is currently the bank’s third-biggest shareholder.

E3G policy adviser Danny Scull said: “While it’s fair for donor countries to insist the World Bank squeeze every bit of finance capacity from existing capital, this Evolution will hinge on whether additional resources can be brought to bear. That means getting out checkbooks.”

He added: “So far, rich countries have resisted calls to top up the Bank, and that’s not good enough. The climate finance ideas in the Roadmap docs are solid, but they won’t lead anywhere without some juice from the donors. Let’s not waste the opportunity.”

Wrong vehicle

But other campaigners told Climate Home they didn’t want the bank to be the vehicle for climate finance. Jon Sward, from the Bretton Woods Project campaign group said the bank’s focus on de-risking private sector investment opportunities should be changed before it is given a capital increase.

The bank’s current strategy could undermine the bank’s climate objectives “by creating a perverse incentive for the [World Bank] to invest in projects that produce large revenue returns as opposed to ones that are most needed to achieve development and climate goals”, he said.

World Bank’s private sector arm to stop supporting new coal

Joe Thwaites, climate finance campaigner at the National Resources Defence Council, said that “given the World Bank’s failure to deliver on the pandemic, debt or climate under [outgoing president] David Malpass’s leadership, it’s understandable that countries are leery about giving the institution more money”.

He added that other multilateral development banks and specialist trust funds are “looking more responsive to developing country needs” and the World Bank must prove itself by “getting serious about reform and putting its existing capital to best use”.

This article was updated on 14 April to include Danny Scull’s comments

The post Developing countries call for new government funds for World Bank appeared first on Climate Home News.

Yellen hosted talks with global finance officials to discuss an initial spate of balance sheet changes that will allow the World Bank to lend an additional $50 billion over 10 years while maintaining its top-tier AAA credit rating, and how to deepen those efforts with it and other multilateral development banks.

Yellen said the changes already approved had sharpened the mission of the World Bank, but more “bold action” was needed to ensure it could work to end extreme poverty, boost shared prosperity and better meet 21st century challenges like climate change, fragility and pandemics.

What’s at stake for climate at the World Bank’s spring meeting?

“We should use the rest of the year to undertake additional reforms through a staged implementation approach that can be agreed upon by the Board and implemented on a rolling basis.”

Climate change demonstrators carry a mock oil pipeline during a “Stop Fossil Gas” protest outside of the 2023 IMF-World Bank meetings in Washington, D.C. on April 12, 2023. (Photo: Reuters/Bryan Olin Dozier/NurPhoto)

Major milestones

The bank’s steering committee – officially known as the Development Committee – met later in the day, where members welcomed the bank’s “Evolution Roadmap” and said they looked forward to additional efforts aimed at achieving “major milestones” by the October annual meetings of the World Bank and International Monetary Fund.

“They expect the Board of Executive Directors and World Bank Group management to finalize a work plan with detailed actions to be taken,” the committee’s chair said in a statement.

Members underscored their commitment to “ensuring that the World Bank Group has adequate financial capacity to respond to development challenges and support its expanded mission.”

World Bank’s private sector arm to stop supporting new coal

They called for ambitious approaches to increasing private capital, facilitating investment and leveraging the public sector.

The members also looked forward to exploring additional recommendations made by an independent panel last year, including making the bank’s emerging markets database more accessible to private investors, optimizing the balance sheet for the low-income lending arm, and exploring a voluntary channeling of IMF Special Drawing Rights.

Momentum ahead

Yellen said upcoming events could be leveraged to keep momentum strong for the evolution of the World Bank. Those included the Summit for a New Global Financial Pact to be hosted by France in June, the Group of 20 Leaders’ Summit in India in September, the annual meetings of the World Bank and IMF in Morocco in October, and the United Nations COP28 climate conference to be held in Dubai in November and December.

“We’ve all seen how threats to global health can disrupt entire societies and economies, and how fragility and conflict can lead to significant displacement and migrant flows,” she said.

She said Ajay Banga, the U.S. nominee to replace World Bank President David Malpass, who will step down on June 1, was “the right leader to take the baton from President Malpass and accelerate our work to evolve this institution.”

Malpass told the committee he felt the bank had responded with “vigor and speed” to Yellen’s call for reforms.

“There was … wide recognition that progress toward these goals requires a sharper focus on sustainability, resilience, and inclusiveness as part of our mission,” he said.

Development Committee members thanked Malpass for his leadership of the WBG during a historically challenging period, including an unprecedented surge in financing in response to multiple crises.

The post World Bank steering committee and US urge for reforms on climate lending appeared first on Climate Home News.

As the leader of an island nation, battered by hurricanes and facing rising sea levels, Mottley wants the bank to take the lead in mobilising the over $1 trillion a year developing countries will need by 2030 to meet their climate investment needs.

Her campaign has picked up some powerful allies. The US is the bank’s host, its biggest shareholder and effectively picked its next president Ajay Banga. They have offered support to at least the principles of Mottley’s agenda, calling alongside Germany for “fundamental reform”.

In response to this pressure, the World Bank’s management ordered its staff to draw up an “evolution roadmap”. The 20-page document says the bank will “broaden” beyond its current “twin goals” of ending extreme poverty and boosting shared prosperity.

Its new mission “will emphasize the importance of sustainability and resilience to reflect more clearly that our mission includes global public goods (GPGs), such as climate change”.

This was followed last week by a 37-page report, which offered more detail and will be debated by governments and bank officials at the development committee of the bank’s spring meeting next Wednesday. The bank’s mission is likely to be officially updated.

Take more risks

But what does that mean in practice? The only real change the bank has proposed so far is to lower the equity-to-loan ratio of its biggest subsidiary bank (IBRD) from 20% to 19%.

This would allow the IBRD to lend $4 billion more a year, much of which would be spent on climate projects.

Reformers including the German government called it a “first step” but said the ratio should be lower, freeing up more money.

This will be debated by the bank’s executive directors, a group of 25 government appointees from around the world, at next week’s spring meeting.

The bank’s development committee, which is leading the reform, said the proposal balances the ambition to spend more with the need for the bank to retain its top-tier AAA credit rating.

The World Bank raises most of the funding its needs to operate by borrowing on international bond markets. Investors’ confidence is therefore paramount.

OECD reforms set to give “green” projects better export finance

Reformers like Barbados’s Avinash Persaud say the bank can go further while still retaining its credit rating, which allows it to borrow, and therefore lend, money cheaply.

Next week’s meeting is likely to approve the 19% change. Reformers are hoping it will agree to revisit that figure again at the World Bank’s annual gathering in October.

A related proposal is to scrap the IBRD’s statutory lending limit, a rule drawn up when the bank was set up in 1944 which limits the amount it can lend.

Get more backing

The World Bank’s credit rating is set by agencies like Moody’s, S&P and Fitch. Their analysts look at the bank’s finances and decide what rating to give it.

Lowering the equity-to-loan ratio means taking on more risk. Something that could worry the analysts.

So the bank is seeking to reassure them by drawing attention to governments’ pledge to back the bank if it ever gets into trouble. These promises are known as the bank’s “callable capital”.

The bank says it will work on options for making better use of its callable capital “in the coming months”, while speaking to governments and rating agencies.

Get more money

But these changes can only get the bank so far. To move the big bucks, the bank needs more money to begin with.

It can get this by charging developing countries more to borrow. But, with many of the world’s poorest countries already in a lot of debt, the bank’s development committee says “there is no appetite for this”.

So, the bank says it needs more money from the wealthy governments among its shareholders through a “capital increase”.

Without this, it says, the change to the lending ratio and other measures “will not be enough relative to the vast needs of client countries”.

But wealthy governments have recently been loath to up their contributions, even as Covid-19, the climate crisis and Russia’s invasion of Ukraine push up the needs.

As a result, World Bank predicts its support will start to fall in the July 2023 to July 2024 fiscal year.

The bank “will need substantial additional financial capacity to respond to a more ambitious, updated mission”, its evolution roadmap says.

Reformers ideas

More radical ideas have not been put on next week’s agenda by the bank. Financing projects, like solar farms, in developing countries is often more expensive than doing so in a richer nation.

One reason among many is that lenders are worried that swings in currency exchange rates in many developing countries will threaten the bank’s ability to get paid back. To compensate for this perceived added risk, banks charge higher interest rates to borrowers.

Mottley’s adviser Avinash Persaud is pushing for a new fund to hedge against currency risk for green projects, providing protection for swings in the value of a local currency. He wants to call it a Just Green Transition, Financing Investment Trust (JGT-FIT).

World Bank’s private sector arm to stop supporting new coal

According to a briefing seen by Climate Home, the idea is for this to be a focused agency sitting in the middle of a network of multilateral development banks like the World Bank.

He estimates that $14 billion would be required to hedge for the returns of half the annual investment developing countries need. Before that, he says, a pilot using $5 billion could prove the idea works.

This would need more than just the World Bank’s backing – but an endorsement from the bank or any of its shareholders next week would propel it up the agenda.

The post What’s at stake for climate at the World Bank’s spring meeting? appeared first on Climate Home News.

An update to the organisation’s ‘green equity approach’ policy, which is aimed at intermediary clients such as commercial banks, explicitly states that IFC investment will no longer support new coal.

The policy previously only required financial clients to reduce their exposure by half by 2025, and to zero by 2030.

Financial intermediaries represent more than half of IFC’s investments and have received almost $40 billion of IFC support since May 2019.

The loophole had allowed the IFC’s financial clients to support a number of substantial new coal projects over the past five years.

OECD reforms set to give “green” projects better export finance

Hana Bank in Indonesia, for example, financed a 2 GW coal power plant in Indonesia in 2019. The plant is predicted to release 10 million tonnes of carbon dioxide a year, a similar amount to the the whole of Jamaica, for 25 years.

PVI Holdings, another IFC client, provided insurance to the Vung Ang II coal power plant in Vietnam in 2021.

Kate Geary, co-director of sustainable finance watchdog Recourse, said the change in policy sent a signal to the wider investment community that “the era of coal is over” and called on the IFC to extend the exclusion to oil and gas investments too. “This is a welcome step but a long time coming.”

David Pred, executive director of NGO Inclusive Development International, said it needed to enforce the new policy with its existing financial intermediary clients like Postal Savings Bank of China, which is among the leading financiers of coal in Asia.

Private backers

A growing number of financial institutions around the world have committed to ending support for coal.

But a report published today by Global Energy Monitor found that, while international public coal financing has all but dried up, new and expanded projects are still being backed by private money.

Of 99 private financial institutions that adopted new or updated coal policies in 2022, the report found most were “insufficient to align banks, insurers, and investors with climate science”. Only 12 of these policies were considered strong enough to halt support for the developers of new coal mines and power plants or set deadlines to end all coal power-related finance in the timeframe required.

Migrant workers face risks building Europe’s new gas supplies in the UAE

The IFC is expected to publish a plan to align its portfolio with the Paris Agreement during next week’s World Bank meetings.

The Compliance Advisor Ombudsman has received several complaints about the environmental and social impacts of the IFC’s support for coal. The Centre for Financial Accountability filed the first such complaint in 2011 over the backing of a coal project in India’s Odisha state, which the ombudsman is still monitoring.

Joe Athialy, the centre’s executive director, noted that it had taken over a decade for the IFC to finally end its support for new coal. “In the meanwhile, communities got scattered, their livelihood stolen and the climate crisis made more severe, with nobody held accountable for all these, and more. We can only hope it moves faster to stop funding oil and gas.”

