Science & Environment

World Bank loan scheme 'failing clean energy'

Electricity pylons and wind turbines (Image: Reuters) Image copyright Reuters
Image caption Nations have committed themselves to decarbonising their economies as part of the Paris Climate Agreement

A multi-billion dollar global fund is encouraging the construction of fossil fuel projects, at the expense of cleaner options, a study reports.

An NGO said that some World Bank policy loans had the effect of supporting coal, gas and oil developments while undermining renewable schemes.

It added the loans were intended to boost growth in the low carbon sector.

The World Bank disputed the report's findings, saying it did not reflect the wider work it did with countries.

The report by NGO Bank Information Center (BIC) looks at the Bank's Development Policy Finance (DPF) operations in four nations - Indonesia, Peru, Egypt and Mozambique.

DPF is one of the main activities of the bank, accounting for about one-third of its funding (more than US $15 billion in 2016), according to the report's authors.

The scheme provides funding for countries in exchange for the implementation of policy agreed by both the national government and World Bank officials.

The authors say the World Bank's Climate Action Plan considers DPF as a key instrument in help developing nations become low-carbon economies.

They added that the scheme was also essential in helping these nations meet their national commitments outlined in reducing emissions, which form the backbone of the Paris Climate Agreement.

However, BIC research found that DPF had introduced subsidies for coal in three of the four nations examined in the report (Indonesia, Egypt and Mozambique).

The authors said this had helped Indonesia become one of the world's top coal exporting nations, while turning Mozambique - considered to be among the most at-risk nations from climate change - into a major player in the global coal sector.

"The findings were really shocking for us because in all of the countries, across the board, the Bank actually created new fossil fuel subsidies, which directly goes against what the Bank wants to achieve," Nezir Sinani, BIC's Europe and Central Asia manager, told BBC News.

"The World Bank has pledged to help countries adopt a low-carbon development path specifically by phasing out fossil fuels subsidies and promoting a carbon tax," he added.

"However, the Bank's policy lending does the opposite by introducing tax breaks for coal power plants and coal exports infrastructure."

'Grossly misrepresent'

A spokesperson for the World Bank told BBC News that the group disputed the picture painted by the report.

"We are deeply disappointed that after close cooperation with BIC on this report, their findings grossly misrepresent the World Bank's engagement in these countries," they observed.

"The report does not capture the World Bank's broader energy work, which involves not only development policy loans, but a mix of interventions - policy reforms, investments, technical assistance - that work together to promote climate smart growth and increased energy access.

"In each of the countries mentioned in the report, the World Bank's development policy loans do not promote the use of coal, but help support a shift towards a cleaner energy mix and low carbon growth."

The report was published by BIC, which works with other groups in civil society to hold the World Bank and other financial institutions accountable, in collaboration with other green groups, including Greenpeace Indonesia and Friends of the Earth Mozambique.

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