ENVIRONMENTAL
TRANSFORMATION FUNDINTERNATIONAL
WINDOW
44. The PBR explained that the Environmental Transformation
FundInternational Window (ETF-IW) "will support development
and poverty reduction through environmental protection and help
developing countries to tackle environmental challenges. [
It] will work to support adaptation to climate change, provide
access to clean energy, and help tackle unsustainable deforestation."[63]
The Comprehensive Spending Review confirmed that it will be funded
50:50 by Defra and the Department for International Development
(DfID), each contributing £400m over three years, all of
which is new money. (Although £50m was already committed,
at Budget 2007, to fund the Congo Forest Conservation Initiative.)[64]
The ETF-IW will take the form of capital grants to a fund managed
by the World Bank, which will distribute funds to recipients in
the form of loans.
45. We welcome
the announcement of £800m new money over three years for
environmental investments in the developing world. This was probably
the most significant and impressive announcement in the PBR.
Certainlywhile raising several issues, some addressed belowWWF
told us they were very impressed with the scale of this funding:
[
] £800 million is a very substantial
amount. This is the first time that a government has put forward
so much money. [
I]t could make a massive impact [
T]his fund is really to be welcomed and could make a potential
impact on global carbon emissions.[65]
46. At the same time, we have a number of concerns
as to the design of this fund. First, its focus appears to be
rather confused, given that the three different types of project
it is intended to fundlow carbon energy investments, forestry
protection, and adaptation to climate changeare each quite
different. This combines with the concerns expressed to us by
WWF over the management of the fund by the World Bank, and the
way in which funding is to be distributed in the form of loans,
with the expectation being that recipients will earn a profit
and thus repay what they have borrowed. While this might be appropriate
for energy investments, it is far from clear that this is appropriate
for funding forestry conservation or adaptation projects. In particular,
we are concerned that the emphasis on awarding loans to profit-driven
projects will lead to funding being awarded to biofuels plantations,
about which we have recently expressed serious reservations.[66]
For instance, WWF told us:
[
] the World Bank is including in its definition
of clean energy large hydropower dams which do not abide to the
World Commission on dams, or biofuels without any sustainability
criteria. We are concerned that the ETF might contribute to such
technologies which have negative social [and] environmental impacts.[67]
While the Exchequer Secretary responded to this concerntelling
us the Government did not expect to give over total control of
the fund to the World Bank, and saying it would be "patently
absurd" if support for biofuels meant "we got rid of
all the forests"[68]her
statement stopped far short of the comprehensive assurance we
were looking for. The Government
should work with the World Bank to ensure appropriate governance
standards are in place for the international ETF to deliver a
suitable disbursement mechanism that places rigorous sustainability
criteria at the heart of what the fund delivers. Furthermore,
the Government should look again at whether this fund should be
dedicated solely to low carbon energy investments, with forestry
protection and climate change adaptation being funded by separate
instruments, less focused on profit-making opportunities.
55 HM Treasury, 2007 Pre-Budget
Report and Comprehensive Spending Review: Meeting the aspirations
of the British people, p 113 Back
56
HC Deb, 29 June 2006, col 397 Back
57
"Environmental Transformation Fund", BERR, www.berr.gov.uk/energy/sources/sustainable/etf/page41652.html Back
58
HM Treasury, Stern Review on the Economics of Climate Change,
p 347 Back
59
Environmental Audit Committee, Second Report of Session 2006-07,
EU Emissions Trading Scheme: Lessons for the future, HC 70, Q131 Back
60
Environmental Audit Committee, EU Emissions Trading Scheme:
Lessons for the future, Q65. Exchange rate as of 29 November
2007, 1 euro = £0.7147, http://markets.ft.com/ft/markets/overview.asp Back
61
"Environmental Transformation Fund", BERR, www.berr.gov.uk/energy/sources/sustainable/etf/page41652.html Back
62
Q164 Back
63
HM Treasury, 2007 Pre-Budget Report and Comprehensive Spending
Review: Meeting the aspirations of the British people, para 7.78 Back
64
The Government explains: "The new fund initiative will support
proposals made by ten central African countries to protect the
Congo Basin rainforest - the second largest in the world and roughly
twice the size of France - from destruction. The main threats
are due to logging, mining and clearance for agriculture."
"Budget 2007: Benn announces £50 million UK contribution
to new Congo Basin rainforest conservation fund", DfID press
release, 21 March 2007 Back
65
Q66 Back
66
Environmental Audit Committee, First Report of Session 2007-08,
Are Biofuels Sustainable?, HC 76-I Back
67
Q51 Back
68
Q170 Back