As the World Burns: A Critique of the World Bank Group's Energy Strategy
| Date | 01 September 2013 |
| Author | Nina Robertson, Bruce Rich, and Lynsey Gaudioso |
43 ELR 10760 ENVIRONMENTAL LAW REPORTER 9-2013
A R T I C L E S
As the World
Burns: A Critique
of the World
Bank Group’s
Energy Strategy
by Nina Robertson, Bruce Rich, and
Lynsey Gaudioso
Nina Robertson is an attorney in the Environment and
Natural Resources Division of the U.S. Department of
Justice. Bruce Rich is a Visiting Scholar at the Environmental
Law Institute (ELI). Lynsey Gaudioso is a J.D. candidate at
Yale Law School and a former Research Associate of ELI.
Summary
e World Bank Group (WBG) is uniquely positioned
to support the growth of developing countries in a way
that decreases GHG emissions and provides energy to
the poor. Historically, the institution has failed to fulll
this potential, supporting carbon-intensive energy proj-
ects and neglecting renewable energy, energy eciency
and pro-poor energy development. A recent comprehen-
sive draft energy strategy and an energy sector “Direc-
tions” document propose some positive changes, but fall
far short of reorienting the institution’s energy lending
in critical ways. Major revisions are therefore required.
First, the WBG should end its support for fossil fuels and
focus its limited resources on energy eciency, renewable
energy, and universal energy access. Furthermore, as a
precondition for lending, the WBG should require bor-
rowing countries to phase out all fossil fuels subsidies and
to fully address the adverse impacts of any hydropower
projects that receive WBG support. In addition, the
institution should incorporate GHG accounting, linked
to the shadow price of carbon, into upfront cost-benet
analyses of all future energy lending decisions. Finally,
the WBG should eliminate perverse internal sta incen-
tives that militate against these needed changes.
Over the next t wo decades, low- and middle-
income countries will demand substantia lly
more energ y to meet the demands of their con-
sumers and to fuel their economic growth.1 According to
the International Energy Agency (IEA), the consequent
rise in energy consumption wil l account for nearly a ll of
the global growth in energy-related carbon dioxide (CO2)
emissions.2 How this new demand for energy is met—
through what sources and for which people—will impact
both poverty levels and the global climate. e World
Bank Group (W BG) is uniquely positioned to promote
environmental ly sound energy growth that benets the
world’s poor. With a mandate to reduce poverty, a mul-
tibillion dol lar energ y portfolio, and t he attention of pri-
vate banks and governments, the in stitution can facilitate
a low-carbon transformation while also ensuring that its
energy investments do not exacerbate climate change.3
Despite this promise, the WBG is underperforming.
Indeed, in certain respects, it is exacerbat ing bot h cli-
mate change and energy poverty by directing substan-
tial resources to high-carbon energy that does not serve
energy-poor communities and may in fact marginalize
them fur ther.
1. I E A, W E O 96 (2010)
[hereinafter IEA (2010)]. According to the International Energy Agency
(IEA), global energy- related CO2 emissions increased by 5% over 2008
levels in 2010, making 2010 levels t he highest in recorded h istory. Id.
In 2008, the IEA reported that energy-related emissions account for over
three-quarters of global warming gases, and, if no action is taken, 97% of
the increase in world energy-related CO2 emissions will come from the de-
veloping nations. I E A, W E O-
418 (2008). See also T S-G’ A G
E C C (AGECC), U N, E
S F, S R R 18
(2010), available at http://www.un.org/wcm/webdav/site/climatechange/
shared/Documents/AGECC%20summary%20report[1].pdf (“e vast
majority of energy demand growth is expected to come from lower-middle-
income countries such as China and India, driven by rapid industrialization
and an increasingly wealthy population scaling up demand for cars, house-
hold appliances and other energy-consuming products.”); David Wheeler &
Kevin Ummel, Another Inconvenient Truth: A Carbon-Intensive South Faces
Environmental Disaster, No Matter What the North Does (Ctr. for Global
Dev., Working Paper No. 134, 2007), available at http://www.cgdev.org/
doc/update/le_Another_Inconvenient_Truth.pdf.
2. IEA (2010), supra note 1, at 8 (China’s primary energy demand is projected
to climb by 2.1% per year between 2008 and 2035, reaching two-thirds of
the level of consumption of the entire Organization of Economic Coopera-
tion and Development (OECD)).
3. Id. at 54 (noting that “even if the commitments under Copenhagen were
implemented the emissions reductions needed after 2020 would cost more
than if more ambitious earlier targets had been pledged”).
Authors’ Note: is Article is based in substantial part on research
conducted for Bruce Rich’s newly released book, Foreclosing the
Future: e World Bank and the Politics of Environmental
Destruction (Island Press 2013). e views expressed here belong
to the authors and do not necessarily reect the views of the U.S.
Department of Justice or the United States. e authors thank Alan
Miller and Kristen Hite for their comments on parts of this Article.