As well as fossil fuels, the IFC has been involved in other controversial projects such as a hydropower project that threatens to displace thousands of people in Mozambique.

The post World Bank’s private sector arm to stop supporting new coal   appeared first on Climate Home News.

An estimated 1,400 families could be displaced by the Mphanda Nkuwa hydropower project due to be built across the river in what would be Southern Africa’s largest dam. Another 200,000 people could be affected downstream.

The government of Mozambique has touted the 1.5GW Mphanda Nkuwa dam, in the district of Marara, Tete province, as key for the southern African nation to address energy poverty and reach its goal of universal energy access by 2030.

But environmental groups say the dam threatens to negatively impact local communities and ecosystems. Local people told Climate Home News they haven’t been consulted on the project and have only heard about it through non-official sources.

Moreover, climate impacts and increasingly erratic rainfall risk making the project unviable, scientists say.

In spite of outcry from local people and green groups, both the World Bank, through its private investment arm the International Finance Corporation (IFC), and the African Development Bank (AfDB) are supporting the project and pushing for the dam’s construction.

The project is expected to “accelerate the transition to clean energy to combat climate change in Southern Africa,” said IFC.

The Mphanda Nkuwa hydro project site is located in the Zambezi river (Photo: International Rivers)

In May last year, the two development institutions acted as advisors to develop the dam, hoping it will become “attractive to reputable developers, financiers and investors to ensure competitive and least-cost power for Mozambique and the region,” AfDB said in a statement.

Sources told Climate Home that the European Union and the European Investment Bank (EIB) have considered getting involved, but have not yet made a final decision.

At the end of 2022, Mozambique became Africa’s newest gas exporter despite 72% of its population having no electricity access. The Mphanda Nkuwa dam is the country’s largest venture into renewable energy and is designed to supply power domestically.

Yet, studies have shown that large-scale hydro may not be as clean as previously thought. While considered a source of low-carbon energy, large hydropower projects emit significant amounts of methane, a greenhouse gas 80 times more potent than carbon dioxide.

The social impact of large hydro projects has also been criticised for violating indigenous peoples and local communities’ rights, and increasing the risk of over-topping and flooding for people living downstream.

The Chirodzi-Nsanangue community during a meeting with Justiça Ambiental (Photo: Justiça Ambiental)

Dam for development 

The government of Mozambique has earmarked the Mphanda Nkuwa project as a national priority in the country’s energy master plan. It’s also a priority investment for the Southern Africa Power Pool Plan.

The dam will be built in the lower part of the Zambezi river basin, around 60 km downstream from the existent giant hydropower plant at Cahora Bassa, known as HCB. Under current plans, the project is expected to reach financial close in 2024 with commissioning to start in 2031.

Government officials, the IFC and AfDB say that Mphanda Nkuwa is key to bringing energy and development to Mozambique.

“The project reinforces our efforts to combat climate change in a region that is desperately short of power but equally in need of transformation and a just energy transition,” said Kevin Kariuki, AfDB’s vice president for power, energy climate and green growth.

Carlos Yum, managing director at the project’s office under Mozambique’s energy ministry, said that Mphanda Nkuwa will support the country’s industrialisation and provide “reliable transmission infrastructure”.

Governments sworn to secrecy on ‘$20bn’ for Indonesia’s energy transition

Resettlement anxiety

The Mphanda Nkuwa project is poised to result in the eviction of farming communities from their land. But people in the affected areas told Climate Home that nobody has yet come to inform them about the plans or seek their consent.

“No one has ever sat down with us to explain about the project or about our rights,” said Horlando Elias Djaquissone, who has lived in the Chacucoma community for 14 years.

The community of Chirodzi-Nsanangue, in Marara district, lies at the heart of the project area. Fisherfolk, artisanal miners and farmers who “rely on the river and its banks for everything” have the most to lose, says a report sent to the EU and EIB by environmental group Justiça Ambiental (JA), which is part of Friends of the Earth International.

The group estimates that more than 1,400 families living in the region could be displaced, and a further 200,000 people living in the delta area would be affected.

A fisherman in the Zambezi river in Mozambique, a sector that is threatened by the Mphanda Nkuwa hydro project (Photo: Justiça Ambiental)

Farmers in the communities of Chacucoma and Nhahacamba live off growing maize on small-holding plots, fishing and artisanal mining, as well as raising cattle, goats and chicken.

But the province of Tete does not have plenty of arable land to resettle the communities of mostly subsistence farmers, the report highlights.

And it’s not the first time some communities have been asked to move. 15 years ago, a coal mine in Marara resettled farmers to infertile lands where they couldn’t grow crops, and where housing conditions were unsafe. In the 1970s, the HCB dam, developed under Portuguese colonial rule, displaced around 30,000 people in the region.

Cornélio Juliano Pacate, of Chacucoma, who sells fish and produces crop all year round, fears he might lose his livelihood if he is resettled. “I don’t want to leave because there might be problems where [the government] will relocate me to,” he told Climate Home.

A preliminary assessment carried out by TMP Systems, a development consultancy agency, suggested the project could see an increased cost of $1.3bn due to resettlements negotiations and social disputes around displacements.

Wrong direction

Civil society groups have been sceptical about the benefits and sustainability of the project.

The country already produces enough energy to meet domestic needs, but most of Mozambique’s population cannot access electricity, said Anabela Lemos, director of Justiça Ambiental.

Electricity is one of Mozambique’s largest exports. In 2021, it came third after aluminium and coal, and generated nearly $570m in revenue. Last November, the country exported its first liquified natural gas (LNG) to the European market.

“The vast majority of Mozambique’s energy output is exported to South Africa at prices that are unfavourable to us, and what we import back is largely used by industry rather than by people,” Lemos said.

South Africa tried to weaken corruption safeguards in coal phase out deal, says CEO

Under current plans, the energy generated by the Mphanda Nkuwa dam will be channelled by transmission lines to Mozambique’s capital Maputo, which is located 1,500km away from the project site.

Because Mozambique’s population is widely dispersed and two thirds of its population live in rural areas, “it makes no sense to invest in transmission lines that cover long distances,” Lemos argued. Instead, the government should  “promote local solutions adjusted to the potential of each place,” she said.

Climate shocks

The Zambezi delta is under severe threat of droughts worsened by climate change, which researchers think could grow even worse after accommodating another large dam in its basin.

Along its course, the river is already powering around 5GW through the Kariba dam, between Zambia and Zimbabwe, and Mozambique’s HCB, also in Tete province. As the impacts of climate change become more pronounced, there is a serious risk that the lower Zambezi will not be able to provide the best conditions for the 1.5GW hydro plant to function.

A farmer along the banks of the Zambezi river in Mozambique, a sector threatened with displacement to new infertile lands (Photo: Justiça Ambiental)

A 2012 study by advocacy group International Rivers found that climate change could reduce water availability in the basin and risk hydropower production. According to the study, rainfall levels could decrease up to 15% over the next century.

Meanwhile, rising temperatures could lead to more evaporation, said Miguel Uamasse, researcher at Eduardo Mondlane University, in Maputo, who has studied the impact of climate change in Mozambique’s hydro landscape for years.

Less rainfall coupled with increased evaporation “will result in lower river flow and lower revenue from energy production,” Uamasse said.

Losses on the local ecosystems and on the Zambezi delta will be “irreversible,” Lemos added, explaining that the dam will alter and disrupt sediments in the river. This will affect the “productivity of the floodplains, the soil and the health of the vegetation,” she said.

“Here, I am doing fine,” said farmer Tafere Juliano, who lives by the river margins. “I don’t know if there will be enough water for my animals to drink wherever they put me,” she added, in anticipation of her resettlement.

Community members argue they can only leave their homes given fair compensation – a matter yet to be determined.

Fungai Caetano contributed to report this story.

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President Joe Biden said the former Mastercard executive “has critical experience mobilising public-private resources to tackle the most urgent challenges of our time, including climate change”.

Banga is currently an advisor to General Atlantic’s climate-focused fund, BeyondNetZero, has sat on the boards of big corporations like Dow Chemicals and has worked with US vice-president Kamala Harris on her Central American policies.

The bank has been led by 13 men and no women. Germany’s world bank governor Svenja Schulze tweeted this week “it is definitely time for a woman to lead the World Bank”.

The World Bank needs to become the frontrunner in fighting poverty and global crises such as #climatechange, #biodiversity loss & #pandemics. And it is definitely time for a woman to lead the World Bank.

— Svenja Schulze (@SvenjaSchulze68) February 22, 2023

The US is the bank’s biggest shareholder and traditionally picks its president so it is likely that Banga will replace David Malpass when he steps down in or before June.

Malpass was a Trump appointee who resigned before the end of his term following criticism of climate sceptic comments he made last year.

The public banks lead for the E3G campaign group Sonia Dunlop welcomed the nomination. She said: “Banga will be a fresh pair of hands at the wheel of what we hope will be a greener, bigger, transformational and reformed World Bank capable of leading a global response to global challenges.”

Climate evolution

The World Bank has become a key focus of efforts to tackle global climate change.

Barbados’s prime minister Mia Mottley first called for its reform to free up spending and tackle climate change, in an initiative labelled the Bridgetown agenda.

That call has been taken up by major bank shareholders like the US, Germany and India. It was endorsed by all governments at Cop27 and has been taken on by the UAE as hosts of Cop28.

Specifically, the bank has proposed lowering the loan to equity ratio of its main lending arm from 20% to 19%, freeing up about $4 billion a year to lend.

Reformers from the governments of Barbados and Germany told Climate Home this week that this was a good start but did not go far enough.

Credit rating

Many governments, including those of Barbados and Germany, say that any loosening of lending rules should not endanger the bank’s AAA credit rating.

This rating, determined by credit rating agencies like Moody’s, allows the bank to borrow money cheap and therefore to lend it cheap.

The government of India will push at the G20 this week for the bank to give cheaper climate finance to developing countries than developed ones.

The bank will host its spring meeting in its home city of Washington DC in April.

World Bank chief to step down early after climate controversy

There it will discuss its ‘evolution roadmap’ with its shareholder governments.

This roadmap aims to broaden the bank’s mission so that it includes tackling climate change, pandemics and other global issues as well as its current twin goals of reducing poverty and boosting prosperity.

The bank proposes to give more money to middle-income countries to reduce greenhouse gas emissions as these emerging economies pollute far more than the world’s poorest countries.

The bank also wants to lend more money to nations which are vulnerable to climate change. Currently, a country’s needs are based just on how poor it is.

To finance this wider mission, the bank’s roadmap calls for more funding from governments.

The post US backs Ajay Banga to lead World Bank in climate fight appeared first on Climate Home News.

The proposal is expected to be tabled at a G20 meeting this week at Nandi Hills summer retreat near India’s tech hub Bengaluru, where financial chiefs from the bloc have gathered for the first major event of India’s G20 presidency.

The development comes as World Bank President David Malpass held a discussion with Finance Minister Nirmala Sitharaman on Wednesday on addressing debt vulnerabilities, India’s finance ministry said.

“India is writing a proposal to form a group for reforms to World Bank,” one of the sources said, requesting anonymity as they are not authorised to speak to media.

“First step”: Reformers react to World Bank plan to free up climate spending

India’s finance and foreign ministries and the World Bank did not immediately respond to a Reuters’ request for comment.

“Democratisation of World Bank has been a long term line pursued by India and other countries. Differential financing terms for least developed and developing countries is desirable,” a second source said.

India’s chief economic adviser on Tuesday said reforms at multilateral development banks would be at the top of the agenda for discussion during the G20 financial chiefs meeting.

