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Why World Bank Continues to Fund Fossil Fuel Projects Despite Climate Change?

Countless critics have taken a swipe at the leadership of the World Bank Group (WBG) for funding fossil fuel projects instead of focusing on clean energy in developing countries. The burning of fossil fuels is the biggest contributor to the climate crisis, but WBG continues to pump millions into this menace. Recently, the 45th Vice President of the US, Albert Arnold Gore Jr. (Al Gore) raised the same issue at a climate event hosted by The New York Times. The environmentalist businessman explicitly called out President Joe Biden to replace the “climate denier” head of the WB. The United States is the biggest shareholder of the Bank, giving it immense power and influence over its operations.

On record, WBG has stated that Climate Change will cause poverty for more than 100 million people in the world by 2030. It also claims to be the world’s largest climate investor in the developing world. In October last year, the Bank reported that it delivered more than 109 billion USD climate funds from 2016-2021. On the other hand, ever since the Paris Climate Agreement (2016), WB has also invested more than 12 billion USD in fossil fuel projects in 35 countries. This figure excludes government budget support, infrastructure to enable fossil-fuel, policy reforms in over 18 countries to increase fossil fuel profit, and technical assistance in country’s oil, gas, and coal fields.

Does World Bank Understand the Science of Climate Change?

After the criticism by Al Gore, Climate Reporter David Gelles questioned the President of the World Bank, David Malpass, if he knew the harms of burning fossil fuels. Shockingly, Malpass replied that he wasn’t a scientist. It led Gelles to share the entire conversation on social media, revealing how the president was not interested in talking about the scientific evidence on climate change.

The reporter allowed him an opportunity to respond to Al Gore’s criticism, but Malpass thought it was odd because they had never met. The president continued to use evasive tactics to avoid commenting on the Bank’s interest in fossil fuel projects and acknowledging how dangerous they were for climate.

Making Money From Fossil-Fuel Industry

Besides 12 billion USD in direct financing, WBG also did not restrict the fossil fuel expenditure. According to reports by organizations, World Bank provided up to 20 billion USD in budget support for projects like coal expansion to 81 countries from 2016 to 2019. It also spent billions to set up power evacuation infrastructure such as transmission lines in countries like India, Pakistan, and Indoneisa. These transmission lines are vital to evacuate power from mega coal plants in these countries.

In some other developing countries, the World Bank has installed policy reforms to favour more profit from fossil-fuel projects. it included tax breaks and removal of subsidies. In Mozambique and Colombia, tax breaks only favor oil, coal, and gas. Moverover, removal of subsidies and higher electricity tariffs in Pakistan help generate more profit from newly installed coal-fired plants.

World Bank is also providing critical technical assistance to oil, gas, and coal even after pledging in 2013 that it will no longer fund coal power plants. Its operation in Asia’s largest lignite deposit, Thar coalfield, in Pakistan is the world’s most profitable coal investment (and devastating for the common people). From 2014 to 2016, WB provided 1.1 billion USD as government budget support to reform power sector. The tariff plan included a high-rate-of-return on investment with higher fixed-capacity payments to attract more investors.

Additionally, WB’s private arm, International Finance Corporation (IFC) gave 150 million USD loan plus 75 million USD equity to Habib Bank and 66 million USD to Bank Alfalah. These 2 Pakistani banks helped WB in funding Thar coal power plants. Pakistan only had 1 small 150 MW coal-fired power plant in 2016 and following the World Bank, it made 5 more, producing 4,770 MW in 2020 whereas another 3,330 MW will reportedly come by 2023. With planned blackouts for years, Pakistan has now too power for its good. The energy surplus shows that plants have low utilization which is coupled with high capacity payments to World Bank, resulting in increased debt in power sector and threatening Pakistan’s economy and chances of moving to renewable energy.

Controversial Activities for the Sake of Business

The so-called development projects have become the main reason behind climate crisis without any notable development. Just like Pakistan, many other developing nations have suffered under the greed of World Bank. 2 years ago, World Bank Country Director for Bhutan Mercy Tembon reported that 70% of Bhutan was covered in forest which was underutilized. She suggested using “sustainable forest management techniques” to modernizing it and increase productivity. Tembon also mentioned advantages of these techniques including forest cutting which were “employment opportunities”, “creating forest-based enterprises”, and “market-based approach for trading timber and non-wood forest products”.

These exact practices have been gradually eating the rest of the world to favour the rich nations. Forests in many countries have become sources for making expensive furniture and their animals have become homeless. It is typical capitalism, turning nature into commodity for high-consumption society to use. The environmentalists have criticized this idea by World Bank and urged it to leave Bhutan alone as it was the only carbon negative nation in the world.

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