Memorandum submitted by WWF-UK
INTRODUCTION
1. WWF welcomes the opportunity to submit
evidence to the select committee enquiry on DFID's funding of
the World Bank.[187]
As increasing proportions of DFID's budget go through other institutions,
including the Bank, WWF-UK is keen to ensure that these funding
flows contribute towards sustainable development and environmental
sustainability.
2. WWF is uniquely positioned to comment
on these issues, as WWF's work is worldwide, with offices in more
than 50 countries. Our experience across the developing world
includes work on freshwater, biodiversity, climate change, forests,
trade and energy. We work in partnership across the globe with
civil society, national governments and multi-national agencies
towards our goal to build a future in which humans live in harmony
with nature. WWF was the first environmental organisation to hold
a Partnership Programme Agreement with DFID.
3. Our submission focuses on two areas of
World Bank activity. The first area focuses on the extent in which
the World Bank is responding to climate change by helping
developing countries to move to low carbon development pathways
using the WWF vision for energy as a benchmark, and what DFID
could do to ensure the Bank takes up its responsibilities with
regards to climate change. The second area looks at the importance
of good governance for social and environmental sustainability,
and compares DFID's work on good governance with the practice
of the World Bank. 4. Our submission is based on two new WWF
reports focussing on these two areas, attached to this submission.[188]
Our arguments are based on these reports, and more detailed information
and evidence for our submission can be found there.
CLIMATE CHANGE
AND THE
WORLD BANK
5. The world is warming and a concerted
effort is required in the coming years and decades to avoid a
global temperature rise above 2oC and the impacts of catastrophic
climate change. Without urgent and rapid efforts to reduce global
carbon emissions, the Intergovernmental Panel on Climate Change
(IPCC) predicts possible temperature rises 4oC or more in the
next century.
6. WWF has demonstrated in its recent report
"Climate Solutions: WWF's Vision for 2050[189]"
that it is technically feasible, globally, to make the shift to
sustainable energy resources and that technologies are available
today to meet the more than doubling of global energy demand projected
by 2050, while avoiding dangerous climate change of more than
2oC above pre-industrial levels. The trajectory proposed by WWF
includes an end to the dominance of fossil energy, a phase-out
of nuclear power, delivery of high efficiency energy services,
and a rapid expansion of renewable energy. However it also cautions
that, in five years it may be too late to initiate a sustainable
transition which could avert a breach of the two degree
threshold for avoiding dangerous climate change.
7. The World Bank has been active in the
energy field for five decades and is an important player in energy
provision in the developing world. As a public institution aiming
to contribute to poverty reduction, it has major responsibility
in providing solutions to avoid global temperature increases of
more than 2oC, as poor countries and people stand to lose out
most in a warmer world. The World Bank has the potential to be
a leader for sustainability, not just because of the investments
it makes, but because of the global leadership role it has for
both public and private sectors.
8. However, a recent comparison between
WWF's energy Vision for 2050 and the World Bank's energy portfolio
raises serious concerns about the current contribution of the
World Bank to a sustainable energy future.
Vision and Strategy
9. The World Bank has failed to produce
a vision towards a low-carbon future to ensure global temperatures
stay below 2 degrees Celsius. Without a clearly articulated vision
and trajectory, it is not possible to define strategies and targets
to inform investments needed now for a sustainable energy future
by 2050. Investments made now will have a generating capacity
for decades to come. WWF recommends that the World Bank adopts
the WWF energy Vision for 2050, or at least develops an own, credible
vision that will contribute to sustainable clean energy provision
for human development which will keep temperatures increases below
2 degrees Celsius.
10. The World Bank's "Clean Energy
for Development Investment Framework" presents a general
strategy for encouraging "low-carbon" projects, but
the World Bank Energy Sector has no specific targets to decarbonise
its investment portfolio. The only target the World Bank has set
itself with regards to action on climate change is that it will
increase its investment to renewable energy with 20% year on year
until 2008. Without ambitious targets for reducing the overall
carbon intensity of its financing portfolio, there is no incentive
for the Bank to make the transition from reducing the carbon intensity
of fossil fuel extraction and use, towards a truly low-carbon
future which is based on high efficiency end use and very low-carbon
renewable.
Energy Financing Portfolio
11. The report reveals that the World Bank
is following a double track approach to energy supply:
A new low-carbon direction: a relatively
progressive programme on new renewable energy and energy efficiency.
This strand has accounted for about 10% of World Bank energy financing
since 1990 (4.7% new renewables and 5% energy efficiency).
A conventional fossil fuels direction:
a "business as usual" approach supporting fossil fuels
and fossil fuel driven power supply, which has often failed to
benefit the poor but has an enormous impact on carbon emissions
(accounting for around 77% of World Bank energy financing, one
third of which is on oil, coal and gas extraction).
12. Between 2005 and 2006, the energy sector
in the World Bank received a massive increase in funding (76.2%).