Sitharaman told Malpass on Wednesday that climate finance was a focus area during India’s G20 presidency and multilateral development banks “can play a major role in incentivising private capital, de-risking instruments, and providing greater concessional finance”.

World Bank chief to step down early after climate controversy

U.S. Treasury Secretary Janet Yellen is also expected to press for consensus on reforming multilateral development banks to vastly expand their lending to tackle pressing global challenges such as climate change and conflict.

The World Bank Group’s climate change action plan for 2021-2025 has set a target to deploy an average of 35% of the institution’s financing in support of climate action.

The Group said in September that it delivered a record $31.7 billion financing in fiscal year 2022 to help countries address climate change, a 19% increase from the $26.6 billion all-time high in the previous fiscal year.

The World Bank has proposed lowering the loan to equity ratio of its main bank from 20% to 19%, freeing up about $4 billion a year to lend.

Refromers from the governments of Barbados and Germany told Climate Home that this was a good start but did not go far enough.

Last week, Malpass announced he would quit by June, following criticism of his climate scepticism.

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The bank’s president David Malpass said last week that the International Bank for Reconstruction and Development (IBRD), the biggest part of the World Bank, may lower its equity-to-lending ratio by one percentage point to 19%.

That would free up around $4 billion a year for emission-cutting and climate adaptation projects. The World Bank claims it spends about a third of its money on climate programmes and is making climate more central to its mission.

Avinash Persaud is an adviser to Barbados’s prime minister Mia Mottley and one of the key brains behind the push for the World Bank’s green reform. He told Climate Home that 19% was “not low enough but a start”.

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A spokesperson for Germany’s economic cooperation and development (BMZ) told Climate Home the proposed change “is a first step” but “having in mind the dimension of the challenges ahead, more reforms are needed”.

The push to reform the bank began in the Caribbean island of Barbados but has been picked up by the US and Germany, two major shareholders in the bank. The US will pick the bank’s next president when Malpass retires in June.

Neither Persaud nor the BMZ put forward a precise equity-to-loan ratio. But E3G campaigner Franklin Steves said the bank should target a range of 15-18%, adding that should be a ceiling rather than the existing floor.

He said that 19% “fails to meet the level of ambition” that the bank’s government shareholders called for at its annual meeting last year or the recommendations of the G20 group of major economies.

Corporations push “insetting” as new offsetting but report claims it is even worse

But many big developing nations fear that reforms could undermine the bank’s credit rating, making it more expensive for the bank to borrow money and eventually pushing up interest rates for the countries it lends to.

China, India and Brazil were among the countries to sign a note recently warning the bank to “avoid measures . . . that might not be understood by rating agencies in positive light”.

The bank’s triple-A rating was “necessary to be able to raise funds at a cost that would enable lending at below-market rates”, it said. “This is the very rationale underlying the [multilateral development bank] concept.”

But the reformers are trying to quell these fears. Persaud said he does not “believe in the Bank losing its AAA rating”. The BMZ spokesperson said the rating “is crucial to the World Bank’s business model” and “there is a need to balance risk-appetite and prudence”.

E3G’s Franklin Steves said a 15-18% ceiling “would not pose a threat to the Bank’s credit ratings, and would unlock tens of billions dollars more in climate and development finance”.

The post “First step”: Reformers react to World Bank plan to free up climate spending appeared first on Climate Home News.

So the World Bank’s attempt to evolve into an organisation that can tackle the climate crisis will soon be led by someone who doesn’t struggle to accept that the climate crisis is happening.

He’s promised to leave by June which means he may oversee the bank’s spring meeting in April.

This week, he revealed the bank will propose then to change the equity-to-loan ratio of one of its arms from 20% to 19%.

That will free up $4bn a year, much of which will be spent on climate programmes. But it’s a tweak, not a transformation.

This week’s stories

• ECT boss accuses EU of protecting fossil fuels by blocking reforms
• World Bank proposes freeing up $4bn by loosening lending rules
• World Bank chief to step down early after climate controversy
• Study: IPCC asks emerging countries to drop coal faster than rich nations did
• UAE’s Cop28 boss calls for “course correction” on climate change
• Biden promises to “work with Congress” to fund Amazon protection
• Sponsored: Floating offshore wind is about to come of age

Transformation is what is needed, as a new study shows the scale of the climate task.

Under the IPCC’s 1.5C scenarios, the study shows that coal-reliant economies like China, India and South Africa must phase out coal faster than any country has ever phased out any energy source before.

That’s not impossible. Records are there to be broken and sometimes smashed. Ask Usain Bolt.

But we’re going to need to go fast and Malpass was dragging us back.

The post Another sceptic bites the dust – Climate Weekly appeared first on Climate Home News.

Malpass said the bank’s International Bank for Reconstruction and Development (IBRD) arm may lower its equity-to-lending ratio by one percentage point to 19%.

This means the bank will take on a bit more risk, in line with an independent report prepared for the Group of 20 (G20) major economies last year.

One of the bank’s main focuses is reducing greenhouse gas emissions and helping countries adapt to climate change.

An ongoing reform process is making  this mission more central to how the bank spends money.

Lowering the equity-to-lending ratio would free up more resources  at a time of mounting global challenges such as the Ukraine war, Malpass said.

The bank’s board, made up of governors picked by its member states, is expected to decide on the issue by the April meetings of the bank and the International Monetary Fund.

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The IBRD in December raised its sustainable annual lending limit by $2 billion, beginning in June 2023, and Malpass said there could be scope for a further 8% expansion in total IBRD lending. Its lending ceiling for fiscal 2022 was $37.5 billion.

Malpass announced his resignation from the bank on Wednesday amid mounting pressure from the U.S. Treasury to move faster on reforming the bank. He told Reuters on Thursday in his first interview since announcing his departure that the bank’s work on its “evolution roadmap” was far along.

The bank’s management has already vetted the 19% proposal with credit ratings agencies, and that was the most likely outcome of the discussions now underway, said a source familiar with the matter.

The World Bank had long argued against changing its capital adequacy rules, worried that doing so would undermine its AAA credit ratings, but two of the three main agencies last year said some changes were possible without tarnishing the ratings.

The bank’s board met on Thursday to discuss the proposal and other options, a second source said. “We recognize it could be lowered in a financially sustainable manner,” the source said.

World Bank chief to step down early after climate controversy

The United States, the bank’s largest shareholder, had no immediate comment on the proposed ratio change, but has been pushing the bank for months to take bolder and quick steps to free up urgently needed resources.

Changing the bank’s current ratio is one of many recommendations contained in last year’s independent report prepared for the G20, which concluded that the World Bank and other multilateral development bank could increase their lending capacity by several hundreds of billions of dollar by reforming the way they operate.

Kevin Gallagher, who heads Boston University’s Global Development Policy Center, said the proposal under discussion marked progress after years of resistance by the World Bank but further changes and a capital increase would be needed.

“It’s an important step in the right direction, but it’s only $4 billion of the hundreds of billions of dollars that G20 says can be stretched to meet our shared climate goals,” he said. “If this is all they do, then it’s a failure.”

Developing countries need to secure $1 trillion a year in external financing for climate action by the end of the decade and match that with their own funds, in order to cut emissions, boost resilience, deal with damage from climate change and restore nature and land, a report concluded last year.

The post World Bank proposes freeing up $4bn by loosening lending rules appeared first on Climate Home News.

Malpass received strong criticism over the bank’s commitment to climate action and over his personal views on climate change.

He had been under increasing pressure since last September, when he refused to publicly accept that burning fossil fuels is warming the planet.

Malpass was asked during an event on the sidelines of the UN general assembly whether he agreed with the scientific consensus on climate change.

The World Bank chief repeatedly dodged the question, to heckling from the audience, before eventually responding “I’m not a scientist”.

Malpass’ departure comes as the World Bank signalled its intention to make climate action more central to its mission.

In its “evolution roadmap” published in January, the World Bank said it “must evolve its mission” to address the crisis facing development and “support climate action”.

This followed calls on the World Bank from US, Germany and other government to launch “fundamental reform” on its climate agenda.

“Reached new records in climate financing”

Malpass did not say why he was leaving, only publishing in a statement that “after a good deal of thought, I’ve decided to pursue new challenges”.

Malpass said he was proud of what was achieved during his term. “We’ve worked hard to reduce poverty, increase economic growth, reduce government debt burdens, and improve living standards across the full range of human development”, he said.

He also added that under his tenureship the World Bank “reached major new records in financing levels, including climate financing”.

Study: IPCC asks emerging countries to drop coal faster than rich nations did

The World Bank said it delivered $31.7 billion in the fiscal year 2022 to help countries address climate change – a 19% increase on the previous period.

The bank, however, has come under fire for how it counts its climate spending.

Research by Oxfam – based on the World Bank’s climate funding in 2020 – claimed up to 40% of its spending could not be independently verified.

A Trump-appointee

A former investment-bank economist and Treasury official, Malpass was appointed by then US President Donald Trump in 2019.

The United States is the World Bank’s biggest shareholder and a long-standing tradition gives the US government the right to select the head of the World Bank.

However, Nadia Daar, the head of the Washington office of Oxfam International, said the process should be opened to more candidates to improve the credibility of the institution.

“If shareholders really want to ‘evolve’ the WorldBank, Malpass’ successor must be hired based on an open and merit-based selection process,” she said on Twitter.

UN budget cuts hindered response to Pakistan’s extreme floods

Sonia Dunlop, public banks lead at the E3G think tank said the next leader “must be a visionary with deep understanding of the food, energy and development crises gripping the world, have climate change as the one of the top priorities, be profoundly committed to multilateralism and have the full backing of developed and developing countries.”

She added: “It is of course high time that the world’s development bank had a woman at the helm.”

All the bank’s 12 presidents have been American men and all but Korean-American Jim Yong Kim have been white.

The post World Bank chief to step down early after climate controversy appeared first on Climate Home News.

The 20-page document, dated 18 December and seen by Climate Home, says the bank will “broaden” beyond its current “twin goals” of ending extreme poverty and boosting shared prosperity.

Its new mission “will emphasize the importance of sustainability and resilience to reflect more clearly that our mission includes global public goods (GPGs), such as climate change”.

It suggests changing rules so the bank lends more of its money, switching focus from the world’s poorest countries to more polluting middle-income ones and factoring climate vulnerability into its borrowing criteria.

Why was this roadmap drawn up?

The World Bank Group committed $88 billion in the 2022 fiscal year, of which it classed $31.7bn (36%) as climate finance. It has not excluded fossil fuels from its portfolio and provided $1.7bn to oil and gas sector in 2021.

The bank was set up after the second world war and its traditional mission has been to tackle extreme poverty and promote economic growth. It is based in the USA and the US government is its biggest shareholder.

In recent years, the prime minister of Barbados Mia Mottley has led a push to reform the bank and the International Monetary Fund to integrate climate considerations in their goals.

Last year, the US, Germany and other governments backed this agenda, calling on the bank to launch “fundamental reform”.

“Too little, too slow”

Mottley’s adviser Avinash Persaud told Climate Home today that this roadmap does not go far enough.

“It sets out the right destination,” he said, “but I don’t think it’s a roadmap to getting there” as it is “too little, too slow” and “too close to business as usual”.

He said that the roadmap spends too much energy defending the bank’s current climate policies to the governments that make up the bank’s shareholders.

A group of UN-appointed experts recently advised that multilateral development banks like the World Bank need to triple their climate finance within the next five years.

