mark hertsgaard

Independent Journalist & Author

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World Bank on horns of dilemma

The World Bank faces a momentous choice: whether to heed an official
recommendation to stop financing oil and coal projects in developing
countries. The bank’s decision will not only affect the fate of
millions of people around the world and billions of investment
dollars. It will help determine whether our civilization reverses
perhaps the greatest threat of the 21st century: catastrophic global
climate change.

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The decision poses a dilemma for World Bank President James
Wolfensohn, for the recommendation to stop funding oil and coal comes
from a high-level advisory commission he himself appointed to show
that the bank was open to input from civil society and not simply a
servant of big corporations, as some activists charged. But Wolfensohn
is under pressure from bank management and key member governments,
including the United States, to reject the ban. A draft response by
management instead urged $300 million to $500 million a year in new
funding for coal and oil projects. A vote by the bank’s board of
directors is expected next month.

The recommendation to quit oil and coal came in January from the
Extractive Industries Review Commission. Chaired by Emil Salim, a
former environment minister of Indonesia but also a former board
member of a coal company, the commission included representatives of
industry, unions, developing country governments, indigenous peoples
and nongovernmental organizations. Citing the dangers of climate
change and the often punishing human rights and pollution effects on
local people, the commission urged that the bank halt all coal loans
immediately and all oil loans by 2008. It further urged the bank to
increase renewable energy loans by 20 percent a year and to grant
people the right to veto projects they don’t want.

These changes would amount to a virtual revolution in the bank’s
operations and have an enormous effect on both energy policy and
corporate behavior in developing countries. Although the bank provides
only a small portion of the financing for a given coal or oil project,
its influence is immense, because private corporations see the bank’s
stamp of approval as a guarantee that their own considerably larger
investments will be safe. So if the bank stops funding coal and oil,
many projects probably won’t go forward.

That’s exactly what activists hope.

Between 1992 and 2002, they point out, the World Bank approved more
than $24 billion in financing for 229 fossil fuel projects. Over the
course of their lifetimes, these projects will generate almost double
the amount of carbon dioxide that humanity as a whole produced in
2000.

An elite Pentagon planning unit recently declared that climate change
was an urgent national security threat that could cause megadroughts,
mass starvation and even nuclear war by 2020. Scientists warn that
climate change will punish the world’s poor most of all. The World
Health Organization estimates that 160,000 people a year already die
from the effects of climate change. That number will increase as
higher temperatures lower crop yields and expand the range of
disease-bearing mosquitoes.

But the plight of the poor is also cited by opponents of the proposed
oil and coal ban. Like it or not, they say, oil and coal are the
cheapest forms of energy available. To rule them out may sound
compassionate, but it will actually keep poor countries poor. We
don’t like [the proposal] at all, South Africa’s minister of minerals
and energy, Phumzile Mlambo-Ngcuka, told the New York Times. We think
it takes an ideological approach rather than a practical one.

Unfortunately, most Third World oil and coal projects do local poor
people little good. A study by the Institute for Policy Studies in
Washington found that 81 percent of the World Bank’s oil and coal
loans went to projects whose output was not consumed at home to build
the local economy; rather, that coal and oil was exported to the
United States, Japan and other wealthy nations. Thus the poor end up
subsidizing the rich.

The World Bank should not be contributing to that perverse outcome.
Salim, the commission chair, said in an interview with Reuters that
private capital should remain free to pursue oil and coal projects on
its own, but the World Bank’s funds should be used to promote
renewable energy technologies that the market has not yet embraced.
Over the past 10 years, the bank’s funding for coal and oil has
outpaced that for renewable energy sources by a ratio of 17 to 1. Had
the bank instead increased funding of renewables by 20 percent a year,
as Salim’s commission now urges, solar and wind would be much closer
to competitiveness today.

The bank claims it is changing course. At a meeting in Bonn, Germany,
last week, Peter Woicke, the World Bank Group’s managing director,
promised a 20 percent annual increase in renewable energy funding. By
2010, Woicke said, this increase would double the bank’s current pace
of $200 million a year in renewable energy lending. But Steve Kretzman
of the Institute for Policy Studies called Woicke’s announcement
nothing but spin.

According to the bank’s own numbers it has averaged about $420
million a year in renewable energy during the past 14 years. Now
Woicke is promising to reach $400 million a year by 2010. That’s going
backwards.

In any case, the most urgent short-term focus for the bank is not
renewables but energy efficiency. No, it’s not sexy. But insulating
drafty apartment buildings, replacing old furnaces and motors and
installing super-efficient light bulbs is the fastest and cheapest way
to produce energy in today’s world.

Energy efficiency is no silver bullet, but it can be a bridge. It can
buy humanity time to get solar, wind, and other green energy sources
up and running — as we must, if we are to meet the great challenge of
this century: helping half of humanity to escape from crushing poverty
without ruining the ecosystems that make life on Earth possible in the
first place.

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About Mark

Independent journalist Mark Hertsgaard is the author of seven books that have been translated into sixteen languages, including Bravehearts: Whistle Blowing in the Age of Snowden; HOT: Living Through the Next Fifty Years on Earth; and A Day in the Life: The Music and Artistry of the Beatles. He has reported from twenty-five countries about politics, culture and the environment for leading outlets, including The Guardian, Der Spiegel, Vanity Fair, The New Yorker, Time, Mother Jones, NPR, the BBC and The Nation, where is the environment correspondent. He lives in San Francisco.

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