Copyright © 2013 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
9-2013 NEWS & ANALYSIS 43 ELR 10761
e WBG’s 2011 Draf t Energy Sector Strategy (the draft
strategy), is a recent major example of the institution’s short-
comings in the energy sector.4 A 10-year strategy document
that sets institutional priorities for WBG loans, grants, and
technical assistance, the draft strategy fails to map a path
toward essential improvements. Long on vague formula-
tions and short on commitments,5 it maintains support
for carbon-intensive energy and fails to orient institutional
resources toward the elimination of energy poverty. In a
similar fashion, a 2013 “Directions” document, approved
by the WBG’s Board of Directors as this Article went to
publication, also falls short, reiterating in a less precise for-
mat many of the draft strategy’s approaches.6
is Article examines key provisions of the draft st rat-
egy a s well as some sections of the Directions document,
and c alls for major revisions to the W BG’s energy lend-
ing.7 We a rgue that the draft’s positive advances are muted
by its major omissions and its continued endorsement of
high-ca rbon energy. A lthough it limits lending for coal,
promotes the elimination of fossil fuel subsidies, and calls
for accounting of project greenhouse gas (GHG) em is-
sions in certa in cases, it fails in several key respects. First,
the draft strategy allows for continued support of fossil
fuels at the expense of renewable energ y and energy e-
ciency. Indeed, the draft strategy’s stated commitments to
oil and gas far outweigh the emissions-reducing impacts
of its low-carbon projec ts and threaten to lock in carbon-
intensive emissions for the next half-centu ry. Second, the
draft strateg y does not requi re projects to internalize the
cost of carbon into upstream project nancing decisions
and lacks measurable energy access targets to ensure pov-
erty-reducing outcomes. ird, the draft turns a blind eye
to t he lessons learned f rom a bleak institutional history
of environmentally harmf ul and poverty-exacerbating
energy lending. Specica lly, its ex ante oil and gas loan-
screening factors are wea k, and the d raft strategy revives
4. See World Bank Group, Energizing Sustainable Development: Energy Sec-
tor Strategy of the World Bank Group (Apr. 2011), available at http://www.
eenews.net/assets/2011/03/30/document_cw_01.pdf. e draft strategy re-
viewed here has not been released to the public. It was leaked in April 2011
and is available on several websites.
5. e WBG recognizes as much: “Demand for energy in developing countries
is expected to increase dramatically in coming decades, with 1.6 billion peo-
ple currently lacking access to electricity. Meeting their needs in an environ-
mentally-sustainable manner is an urgent yet dicult challenge, requiring
innovative policies and instruments.” World Bank Group, New World, New
World Bank Group: (I) Post-Crisis Directions 3 (Apr. 20, 2010) (unpub-
lished manuscript), available at http://siteresources.worldbank.org/DEV-
COMMINT/Documentation/22553954/DC2010-0003(E)PostCrisis.pdf.
6. World Bank Group, Toward a Sustainable Energy Future for All: Direc-
tions for the World Bank Group’s Energy Sector (2013), http://documents.
worldbank.org/curated/en/2013/07/18016002/ (last visited July 24, 2013).
7. Because the 2013 Directions document reiterates many of the shortcomings
of the 2011 draft strategy, our detailed analysis of the draft strategy in this
Article can inform more comprehensive, future examinations of the Direc-
tions document.
substantia l lending to large hydropower dams a nd con-
tinues support for fossil f uel ext raction and development
without adopting reforms recommended by reviews like
the Extractive Industries Review and the World Commis-
sion on Dams t hat the W BG itself sponsored.
e WBG’s energy-lending practice, as exemplied by
the draft strategy and its current lending, do not match
its climate change rhetoric. Over one year after the draft
strategy was circulated and under new institutional leader-
ship, the WBG released Turn Down the Heat in November
2012. Warning of the catastrophic impacts of the predicted
four degree Celsius increase in global temperature, the
report emphasizes that the world, and particularly its poor-
est populations, faces the prospects of increasing droughts
and food shortages, rising malnutrition rates, ooding of
coastal cities, and growing shortages of water in many
regions, together with growing uncertainty and risks about
the future of economic development itself.8 In the forward
to the document, WBG President Jim Yong Kim declares,
“it is my hope that this report shocks us into action.”9 He
further states that “data and evidence drive the work of the
World Bank Group” and that “the World Bank is a leading
advocate for ambitious action on climate change.”10 Scien-
tic reports, President Kim maintains, have led t he WBG
to “ramp up its work on these issues” leading to the 2010
World Development Report on climate and development,
the 2008 Strategic Framework on Development and Cli-
mate Change, and its recent report released at the Rio+20
Summit on Inclusive Green Growth.11 According to Kim,
the W BG will “redouble” its eorts to support “national
initiatives to mitigate carbon emissions and build adaptive
capacity as well as support inclusive green growth and cli-
mate smart development.”12
Unfortunately, a s this Article will show, there is a discon-
nect between President K im’s statements and the WBG’s
actual behavior. If the WBG’s lending priorities and insti-
tutional pathologies do not change, there is little likelihood
that the institution will be more eective in addressing cli-
mate change and achieving its newly proclaimed goal of
inclusive green growth.
After providing additional background on global energy
poverty and the WBG’s lending history, diverse interests,
8. P I C I R C A-
, T D H: W 4C W W M B
A (e World Bank, 2012), available at http://climatechange.
worldbank.org/sites/default/les/Turn_Down_the_heat_Why_a_4_degree_
centrigrade_warmer_world_must_be_avoided.pdf.
9. Jim Yong Kim, F, P I C I R-
C A, supra note 8, at ix.
10. Id.
11. Id.
12. Id. at x; see also Anna Yukhananov, World Bank Climate Change Report
Says “Turn Down the Heat” on Warming Planet, R (Nov. 18, 2012),
http://www.hungtonpost.com/2012/11/18/world-ba nk-climate-change-
report_n_2156082.html (last visited July 9, 2013).
Copyright © 2013 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
To continue reading
Request your trial