Persaud said: “If you’re running a business and you need to do 300% more, you can’t simply go to every division and say I need you all to try a little bit harder, you need a different approach. You need different mechanisms. You need different divisions.”

This criticism was echoed by NRDC climate finance analyst Joe Thwaites. He told Climate Home: “It’s a disappointing combination of navel gazing and finger pointing. Rather than grapple with the ambitious reforms needed to confront the unprecedented crises the world faces, they’re trying to kick the issue into the bureaucratic long grass. Shareholders shouldn’t stand for this.”

The bank’s president David Malpass has been under fire from environmentalists after casting doubt on climate science last year.

Persaud said “people would love to blame the head” but “it’s not easy for any institution to reform itself”. He said governments should be drawing up the roadmap and leading the reforms not the bank itself.

The bank might lend more

National governments have pushed recently to change the rules of multilateral lenders like the World Bank to release more money.

The bank’s roadmap partly endorses this, proposing “further optimising the balance sheet” and a “review of [the World Bank-linked International Bank for Reconstruction and Development’s] minimum equity-to-loan ratio to assess feasibility for a moderate reduction to enhance the efficiency of capital utilization”.

However, it says the bank will try and keep its AAA credit rating. This rating is set by rating agencies and allows the bank to borrow money cheaply. The bank fears lending out too much money could endanger this rating.

Persaud agreed that the bank should not reduce its AAA-rating but added “the experts are saying that there is a tremendous amount of additional lending that is possible without reducing the AAA rating”. He said the bank’s proposals were “too tentative”.

More money for middle-income countries

As it aims to tackle extreme poverty, the bank has traditionally focussed on the world’s poorest countries.

But the roadmap points out that these countries are responsible for just 2% of global greenhouse gas emissions. Low and middle-income countries are together responsible for 60% of emissions.

The document says: “A focus on global challenges might also require revisiting the emphasis on income per capita… as countries with higher income per capita.. .are essential partners to achieve progress on [global public goods] (e.g., on carbon emissions).”

To encourage emissions reductions in middle-income countries, the roadmap proposes scaling up the global public good fund of the International Bank for Reconstruction and Development, the World Bank’s lending arm.

Middle income countries like China could access climate finance through this. But wealthy governments are likely to need to contribute more to it so that it can be scaled up.

More money for climate vulnerables

Whether a country is eligible for World Bank finance is judged partly on how much it needs the funds. This is currently evaluated on how poor the country is.

The roadmap proposes measuring needs partly on vulnerability to the impacts of climate change.

This would make it easier for climate-threatened nations which aren’t among the world’s poorest, like the Maldives, to access World Bank funds.

But where will the money come from?

The World Bank gets its money by borrowing on the international capital markets. It can do so very cheaply because lots of governments back it.

But the money it got from governments in 2018 has not allowed it to borrow enough to deal with all the global crises since then.

These include, the roadmap says, the Covid-19 pandemic, Russia’s invasion of Ukraine and the climate crisis.

As a result, the document predicts, World Bank support will start to fall in the July 2023 to July 2024 fiscal year.

The bank “will need substantial additional financial capacity to respond to a more ambitious, updated mission”.

This will require a “concerted effort” by the bank’s management and the governments which make up its shareholders.

The roadmap has been sent to shareholders and will be presented to the board of governors in the coming weeks.

The bank’s management will then report to its development committee at the World Bank spring meeting and then prepare a paper for endorsement at its autumn meeting.

The post World Bank moots stronger strategic focus on climate action appeared first on Climate Home News.

On Tuesday, Germany and the US handed a joint proposal for “a fundamental reform of the World Bank” to its management, during this week’s annual meetings in Washington DC.

The proposals aim to make the bank fit to address global challenges, including climate action and biodiversity conservation.

A spokesperson for the German government told Climate Home News the proposed reforms were backed by 10 countries, including all of the G7 group.

Development minister Svenja Schulze, who serves as Germany’s representative on the World Bank’s board of governors, said: “The World Bank’s current model…. is no longer appropriate in this time of global crises. Challenges and investment needs are so great that the model needs to be adjusted.”

Schulze said the reforms should include “climate lending on better terms” and “targeted budget support for governments which want to pursue policy reforms to make their economies climate neutral”.

Germany expects a response from the bank by the end of the year.

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Developing countries have warned they need affordable financing options to transition to clean energy and invest in resilience without being pushed into unsustainable levels of debt. But finance isn’t flowing to those that need it most.

Last week, Janet Yellen, US secretary of the treasury, said multilateral development banks, including the World Bank, had to “evolve” to address global challenges such as climate change.

The US, the bank’s largest shareholder, and the group of reformers are calling for its management to develop “an evolution roadmap” by December, she said.

Yellen said development banks should increase concessional funding, including grants, to support middle-income countries transition away from coal.

Besides from governments, the banks could support regional and sub-national entities, such as green city initiatives, adopt stronger targets and develop new instruments to mobilise private finance.

Lagging behind

The World Bank provides loans and grants to developing countries and plays a critical role in leveraging private sector finance. Yet, it lags behind its peers in the share of funding dedicated to climate.

Analysis by The Big Shift, a coalition of NGOs, found that the World Bank provided more than $14 billion in financing for fossil fuels since the Paris Agreement was adopted. While it has committed to end financing coal as well as oil and gas extraction, its subsidiaries are still backing fossil fuel projects.

President David Malpass’ remarks doubting the scientific consensus on climate change increased scrutiny in the bank’s management. Malpass later rowed back on his comment. But civil society groups say the bank can’t be reformed without a change in leadership.

Funds for Pakistan flood relief come too little, too late

Collectively, multilateral development banks hold an estimated $1.5 trillion in assets.

Earlier this year, a panel of experts, commissioned by the G20, presented five recommendations to maximise the banks’ financing capacity without threatening their financial integrity.

Their report found that the reforms could unleash “several hundreds of billions of dollars over the medium term”.

Franklin Steves, of think tank E3G, told Climate Home, the panel’s report “has clear momentum behind it, and it’s gathering political support among a variety of shareholders”.

“It’s incredibly encouraging that things are gradually moving the right way,” he added. “We need to snowball that effort as much as possible to get key stakeholders in the G7 and G20 behind these proposals.”

‘Most acute crisis’

For developing countries, an overhaul of development banks’ lending practices cannot come too soon.

The compounding crisis of the pandemic, the war in Ukraine and the resulting food and energy crisis have caused developing nations’ debt levels to soar, eroding their fiscal space to invest in climate resilience.

According to the IMF,  more than 60% of low-income countries are in –or at high risk of—debt distress.

“This is the most acute crisis we’ve ever witnessed,” said Gayle Smith, CEO of the One campaign, which advocates to end extreme poverty and previously served as the administrator for the US Agency for International Development.

“Some countries have the tools to deal with these crisis and some don’t,” she added. Most vulnerable nations are in the latter camp.

“There needs to be an upscale in financing as a matter of urgency,” said Jean-Paul Adam, climate change director for the UN Economic Commission for Africa. “The World Bank is certainly one of the foremost institutions that should be leading the way.”

Barbados’ prime minister Mia Mottley set out some solutions in her ‘Bridgetown agenda’, a detailed proposal backed by UN officials, academics and civil society groups. One of three key pillars is to expand lending from multilateral development banks by $1trillion.

So far, no major economy has publicly endorsed the agenda.

The post US, Germany back ‘fundamental reform’ of World Bank to scale climate finance appeared first on Climate Home News.

The leader of one of the world’s smallest nations is working to deliver a new global finance compact for vulnerable countries trapped between financial stress and the inability to prepare for the next climate disaster.

Addressing the UN general assembly on Thursday, Mottley laid out a plan to transform the global finance architecture and make it fit to address the climate crisis. This is neither “idle thought or arbitrary comment on our part,” Mottley told the plenary hall in New York.

In fact, many in the room would have been familiar with what she is proposing. At the end of July, Mottley hosted a retreat in Barbados’s capital Bridgetown to brainstorm solutions and test her ideas.

The retreat was convened with senior UN officials including deputy secretary general Amina Mohammed, the Rockefeller and Open Society foundations, academics and civil society. Canada’s prime minister Justin Trudeau tuned in virtually.

The outcome was the ‘Bridgetown Agenda’ – a set of core messages designed to reform the World Bank and the International Monetary Fund (IMF), institutions set-up at the end of World War II and still dominated by the US and Europe.

Since then, Mottley has embarked on a diplomatic drive to gather support for the movement for reform she began in Bridgetown.

Last week, she travelled to the White House to present the plan to US vice president Kamala Harris. Climate Home News understands that Harris was receptive to some of the ideas.

Today, I met with @VP Kamala Harris, Heads of CARICOM and President of the Dominican Republic Luis Abinader, to discuss and help accelerate the implementation of PACC 2030. Thank you to all. We must continue making the right decisions today, for the sake of our world tomorrow. pic.twitter.com/EYR4BZAtwW

— Mia Amor Mottley (@miaamormottley) September 15, 2022

On the sidelines of the UN general assembly in New York on Wednesday, Mottley presented her case at a leaders’ roundtable on climate action organised by the UN.

The meeting was poorly attended by leaders. There were no heads of governments or delegation from wealthy nations. Instead, representatives for the EU Commission and the US attended. But IMF head Kristalina Georgieva was in the room.

“We can’t pretend day by day that someone somewhere else is going to make that change. This is our time to make that defining difference,” she later told the UN plenary hall.

“And many of the things that are put before us today don’t require money, but they require a commitment and they require political will.”

The plan for reform is based around a new form of internationalism which seeks solutions that transcend national borders, Avinash Persaud, one of Mottley’s closest advisors and the brain behind many of the proposals, told Climate Home.

“The world is not going to progress with country-by-country commitments. It’s going to progress through a global movement and global projects,” he said.

For Mottley and her team, the financial system is failing to provide developing countries with the funds necessary to invest in resilience, address climate change and meet development goals at a time when vulnerable nations are facing soaring debt levels.

Almost 60% of the world’s lowest-income countries were already in debt distress or at high risk of it before the start of Russia’s war in Ukraine, according to the World Bank. Rising costs have made things worse.

Persaud has warned that “a silent wave of financial stress is running through world markets and will soon crash onshore” with widespread consequences.

Meanwhile, climate vulnerable nations from Pakistan to Puerto Rico are facing growing costs to recover from climate disaster and prepare for the next one.

“In order for us to get away from that, we need to secure long-term funding. This must now be the global movement of our time,” Mottley told an event in New York organised by the Bill & Melinda Gates Foundation.

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Mottley launched the ‘Bridgetown Agenda’ on Friday, as she delivered the inaugural Kofi Annan lecture in New York.

The agenda is based around a three-pronged approach.

The first step is to prevent a debt crisis with emergency IMF relief and long-term concessional funding for development, lent over at least 30 years, to prepare for the future.

Money should be available not just “following a disaster, but before a disaster,” she said, citing World Bank research that for every $1 spent on resilience, many lives and $7 could be saved in avoided costs.

This, she said, calls for a greater redistribution of special drawing rights (SDRs), the IMF reserve asset issued as relief during the pandemic, from wealthy nations to those that need it most.

Last year, the IMF injected $650bn in SDRs into the global economy to help countries recover from the Covid-19 pandemic. The IMF created a $45 billion Resilience and Sustainability Trust for rich nations, which received most of the support, to re-channel the funds to developing countries.

Mottley and her supporters are asking for at least $100bn to be redistributed.

Mia Mottley: the ‘fearless’ leader pushing a global settlement for the climate frontlines

The second step is to expand the lending capacity of multilateral development banks to developing nations by $1 trillion to be invested in climate resilience. This includes by allowing the banks to hold SDRs for lending.

