The World Bank has been criticized by a leading European NGO for some of its loans and grants. In a recently released report, the German group Urgewald blasted the international financial institution and the lending agency for its continued investments in fossil fuels, despite ongoing commitments to tackle climate change.
The tension between the international lending agency and the NGO is a edifying tale for financial companies – or any organization moreover – this call for climate action continues to invest in Where to assure fossil fuels.
Fossil fuels still attract billions in loans and grants
By accessing updated World Bank data and contacting individual projects, companies, and grantees and loans, Urgewald concluded that the World Bank had invested more than $ 2 billion in fossil fuel projects over the past two years.
The NGO also alleged that World Bank lenders have distributed more than $ 12 billion for fossil fuel projects since the adoption of the Paris climate agreement in 2015. That’s roughly the last same amount the agency spent on fossil fuels between 2014 and 2018.
Urgewald concluded that the majority of the $ 10.5 billion invested over the past five years was intended to finance new fossil fuel projects in the form of new loans, guarantees and equity. The NGO researchers further mentioned specific examples of projects that the World Bank has recently funded, such as an additional $ 38 million granted to support upstream oil and gas development in Brazil through ‘a technical assistance program. An additional $ 20 million was provided last March to the oil resources governance and management project in Guyana, with funding commitments until April 2021, according to Urgewald.
The claims made in the study came days before the World Bank’s 2020 economic outlook meetings this week, which highlighted the importance of investing in more sustainable projects against a backdrop of a stalled global economy.
In an initial statement in response to Urgewald, the World Bank claimed it had stopped funding upstream oil and gas investments Last year. The agency said it was also determined to help developing countries with energy projects that would be economically viable in countries dependent on imported energy. He then highlighted the recent effects of the COVID-19 pandemic on global and local economies, and said the bank was working with governments, various partners and the private sector to address current challenges.
A question of what is needed in emerging economies
In addition, the World Bank has reiterated the importance of financing for the adaptation of energy operations necessary for health facilities and critical hospitals. Yet in a recent report, the International Monetary Fund (IMF) said: “The economic crisis induced by COVID-19 does not change the basic climate challenge, nor the appropriate response to it. “
To this end, at the World Economic Outlook 2020 Forum, Gita Gopinath, Chief Economist and Director of the Research Department at the IMF, spoke of the need to continue investing sustainably in a Press statement. Gopinath insisted that an incentive to invest in sustainable infrastructure, with low interest rates and high uncertainty, could “dramatically increase jobs” and that sustainable public investment plays a key role in reducing costs. carbon emissions.
Short-term gains, but long-term rise in poverty
Nonetheless, Heike Mainhardt, senior banking advisor at Urgewald, described the World Bank as part of the problem, accusing the bank of a lack of leadership on climate change. The accusations are timely given that World Bank leaders recently warned that without urgent global warming mitigation measures, 100 million people could fall into poverty. In addition, the United Nations Environment Program (UNEP) has found that, by 2030, the global exploitation of fossil fuels is on track to reach 120 percent more than what can be used to maintain the 2015 Paris Agreement target of keeping global temperature rise below 1.5 degrees Celsius.
Citing the Urgewald study, United Nations Secretary-General António Guterres personally called on the World Bank on its investments in fossil fuels, warning that fossil fuel projects were “”the pastAnd that investing in future technologies such as renewable energy and sustainable transport was a more rational way forward, given the goals of the Paris Agreement.
A question of subsidies
Guterres has called for an end to fossil fuel subsidies in previous speeches, shaming “polluting industry bailouts.” The IMF has also warned that fossil fuel subsidies negative environmental and economic effects, further reinforcing existing income inequalities, as these subsidies mainly benefit wealthy households.
Nonetheless, the World Bank rejected Urgewald’s study, calling it “distorted and unfounded”. The organization pointed out that all the money it distributed to fund fossil fuel projects during the study period amounted to 1% of the $ 2 trillion spent globally on the exploration and production of oil and gas.
But for World Bank critics, being just a small part of a big deal may not be a sufficient counter-argument. Even though half of the bank’s funding has gone mostly to natural gas power projects, as the bank asserts, the argument remains that the strategy still comes down to subsidizing fossil fuels. The World Bank’s response is that financing natural gas projects helps developing economies avoid cheap coal, which is much more polluting. Whether this constitutes a good positive strategy for the climate in the long term remains to be seen. Organizations like Urgewald certainly don’t buy it.
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