The third step is to develop long-term instruments that can mobilise $3-4 trillion in finance for carbon-cutting projects and a mechanism for raising reconstruction grants to help nations rebuild after climate disasters.

Part of the money could come from the IMF agreeing to a new issuance of $650bn in SDRs – a threshold that doesn’t require approval by US Congress.

The next push for Mottley will be the annual meetings of the IMF and the World Bank, which start next month.

As the largest shareholder in both institutions, the US government would need to be on board.

UN chief António Guterres has made clear he backs Mottley’s agenda. Speaking to the press on Wednesday, he called on Washington to “get behind these ideas now”.

The post Mia Mottley builds global coalition to make financial system fit for climate action appeared first on Climate Home News.

Governments and businesses alike are adopting net zero targets at a rapid pace: countries with net zero targets now represent over 60% of global emissions, while companies with such commitments together represent sales of nearly $14 trillion.

These commitments may not yet be ambitious enough to meet the Paris Agreement’s goal of limiting temperature rises to 1.5C, but they come tantalizingly close. And by setting their sights on almost complete decarbonisation by mid-century, they should ideally provide the signal needed to shift investments from polluting industries to clean technologies.

Yet this is not how it is playing out in practice.

Last week, the International Energy Agency outlined what it believes must happen if we are to reach net zero by 2050. First on the list is not approving any new coal plants, coal mines, or oil and gas fields from 2021 onwards.

Fossil fuel companies, however, are planning to invest heavily in new fields and mines over the coming years, many of them in highly sensitive ecosystems such as the Arctic.

Meanwhile, hundreds of coal plants are in the planning stage around the world. These investments typically have life spans of several decades, meaning many could still be in operation well beyond the mid-century decarbonisation goal.

Why would investors continue to inject money into ventures that are simply not compatible with the commitments adopted by the world’s governments?

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The truth is that investors take their decisions based on concrete strategies, roadmaps, and incentives, while targets may be seen as merely aspirational. Yet in most countries, long-term strategies are sorely lacking. To-date, only 29 countries have submitted the long-term decarbonisation strategies called for by the Paris Agreement.

Equally lacking are the clear and robust price signals needed to drive low-carbon investments at scale. Most experts agree that placing a price on emissions is essential for achieving decarbonisation. Yet in the World Bank’s State and Trends of Carbon Pricing 2021, my colleagues and I found that only 3.76% of global emissions are covered by a carbon price above $40/tCO₂e — the lower end of the range leading economists say is needed to meet the 2C target that represents the absolute minimum commitment under Paris.

Source: World Bank, State and Trends of Carbon Pricing, 2021

Perhaps more sorely missing still is the long-term clarity on how carbon prices will develop. Only a handful of countries have set out clear pricing pathways, and even these do not extend further than 2030 – far shorter than the lifespan of most energy investments.

In addition to locking-in high-carbon investments for decades to come, the absence of robust and stable price signals risks delaying R&D and pilot projects needed to achieve deep decarbonisation.

A recent analysis of the effectiveness of carbon prices found that while they have had some impact on reducing emissions, low prices and broad exemptions have led to little impact on innovation and zero‐carbon investment.

Goldman Sachs estimates that carbon prices upwards of $100/tC2e will be needed to drive the technological breakthroughs necessary to unlock hard-to-reach emissions reductions, while Woodmac predicts prices of $160/tCO₂e are needed to meet the 1.5C target.

Comment: Governments are overlooking a key piece in the climate puzzle: community energy

The State and Trends report also reveals that more and more companies are starting to adopt their own internal carbon prices, mostly with a view to triggering low-carbon investments.

Yet these prices are often modeled on (expected) regulatory prices in the jurisdictions they operate in and are therefore also too low to drive the investments needed. Oil and gas companies, for instance, on average assume a carbon price of a mere $31/tCO2e.

Evidently, this is hardly enough to discourage Arctic drilling.

There are some encouraging signs. The European Union – which in the process of aligning its emissions trading system with its 2050 net zero goal and the European Green Deal – has seen prices soar to record highs in recent months.

The New Zealand government, meanwhile, is setting its emissions cap for the coming years to align with its own 2050 net zero goal. And an increasing number of countries are showing interest in developing long-term strategies that set out clear decarbonisation pathways toward mid-century.

As more countries move to agree on net zero targets, they would do well to move quickly to connect them to concrete plans and robust economic incentives. Ambitious targets are a crucial start, but they must not prove mere castles in the sky.

Darragh Conway is the lead legal counsel at Climate Focus and a lead contributor to the State and Trends of Carbon Pricing report 2021. 

The post To meet net zero by 2050 we need a long-term vision for carbon pricing appeared first on Climate Home News.

Speaking to Climate Home News, Grenada’s finance minister Gregory Bowen said successive governments were desperate to change this but had their hands tied by a privatisation deal made nearly 30 years ago.

On advice funded by the World Bank, the current government pursued reforms to support renewables – only to be ordered to renationalise the electric utility by a World Bank tribunal, for $58 million plus legal costs.

As the government seeks to recoup some of the costs by selling shares in the utility, Bowen held up the three decade-long struggle as a cautionary tale. “It has significantly prevented us from going into renewables and we do not believe any country, any small country, should enter any such agreement,” he said.

In the 1980s, almost all developing countries had nationally owned electric utility companies. The only major exception was Chile, then run by free-market dictator General Augusto Pinochet. In the 1990s, they started to sell them to private companies, cheered on by institutions like the World Bank.

One of those countries was Grenada. In 1994, on advice from the World Bank, it privatised its electric utility, Grenlec. The then government sold a controlling interest to a small family firm in Florida called WRB Enterprises, which made its money primarily by selling Caterpillar construction machinery and whose only electricity experience was in part of the Turks and Caicos.

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Bowen, who ran Grenlec when it was state-owned, described the privatisation contract as one-sided and “the worst deal that could ever have passed” for Grenadians.

Bob Blanchard, chief executive of WRB, disputed that characterisation, telling Climate Home News the company shouldered its fair share of risk. “Every decision we made if it backfired came on the stockholders not the rate-payers,” he said.

Among the deal’s conditions was that, if the country’s currency collapsed, there was civil unrest or its power supply was wrecked by a hurricane, flood or fire then the government would have to buy Grenlec back. Any change to the law that impaired the value of Grenlec’s assets could trigger a “repurchase event”. The price would be determined by a formula in the contract which Bowen says “had nothing to do with fair value”.

Meanwhile the rate-setting framework allowed Grenlec to pass on any increase in the oil price to consumers.

Between 2011 and 2015, Grenada’s energy costs per kilowatt hour were between four and ten times more expensive than those in the USA, although similar to some Caribbean neighbours’. In a recent press conference, Grenadian foreign minister Oliver Joseph described high electricity costs as “stifling economic growth” by putting off manufacturing companies from investing.

Gas prices are going up again today. Grenlec also said that their fees are increasing because of the rise in the cost of fuel.

— Ashleigh (@_Ashess_) July 17, 2018

As solar power costs dropped, rooftop panels could have been a cheap and clean alternative for Grenadians. But they had to get a licence from Grenlec and sell any excess electricity to them, or face up to six months in prison. The number of licences available was limited – to avoid overloading the grid at particular locations, according to WRB.

Originally, surplus electricity from rooftop solar was sold to Grenlec through a “net metering” scheme, with a ten-year fixed price of $0.17 per kWh. But, Blanchard said, this was “very costly to the company”. It was replaced with “net billing” system, under which Grenlec deducted the cost of the fuel it would otherwise have used to supply the property. According to the International Renewable Energy Agency (Irena), this “resulted in limited installation of installed capacity, as consumers perceive the payback period as too risky”.

The only problem I have with WRB and Grenlec is the monopoly on electricity. If I wanna get off the grid I should be able to

— Grenadian Christian Soldier (@nickyb_zero3) March 13, 2019

In this monopolistic system, Grenlec would have to drive any large-scale transition to renewables. This transition did not take place. Grenada achieved barely a tenth of its target to get 20% of its electricity from renewables by 2020.

The government blames the 1994 deal which it says gave Grenlec no incentive to invest in renewables. The Inter-American Development Bank agreed, saying the deal “enabled a monopolistic, fossil fuel biased development of the electricity sector, severely hampering the development of renewable energy technologies”.

WRB’s Blanchard insisted the lack of progress was “not through lack of trying” on the company’s part. He blamed Bowen’s conservative New National Party, complaining the government had not supported attempts to purchase land from the state or absent private landowners for solar and wind farms.

What’s not clicking for Grenada? Truly. We just have our renewable resources going to waste. Talk, talk, talk bit no action https://t.co/HeScr8xqBd

— 谢奈尔 (@itsShay_nell) October 22, 2020

In 2016, a World Bank-financed project led to reforms which shortened Grenlec’s 80-year license, opened up electricity generation, changed the way electricity prices were set and took away its tax concessions.

This draft law was overseen by a consultant who was paid $115,000 by the World Bank to advise on the implications of the reforms on the 1994 deal and “strategies to avert arbitration”. Two more World Bank-financed consultants then reviewed the law.

After all that, WRB argued the law was a “repurchase event” and took Grenada to the World Bank’s International Centre for Settlement of Investment Disputes (Icsid) to try and force a sale.

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Following a two-year court case and nearly $15 million in legal costs, the three Icsid arbitrators ruled in WRB’s favour. They ordered Grenada to pay the company $58m plus costs – nearly a tenth of the country’s $786m projected 2020 revenue – to buy back a share in Grenlec.

According to Bowen, the case caused such embarrassment for the World Bank that its president asked Grenada’s prime minister to make it go away with a settlement. “It was not looking pretty at all,” Bowen said, “you get the World Bank loan to change the legal framework and then it was the court arm of the World Bank who imposed such a ruling. I think there was embarrassment at the highest level of the World Bank… their programme caused us to be in this position and I think they are very very conscious of that.”

Blanchard also criticised the World Bank. “They were funding an effort that was ill-conceived and was going to potentially run down the risk of where we ended up with an Icsid case and an arbitration. Their position was that all they are doing is providing the funding. What the government does with that funding is up to the government.”

This case could have consequences for other nations. While there is no concept of “precedent” in international law, Icsid arbitrators can take “inspiration” from past rulings.

The tribunal ruled that WRB was under no legal obligation to share the government’s view of Grenada’s best interest. Martin Brauch, a legal researcher from the Columbia Center on Sustainable Investment, told Climate Home this ruling ran “dangerously close” to denying the government’s right, which is enshrined in international law, to determine the public interest and regulate accordingly. “Its decision may have that detrimental effect,” he added.

Gus Van Harten, a lecturer in international investment law at Osgood Hall law school, said that investor-state dispute settlement law is “full of these failed privatisation deals – these terribly negotiated deals”. He added that the ruling “shows how energy privatisation contracts can bind governments for generations”.

Having been forced to nationalise Grenlec, the government is now trying to sell shares in Grenlec – but does not expect to get what it paid for them. This time, Bowen said they only want to sell to Grenadians. The plan is to install a “competent management company to take it into the 21st century”.

So when things settle a bit more, we buying shares with Grenlec awa? Or we don’t trust? pic.twitter.com/hPEff4AGO1

— Krissy (@KrissyLionz) December 30, 2020

With control of energy policy, the government is aiming for at least 30% (and up to 100%) of electricity to be generated renewably by 2030. The US National Renewable Energy Laboratory estimates it has the potential for 20 MW of wind power, 25-50 MW of solar power and more than 50 MW of geothermal. The country’s electricity generation capacity is currently around 50 MW. 

Despite the bad experience, Bowen said, the government is still looking to the World Bank for support, along with other multilateral development banks and the Green Climate Fund (GCF).

Most climate finance from rich countries is in the form of loans, many of them on not so generous terms. Bowen called for grant funding. “If we get grants we can make the price come down significantly and maybe over 30 or 40 years we could cover the $63m we paid due to this whole scenario between the World Bank and ourselves,” he said.

The World Bank declined to comment.

This article was updated to clarify that the government was planning to divest shares in Grenlec, not find a new private buyer.

The post Why Grenada had to nationalise its electricity for $60m to pursue renewables appeared first on Climate Home News.

In September, the International Finance Corporation (IFC) published its green equity approach (GEA), outlining that: “IFC no longer makes equity investments in financial institutions that do not have a plan to phase out investments in coal-related activities.”

Yet the client it chose to pilot the approach with in 2019, Hana Indonesia, has since approved project finance to the 2,000 MW Java coal power station in Banten, Indonesia.

A source with knowledge of the matter told Climate Home that when confronted, IFC officials claimed not to be aware of Hana Indonesia’s involvement in the coal megaproject.

“We are in discussion with PT Bank KEB Hana Indonesia to better understand its recent lending activities,” a spokesperson for IFC said.

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Java 9 and 10 is predicted to release 250 million tonnes of carbon dioxide over 25 years, equivalent to the annual emissions of Thailand or Spain, according to a report by sustainable finance watchdog Recourse.

A Greenpeace report warned that the $3.5 billion coal project could lead to more than 4,700 premature deaths over a 30-year period and affect the air quality in the Indonesian capital Jakarta, 120km from the power plant. 

Indonesia has the fourth largest coal pipeline in the world and is one of only five countries in the world to start construction of new coal power plants in 2020, according to Climate Action Tracker.

The GEA was developed precisely to encourage equity clients in such countries to shift away from coal, with a goal to reduce their coal exposure by 50% by 2025 and to zero by 2030.

“The approach will allow IFC to continue engaging with banks that finance coal, but with a transparent framework and declining limits in line with the Paris Agreement and various climate scenarios,” the IFC said. 

The policy came two years after the IFC said it would proactively seek clients committed to moving away coal.

“If the IFC continues to fund really egregious coal such as Java 9 and 10 that is a huge disappointment and frankly a betrayal of all the GEA stands for,” Recourse co-director Kate Geary told Climate Home. 

“The GEA will be revised in 2021 and we need to see this loophole closed – no new coal has to be a condition of IFC agreement to partner with a bank under the GEA.”

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Hana Indonesia’s parent bank is Hana Korea, South Korea’s fourth largest bank. IFC has a “long-term relationship” with Hana Korea, according to Seongeun Lee, a researcher at the Korea Sustainability Investing Forum. “They have invested in Hana Korea from their inception.”

IFC and Hana Korea are both shareholders in Hana Indonesia. IFC owns almost 10% and Hana Korea almost 70% of equity in the bank, according to Recourse. Neither bank has made a public statement on coal financing.

Hana Korea is one of several South Korean banks to invest in Java 9 and 10, noted Yuyun Indradi, the executive director of campaign group Trend Asia.

“Korea is financing dirty energy projects [overseas], while they try to implement the Green New Deal domestically. It’s a double standard,” Indradi said.

When President Moon Jae-in won the election earlier this year, he announced an ambitious Green New Deal, which included a 2050 net zero pledge and ending state support for overseas coal projects. 

In July, South Korean lawmakers proposed a bill that would end financing for overseas coal projects. Seongeun said it is currently unclear whether the bill will pass and said that to date only six Korean financial institutions have declared that they will no longer invest in coal. 

“Hana has seen that [Java 9 and 10] is the last chance as a business opportunity [to invest] in the dirty energy sector,” Indradi said. 

According to Recourse, IFC could play a pivotal role in ending Indonesian and Korean investment in coal.

“We need IFC to take Hana Indonesia to task over this, and to use its relationship with Hana Korea to have a serious discussion about the bank’s huge coal exposure around the world,” said Geary.

This article was amended to clarify the emissions comparison.

The post World Bank branch indirectly backs coal megaproject despite green pledge appeared first on Climate Home News.

This week, I’m attending the World Bank Spring Meetings in Washington DC with a message for World Bank officials from my home country: It’s vital that the World Bank, under its new president, keeps its promises to tackle climate change and becomes a real champion.

This would demonstrate the bank’s leadership on climate change and investments in clean energy, like off-grid solar power to reach the poorest.

One billion people still live in the dark, without any electricity. Energy poverty is particularly stark in rural and remote regions in Africa. In Tanzania, less than a fifth of people in rural areas have access to electricity. Off-grid renewables, like small solar systems, often reach rural communities more quickly and cheaply than a central grid, and are safer and cleaner than local alternatives like kerosene.

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The Christian Council of Tanzania saw the benefit of this approach, and is working with Tearfund to pilot off-grid renewable projects and to advocate for greater government support. These kind of projects can improve people’s health, education, gender equality and income generation.

For example, solar power has also enabled basic computer classes to be held and has improved teacher retention rates in Tanzania’s rural areas. We have similarly seen how hydro mini-grids have improved health facilities, which with a reliable electricity supply can use microscopes and refrigerators for medicine storage.

A network of women entrepreneurs in Tanzania have substituted kerosene with solar lamps, using the savings for school fees, farming inputs and investment in businesses.

Rachel is a farmer and tailor in Makutupora in central Tanzania who bought a solar panel with a loan from a self-help group supported by Tearfund. Now that she has a solar light, she can work in the evenings, making clothes to sell to people in the village. By working three or four hours each evening, she has increased the family’s monthly income from 70–80,000 TZS ($31–35) to sometimes as much as 150,000 TZS ($66).

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Off-grid renewables can help support small businesses, enabling them to open longer hours and thereby reach a higher number of customers, increasing profits. Ali, from the Dodoma region of central Tanzania, has used solar light to open his kiosk in the evenings, selling cattle medicines to farmers when they return from the fields. He’s seen his income more than double, enabling him to buy a plot of land on which he intends to build a house for his family.

We need to see much more investment in initiatives like this in Tanzania and scale them up. Business as usual won’t ensure that the poorest have clean energy. The World Bank has made steps to increase their investments in off-grid renewables to $600m in 2018, but this is still a small proportion of their overall energy budget.

We need the World Bank to develop a roadmap on how it will ramp up its investments to meet the demand for clean energy in African countries like mine and mainstream off-grid renewable energy into its energy portfolio. For example, the African Development Bank has set an ambitious strategy to achieve electricity access by 2025.

The World Bank’s investments send a crucial signal to other investors so it must set the direction to clean energy and energy for all.

Emmanuel Kimbe represents the Christian Council of Tanzania, a Tearfund partner

The post One billion without power need new World Bank president to keep faith appeared first on Climate Home News.

Jim Kim revealed his decision to quit his position on Monday, signing off more than three years before the end of his term in 2022. He will join private equity firm Global Investment Fund on 1 February, the firm announced on Tuesday.

According to Reuters, Kim sent a letter to bank staff that said: “I’ve concluded that this is the path through which I will be able to make the largest impact on major global issues like climate change and the infrastructure deficit in emerging markets.”

Experts working in development finance paid tribute to the most active president on climate change in the World Bank’s history. Kim will be remembered by many for pulling the plug on many fossil-fuel projects, not least coal. In 2013, the bank said it would only lend to new coal plants in “exceptional circumstances”.

In 2017 the bank announced that it would stop financing upstream oil and gas by 2019, and went on to develop internal carbon pricing mechanisms for project assessments. It then pledged to double its investments in low-carbon investment projects in the next five years at the UN climate conference in December, taking the budget to $200 billion.

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Kim “completed the shift in energy policy begun under Bob Zoellick [world bank president 2007-2012] and challenged all parts of the bank to understand what unmitigated climate change does to the development aspirations of all countries,” said Rachel Kyte, a UN sustainable energy leader who worked as the World Bank special envoy on climate between 2014 and 2015.

“Jim Kim has been the most strident of the bank’s presidents yet in committing the group to climate goals – as befits our times,” Glada Lahn a senior researcher in energy at the Chatham House said.

In October 2018, Kim’s refusal to back a 500MW lignite plant in Kosovo – the last on its books – “sent a clear message” that “coal is no longer the ‘low cost’ option and development banks should not be helping to lock in this kind of infrastructure”, said Lahn.

“But the coal question remains – while the bank is not funding coal directly, it has continued to support other commercial banks and corporations that do,” she said.

Both the end to funding of coal-projects and phase-out of support for upstream oil and gas were “only valid for direct project finance”, said Moritz Schröder-Therre, a spokesperson for the German environmental and human rights organization Urgewald.

“Our research, which will be published for the World Bank’s spring meetings, clearly shows that the bank remains a big funder of fossil fuels through development policy lending and financial intermediary lending. This means that at the first glance the bank looks better than it is actually performing,” he said.

Last year, a report found bank partners were financing coal plants in the Philippines. The bank has promised reform.

The bank also continues financing infrastructure that assists the fossil fuel industry. In 2016, a $500m loan to a gas pipeline between Azerbaijan and Italy was decried by environmental groups as a subsidy that would bolster EU fossil fuel use for decades.

World Bank dumps Kosovo plant, ending support for coal worldwide

Whoever is chosen as Kim’s succesor, Lahn said, would need to collaborate with other actors to expand the climate advances made by the bank to other institutions.

“The World Bank cannot work alone. While it may be phasing out fossil-fuel related infrastructure, Asian export credit banks and others are funding a lot. To fulfil last month’s announcement [of $200bn in climate-related finance], the Bank needs to work with other development banks – and newer financiers across the spectrum to make sure there is alignment with the Paris goals in financing globally.”

Lahn also said sustainable reconstruction was a top priority, with several North African and Middle Eastern countries needing massive infrastructure investment after years of conflict.

“How to build back better, and with climate change and hyper efficient resource management in mind, has to be high on the new head’s agenda if she or he is serious about giving these societies a fair chance to recover and develop,” she said.

Kim’s departure will begin a succession process that will immediately test the climate advances he made. The US, as the bank’s largest donor, traditionally nominates its president.

Judy Shelton, the US executive director on the board of the European Bank for Reconstruction and Development, a London-based multilateral lender, told the Financial Times that Kim’s departure presented “interesting potential opportunity.”

“We need fresh ideas on development finance,” she said. “Climate change has become too much of an obsession, displacing more urgently needed job-creating infrastructure projects.”

It is not unprecedented for the US choice to be challenged. A string of developing countries had opposed Kim’s installation in 2012, with then-Nigerian finance minister Ngozi Okonjo-Iweala emerging as a competitor. In this round, the Trump administration’s disinterest in addressing climate change and pro-coal, oil and gas stance will pit it against other major donors.

Kyte said: “There is no dichotomy between working on climate change and creating jobs, strong health services or building effective infrastructure as some commentators have suggested. Ensuring development is low carbon and resilient, and that communities, especially the most vulnerable can adapt, is the role of the World Bank Group today.”

Last year’s IPCC report on 1.5C, which predicts climate disaster even in the event warming is limited to “well below” 2C, should be a guiding document for Kim’s successor, said Petr Hlobil, the campaign director of Bank Watch.

“The new president should take IPCC warning that there are only 12 years left to reverse this trend and shift the World Bank finance towards the transition to a zero-carbon economy.” he said. In December, the US government refused to welcome the findings of the report.

The post Departing World Bank chief leaves climate job unfinished appeared first on Climate Home News.

Last week the bank’s governors responded to a report from its inspection panel, which found the villagers of Hade, about half an hour outside the capital of Prishtina, have been left “in limbo” for more than a decade after successive waves of relocations broke up their community but failed to provide new housing and services.

The panel found that failures on the part of the World Bank’s operatives during the planning “contributed to significant delays experienced during resettlement. Community members remained in temporary housing for a prolonged period which caused harm by creating uncertainty about their future and disruption in their lives”.

While the bank was not involved in the initial relocation, it had helped to plan a second programme in 2012. Climate Home published a leaked copy of the panel’s findings in December.

World Bank management agreed that there had been instances of non-compliance during the resettlement process, which the bank helped to plan. But said it held the view that these “did not have significant impacts, and Management actions are being proposed to address them”.

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The bank’s management also disagreed with an inspection panel observation that as a major institution during the early years of Kosovo’s independence, the bank could have stepped in during early bungled attempts to relocate the village to provide assistance and expertise.

Panel Chairman Gonzalo Castro de la Mata said: “The panel highlights the importance of considering the broader context in future interventions, given the existence of legacy issues and the harm currently experienced by many people in Kosovo. We trust that our report has contributed to an improved understanding of past and future challenges, and will therefore enable institutional learning.”

World Bank Country Director for Kosovo Ellen Goldstein said: “While no project supported by the World Bank in Kosovo caused resettlement, we want to emphasise the importance of continuing to build capacity for this young fragile country to employ more effective environmental and social practices to avoid or mitigate impacts on people and the environment. Our technical support to Kosovo has been geared towards this goal.”

Dajana Berisha, executive director of the Forum for Civic Initiatives said: “The World Bank is trying to limit its own responsibility by attributing majority of the responsibility for failing to conduct a dignified resettlement in compliance with own operational standards to the Government of Kosovo.”

Ragip Grajcevci is one of the few remaining residents of “Old Hade”. The newspaper reads: “Sibovc puts Hade in limbo” (Photo: Karl Mathiesen)

Ragip Grajçevci, whose family still lives on the lip of the Sibovc mine, said the villagers were planning to protest outside the World Bank offices in Prishtina.

“A satisfactory response would be for the Bank to offer concrete financial means for the complete and immediate resettlement of Hade Village, and not do it in phases as that would only delay the inevitable and we will be further impoverished in the process.”

Haqif Shala, whose family lives in Hade, said the bank’s response did nothing to end their years of dislocation.

“We will proceed to follow our legal routes all the way to the Internal Court in Strasbourg because all we are asking for is our rights, as agreed upon and signed by the Government, Ministry of Environment and Spatial Planning.”

The bank is currently weighing whether or not to underwrite a new coal power plant close to Hade. Kosovo has the fifth biggest reserves of lignite on earth and a deficient and spluttering generation system. It would lead to more villages being moved to make room for further expansion of the mine.

Grajçevci said that by not offering a solution that involved proper resettlement for his village in this instance, “the bank’s intention is to ensure that the cost of building the new power plant remain low, while the residents of Hade Village are the ones suffering the consequences of this”.

In a press release, the bank undertook to “ensure that all relevant environmental and social issues are addressed as required under Bank policies, including appropriate safeguards instruments for mining-related resettlement” if the plant goes ahead.

The post Kosovan villagers to take coal mine woes to human rights court appeared first on Climate Home News.

On Wednesday, German chancellor Angela Merkel and Müller met with World Bank President Jim Yong Kim to sign a cooperation agreement on climate change.

A statement from the German government said Müller had used the moment to call on the World Bank to put “an end to investments in obsolete and climate-damaging technologies”.

“The World Bank must also focus all of its work on climate and sustainability targets,” said Müller.

World Bank cash for fossil fuels: The worst kind of hypocrisy

The bank is considering finance for a new coal plant in Kosovo – despite an internal policy ruling out such projects except in rare circumstances. It has also announced support for large gas projects in Azerbaijan and Ghana among others.

One study has found that the bank’s annual contribution to the wider fossil fuel sector was more than $3bn in 2014.

Germany contributes €105m to the World Bank’s climate programmes. Under the agreement signed on Wednesday this will be targeted towards helping poor countries cut carbon, providing insurance to communities who may suffer climate impacts and forest sustainability programmes.

Müller said Germany and the World Bank would protect developing countries “through insurance against droughts and flooding, through investments in the vital preservation of forests. Climate change is also an opportunity, especially in the developing countries: renewable energies create jobs and are good for human health”.

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The giant state-owned Sibovc mine has swallowed communities as it expanded. It would supply the only coal power plant on earth the World Bank is considering backing.

The report, finalised in September by the bank’s Inspection Panel and seen by Prishtina Insight and Climate Home, investigated two waves of bungled, incomplete resettlement in the village of Hade in 2004-5 and 2012.

More than a decade after the appropriations began, the fragmented community continues to be insecure and frustrated, the report said. While the World Bank was not the primary agent, the panel found failings on the part of the bank contributed to “real and often severe harm” over a “prolonged period”.

Their report has been passed to the World Bank board, which will meet to discuss it in December. Marco Mantovanelli, the bank’s country manager for Kosovo, said he could not comment until the report was made public, to “preserve the integrity of the Panel’s processes”.

Just a fragment of the original village of Hade remains, perched on the lip of the state-owned Sibovc mine. Coal often spontaneously combusts in the mine below, sending dust and smoke billowing through gardens and homes. The noise of the constant digging grates on the nerves, according to families still living there.

The expanding Sibovc lignite mine has forced many from their homes. Those that remain live beside the dust and noise of the mine (Photo: Karl Mathiesen)

Ragip Grajcevci is one of those waiting for the day they are cleared out. Since 2004, he has watched his village disintegrate around him. He helped to organise the complaint that precipitated the visit of the inspection panel.

“The World Bank and the Kosovo government have repeatedly lied to us when they promised they will improve our livelihoods by moving villages,” said Grajcevci. “We have become poorer as a result of the lack of care from these institutions who claim to be doing all this ‘economic development’ in the name of fighting poverty.”

Land in Kosovo has been dearly bought. In 1999, the 51-year-old was a guerrilla fighter in the Kosovo Liberation Army. He lost an eye and a finger.

The panel investigators visited Grajcevci in Hade in early 2016. “The lives of these people are in limbo which is, without doubt, taking a heavy toll,” said their report. “In addition many of them suffer environmental consequences from the mine, such as dust and noise.

In a July response to the complaint made by Hade’s villagers, the bank rejected the allegation that it had failed to follow procedure or contributed to their grievances. But it did recognise the problems faced by the community and committed to addressing them in future development plans. The finding of the panel will pile pressure on the bank to make good on that promise.

Ragip Grajcevci fought in Kosovo guerrilla war for independence. The newspaper reads: “Sibovc puts Hade in limbo” (Photo: Karl Mathiesen)

Prishtina Insight and Climate Home reviewed two leaked documents – the executive summary and full report.

Overall, the panel was at pains to point out the bank was working in an “extraordinarily challenging” environment in Kosovo. The nascent post-war institutions have been highlighted by numerous international agencies as corrupt and dysfunctional. Much of the harm was found to be the responsibility of the United Nations Interim Administration Mission (Unmik) and the government of Kosovo.

But its report did identify specific instances in which the bank had contributed to the suffering. The panel concluded:

• The bank had no role or responsibility for the forced relocation of 664 people from Hade in 2004. That decision was made by Unmik. But the panel noted that bank officials were aware of the ongoing failure of the government to provide suitable new homes. The panel said that the bank, with its expertise, “could have done more to help”.
• A special economic zone which has frozen development for thousands of households since 2004 was far too large and “not in line with international practice”. While ultimate responsibility for this lay with Unmik, the bank again neglected an opportunity to influence the situation for the better.
• The bank had been directly involved in the 2012 resettlement of 320 residents from Shala, a neighborhood of Hade. It had financed and overseen the planning.

In the latter case, the panel found that the bank had failed to test the resettlement process against its own guidelines. As a result, the panel said, the Shala resettlement was deficient in the following ways: the community was excluded from the planning and not kept informed; the plan did not estimate of the size of the population affected; nor did it value the assets of the people of Shala; no arrangements were made for civil works, funding or contingency measures; and there was no timeline beyond the start date.

Sibovc has a lignite reserve of roughly one billion tonnes, one of the largest in Europe. (Photo: Kallxo TV)

This “contributed to significant delays experienced during resettlement. Community members remained in temporary housing for a prolonged period which caused harm by creating uncertainty about their future and disruption in their lives”.

Rob Doherty, a spokesman for the panel, said that until then he could not comment on the contents of the leaked report.

“It remains confidential until the Board has had the opportunity to formally consider it,” he said.

Mantovanelli said: “The World Bank Group has internationally recognized social and environmental protections, and we take very seriously reports from people who feel they have been negatively affected under a project we have financed…

“We have an independent panel to assess complaints on compliance with our high standards and the panel makes recommendations on how to fix problems and ensure people maintain their quality of life – including the ability to earn a living and enjoy a healthy environment.”

Ten kilometers from the mine is “New Hade”, the relocation site for hundreds of people from the villages close to the mine. It was to have a school, a medical clinic and a cemetery, but none of these have been built.

Most of New Hade is still a bare field. Just 22 families have moved here and half of the built homes appear empty. Only the main road has been sealed. On a recent visit, a stream of sewage flowed beside the homes.

The village of Hade e Re (New Hade) was supposed to recreate the economic and social life of the relocated village. Just a few homes have been finished and there are no services or shops (Photo: Karl Mathiesen)

Haqif Shala moved to New Hade in November 2014 after spending two years in temporary housing. He said those who remain in rentals should refuse to move into the new village until it was complete.

“The promised infrastructure that should have been finished by the Ministry of Spatial Planning with the World Bank support is not ready. We lack electricity, while roads and the sewage system are not finished,” he said.

“I could keep cows in my previous home [in Hade], I had a garden. Here it’s not allowed,” Shala says. “We can’t even keep hens.”

The government has dismissed these concerns. Arben Citaku, the secretary of the Ministry of Spatial Planning, told a parliamentary hearing “the ministry has resolved the problem of the new location and defined the further steps that needs to be worked on… we believe the same economic status of villagers that moved to [New Hade] has been preserved, even though we might not have improved that status”.

Requests to the government to comment on the report were ignored.

Since 2011, the World Bank has been a formal advisor and financier to six different Kosovo governments. In general, the inspection panel found the bank had had a positive impact on Kosovo’s troubled energy sector, 97% of which is fuelled by the country’s lignite – the fifth largest in the world.

Haqif Shala is one of the few former residents of Hade to have been settled in the new village, which still lacks basic services and adequate sewage systems (Photo: Karl Mathiesen)

Lignite is the dirtiest form of coal and plants in Kosovo are implicated in high rates of lung cancer, skin conditions and respiratory problems such as asthmatic bronchitis. According to the Health and Environment Alliance and Association of Pulmonologists of Kosovo, the country’s two creaking Tito-era coal plants create a medical burden that costs between €70m and €169m per year.

“I am tired of living under dust, noise, of seeing people die of cancer around me and not being able to plan our futures here because of the dirty coal that is being dug right next to our doorstep,” said Grajcevci.

Kosovo Ombudsperson Hilmi Jashari is also investigating the community’s claims. Standing on top of a ridge with people from Hade and Shipitulle, another affected village, he looks down into the dusty maw of Sibovc.

“You might as well change the name of this place to Balkan Chernobyl,” said Jashari. “These sort of living conditions are [comparable to] 19^th century standards; unacceptable to be living under in 21^stcentury Europe.”

Yet chronic power shortages have lead to a concerted push for new coal generation from within the Kosovan government and the World Bank. The bank is weighing a proposal to underwrite the construction of the Kosovo e re (New Kosovo) power station.

Kosovo e re is the only coal plant in the world the bank is considering backing.

Obilić is the closest town to Hade and the location of Kosovo’s two old coal power stations. Air pollution here is among the worst in Europe (Photo: Karl Mathiesen)

This month, World Bank president Jim Yong Kim said slowing down the proliferation of new coal plants in the developing world was vital to ensuring global climate targets were met. The bank’s policies restrict its involvement in new coal projects to exceptional circumstances.

The new plant has undergone constant delays and revisions. But preparations – including the expansion of the mine and resettlements – have continued.

Dajana Berisha from the Forum for Civic Initiative, a Prishtina-based grassroots organization, prepared the formal complaint to the bank on behalf of the Hade community. The complaint argued that the villagers had suffered a “loss of land, livelihoods and wellbeing as a result of the bank’s non-compliance with its own policies in its technical assistance to prepare a framework designed to forcefully resettle us to make way for a Bank financed new coal power plant”.

Berisha thinks it unlikely the panel’s decision will result in any concrete action. But after years of having their grievances ignored, the community has been vindicated.

“We hit big,” she said. “When I met these villagers they were smart and strong and willing to go very far to get their rights set straight, but they lacked information about their rights and felt intimidated by the arrogance of the officials from Kosovo’s institutions and the World Bank who would occasionally visit them.

“Now, the community can not be looked down and ignored by anyone, this decision proves they were right all along. It is a moral victory that gives the community an upper hand in the debate about building the third coal power plant that the World Bank is planning to support during the following year.”

Kosovo’s power supply is 97% reliant on lignite from Sibovc (Photo: Kallxo TV)

The finding that the resettlement in 2004 was never completed is particularly damning for Unmik and the US mission in Kosovo. Diplomatic cables released by Wikileaks reveal the callous way the displaced villagers were viewed by those in charge in Kosovo during the transition to independence.

US chief of mission Philip Goldberg reported in 2006 that the resettlement process was completed.

“In May Unmik finally took action to remove the remaining squatters near Hade village in Obilic municipality, the site of an accessible, massive lignite coal seam. The residents had interfered with mining operations for six weeks to demand employment with KEK despite the [provisional government] already relocating and compensating them for the expropriation of their land,” he said.

Unmik did not respond to a request to comment. The US state department said it would not comment on the leaked diplomatic cables.

Ted Downing runs the International Network on Displacement and Resettlement. He has studied the case of Hade and claims the World Bank and Kosovo government are playing people against profit, asking them to absorb the cost of development in their own lives, livelihoods, budgets and social-psychological stress.

“There is a game going on, a vicious horrible game with people’s lives where the cost of displacing them [by international standards for resettlement] is being pushed back and pushed down and because if they are not paying that cost, the profitability of the mine increases,” said Downing.

Not just the living. The graves of Hade’s ancestors will also need to be moved to make way for the mine. Photo: Karl Mathiesen

In September, the state energy company Kosovo Electric Company (KEK) began a new round of negotiations with several hundred more village inhabitants, who have to be displaced in order to make way for new excavations for coal digging.

“If we don’t start mining in the new mining field by the end of the next six months, we will run out of our coal reserves to feed the current existing plants,” said Adil Jonuzi, the head of coal division in KEK.

Looking at a pair of dormant excavators, he said: “My heart sinks when I see these two beauties lying still and not in function.”

A few hundred yards away in Hade, life is also frozen. Schools have emptied of children and basic foodstuffs, such as bread, are no longer available. Grajcevci, like most of Hade’s men, is employed by the mine that has destroyed his village.

“Kosovo is independent, the war is finished, but my battles for a dignified life in this country are ongoing because now we have an enemy that is killing us slowly even in peacetime,” he said.

“Now, we have learned a lesson that if we don’t unite as a community we will be trampled upon, we will be tricked and become poorer. As a result we will not allow them to divide and rule us. We’ve had enough.”

Jeta Xharra is country director in Kosovo for the Balkan Investigative Reporting Network.

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Jim Yong Kim said leaders in Hanoi are considering plans for up to 40 gigawatts of new coal power, believing it will be cheaper than solar, wind and other forms of renewables.

“When I ask them about using renewables they say ‘we would but it’s too expensive’,” he said. Coal is 9 cents a kilowatt hour and the tariff for solar is 12-13 cents, but “there’s no need for it to be that high…

“We are bringing to the table all the tools we need to bring the costs down significantly and quickly.”

In May, Kim said a decision by Vietnam to build the full 40GW would be a “disaster” for the planet, and announced the bank would devote 28% of its funding to helping developing countries invest in renewables.

Recent data from the Vietnamese government indicates coal imports rose nearly 200% in the last 12 months.

In an unscripted aside, Kim expressed concern about a lack of progress since last December’s Paris climate deal, when 195 countries agreed on a plan to limit global warming to well below 2C.

That agreement is expected to enter into force later this year. The US and China have formally joined, with India and the EU promising to do so in October.

Canete: EU to ratify Paris climate deal next month

Kim, who was reappointed as World Bank president earlier this week, said he was frustrated by “magical thinking” among many politicians and policy makers who appeared to believe Paris had solved the problem.

“When we realised agreement at COP21 there were a lot of people who think we have done the job,” he said. “We celebrated so long that the hangover is just starting, but where is the platform on which we can say these are our priorities?

“I would strongly suggest that in Marrakech [venue for the 2016 UN climate summit] we plan to have this discussion. If we don’t, we’ll end up patting each other on the back for political agreements and end up post 2C.”

Kim added that “just a fraction” of the $100 billion a year in climate finance promised by developed countries was needed to de-risk infrastructure projects, but added flows of support had to be ramped up this year.

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Getting there requires innovation – in technology, policy, entrepreneurship and financing. Breakthroughs are happening on all these fronts, driven by the private sector, international organizations, civil society and forward-looking governments.

The World Bank Group and Responding to Climate Change Limited (RTCC) are proud to host ‘Innovating to Meet the Climate Challenge,’ a half-day event looking at emerging innovations and the new opportunities they bring.

https://www.youtube.com/watch?v=s75GBOio8ZM

Event Agenda (all times US East Coast)

2:00 pm Opening remarks by Jim Yong Kim, President, World Bank Group

2:30 pm Session 1: Using Carbon Pricing Revenue to Jumpstart Innovation

• H.E. Dr. Hakima El Haite, Delegate Minister in Charge of Environment, Morocco and COP22 Host
• Catherine McKenna, Minister of Environment and Climate Change, Canada
• Laura Tuck – Vice President, Sustainable Development, World Bank
• Feike Sijbesma, CEO, Royal DSM
• Rodolfo Lacy Tamayo, Deputy Secretary of Planning and Environmental Policy, Mexico
• Feike Sijbesma  – CEO, Royal DSM
• David Heurtel – Minister of Sustainable Development, Environment and the Fight against Climate Change, Quebec, Canada
• Anirban Ghosh, Vice President, Sustainability, Mahindra & Mahindra

Moderator: Lance Pierce, President, CDP North America

4:00 pm: Coffee Break

4:30 pm Session 2: Driving Climate Innovation in Developing Countries

Opening remarks by Nena Stoiljkovic, Vice President, Global Client Services, IFC

Challenge 1: “How Can Financial Innovation Drive Climate Action?” 

• Namita Vikas – Group President & Managing Director, Climate Strategy & Responsible Banking, Yes Bank
• Ashley Schulten – Head of Fixed Income Climate Solutions, Blackrock
• Kyung-Ah Park, Managing Director, Head of Environmental Markets, Goldman, Sachs & Co

Challenge 2: “How Can We Bring Good Ideas to Scale?” 

• Tehut Tesfaye – CEO, Ethiopia Climate Innovation Center
• Ron Margalit – Principal, Development Financing, Lumos Ltd
• Bill Bien – Global Head of Strategy, Marketing and Alliances, Philips Lighting, Philips

Moderator: Ed King, Editor, Climate Home

6:00 pm: High level remarks by Ségolène Royal, Minister of Environment, Energy and the Sea, in charge of International Relations on Climate, President of CoP 21, France

6:35 pm: Closing by John Roome, Senior Director,Climate Change, World Bank

The post Live in New York: Innovating to meet the climate challenge appeared first on Climate Home News.

But as the euphoria died and the focus turned to delivering fast cuts to greenhouse gas emissions, penalties for pollution are becoming an attractive quick-fix solution – especially if the funds generated can be directed towards clean energy and protecting forests.

Article 6 of the Paris deal offered the potential of an international carbon market in the future, with regional and national schemes steadily converging under a global framework.

Prices for carbon remain low, but these markets are expanding. According to the World Bank 40 national and 23 sub-national governments are now pricing carbon pollution.

In focus: Tracking the spread of global carbon markets

The EU’s emissions trading scheme is well-established. South Korea launched its market in January. China plans to open a national ETS in 2017.

Canada, California, Massachusetts, New Hampshire and New York participate in regional initiatives. Chile and Ethiopia added their backing to calls for a global price last December.

On Wednesday Mexico, Quebec and Ontario announced plans to cooperate on linking their domestic markets.

And in October countries will decide at the UN’s International Civil Aviation Organisation (ICAO) on a new market-based approach to tackle fast-growing aviation emissions.

On 21 September representatives from the World Bank, North and Latin American regional government plus leading investors will gather in New York to discuss the potential for pricing carbon.

Climate Week 2016

The conference, organised by Responding to Climate Change and the World Bank, will cover the pros and cons of different carbon price revenue options, drawing on real-world experiences from countries and states already running markets.

We’ll hear from World Bank chief Jim Kim,a strong supporter of a price on carbon and a vocal champion of tougher climate action.

The conference will also hear from business leaders who are driving climate innovation, and discuss how future climate-smart industries will develop by 2020.

Check the RTCC website for more details of how you can attend.

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The loan will leverage investment in the country’s domestic energy market and mobilise $1 trillion in finance for the Indian-led International Solar Alliance (ISA) said officials.

“India’s plans to virtually triple the share of renewable energy by 2030 will both transform the country’s energy supply and have far-reaching global implications in the fight against climate change,” said Jim Kim, World Bank Group President.

“Prime Minister Modi’s personal commitment toward renewable energy, particularly solar, is the driving force behind these investments.”

Met @WorldBank President @JimYongKim & discussed ways to deepen India’s engagement with the World Bank. https://t.co/5yfW1e8BZK

— Narendra Modi (@narendramodi) June 30, 2016

Launched on the sidelines of the 2015 UN climate summit in Paris, the ISA counts 120 countries as members and targets a concerted push to lowering the costs of solar power.

India has plans to deploy more than 100 gigawatts of solar by 2022, a goal energy minister Piyush Goyal has previously said it would meet easily due to falling technology costs.

Seen as key to tackling climate change, Indian prime minister Narendra Modi has been heavily courted by major economies keen to see him enforce tougher greenhouse gas emission goals.

Last year Germany offered €1 billion over five years to help India meet a goal of deploying 100 gigawatts of solar by 2022, while in June Modi and US president Barack Obama agreed to a $440 million clean energy package.

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