However, the Bank has opted to invest this new money in the same
way as it has been investing for years, with the large majority
going to oil, gas and conventional power, despite the clean energy
pledges the Bank has made in the Clean Energy Investment Framework.
13. Recently the World Bank has started
reporting on the carbon intensity of its energy investments. These
show that over the past five years only about a third of World
Bank spending is classified as investment in low-carbon energy.
While the percentage of low-carbon energy investment has started
increasing, representing almost 40% in 2007, it still remains
less than half the overall energy portfolio. This means that over
60% of World Bank energy financing has no climate change considerations
at all.
14. The Bank's classification of low carbon
technologies allows it to some extent to continue spending as
usual. They include a large range of significant carbon emitting
power plants, such as clean coal and large hydropower plants.
Only just over a third of the financing defined as "low-carbon"
in 2005 and 2006 was on new renewable energy and energy efficiency.
The renewable energy options are zero carbon emitters, but receive
far less investment.
GOOD GOVERNANCE
AND THE
ENVIRONMENT
15. DFID has produced a number of strategy
documents that emphasize the overriding importance of good governance
for poverty reduction. These include: Governance, Development
and Democratic Politics: DFID's work in building more effective
states (2007); Eliminating World Poverty: Making Governance
Work for the Poor (2006); Partnerships for poverty reduction:
rethinking conditionality (2005); and Realizing Human Rights
for Poor People (2000).
16. DFID defines governance broadly to include
all the ways in which "citizens, leaders and public institutions
relate to each other in order to make change happen." The
White Paper concludes that good governance requires three things:
State capability, Responsiveness and Accountability. In
this regard, the extent in which civil society is enabled to participate
in public policies and projects, including those of international
institutions, is crucial for the good governance, and therefore
pro-poor and sustainable impact of these policies and projects.
Meaningful participation by affected communities means that they
have the opportunity to make decisions for themselves, or have
real influence over those who do. DFID has recognized the importance
of participation of poor people as one of three key pillars in
their rights-based approach to development which "incorporates
the empowerment of poor people into our approach to tackling poverty."
Both environmental and social impacts of World Bank funding lie
often at the very project level, so the systems and mechanisms
that govern project decision making, implementation and monitoring
are critical for accountability and good governance. This submission
focuses specifically on accountability at project level.
17. As well as improving development outcomes,
good governance lies at the very heart of the environmental sustainability
agenda. Because environmental issues often play out at a localised
level, environmentally relevant information will often get lost
if there is no sufficient and full participation in decision making
processes. DFID recognises this in its approach to the environment.
Two key insights animate DFID's approach to the environment. First,
DFID has recognized that environmental degradation disproportionately
affects poor people, thus sound environmental stewardship is central
to pro-poor development. Second, DFID has also recognized that
"institutional and governance failures underlie the environmental
problems facing poor people." As a result, environmental
challenges are inextricably linked to both DFID's overarching
poverty reduction mandate, and its focus on improving governance
in developing countries.
18. Although DFID has consistently recognized
the importance of good environmental governance to its overarching
objectives of poverty reduction and sustainable development, its
Institutional Strategy for working with the World Bank is limited
in scope and fails to systematically align DFID's good governance,
environmental, and sustainable development priorities with its
interventions at the World Bank. As increasing amounts
of funds will be disbursed through the Bank and through other
multilateral institutions, it is crucial that the institutional
strategy for these partnerships include the promotion of DFID's
policy priorities, with measurable targets against which the World
Bank should be monitored.
Participation in World Bank projects
19. The World Bank has been accused of not
allowing meaningful public participation in its project cycles.
In response, the World Bank has made some improvements, but much
more needs to be done to ensure the right procedures are in place
to allow for full and effective participation.
20. There are a number of systemic constraints
that have limited public participation in Bank-supported projects.
These have been raised and discussed by the World Bank's own internal
evaluation procedures, as well as by a large number of reports
from the Inspection Panel, the independent evaluation body of
the World Bank. While there are of course also in-country constraints
to full significant participation, there are a number of institutional
areas which the World Bank could tackle to allow for meaningful
participation. They are the following:
— The Bank's Information Disclosure
Policy limits informed participation.
— Participation usually does not occur
until project preparation and appraisal, thus preventing opportunities
to consider alternative approaches.
— There is weak participation during
monitoring and evaluation of projects
— There are internal disincentives
for task managers, with participation perceived as an add-on rather
than integral to an operation.
— There are inadequate benchmarks,
standards and learning systems in the Bank to improve participation
— The Bank's accountability mechanism
(Inspection Panel) for meaningful engagement is not sufficient
Governance and Transparency in Natural Resources
21. One of the key areas where problems
with governance and transparency have occurred in World Bank projects
is in the natural resources sector, particularly in the
oil and gas sector, but also in other sectors such as forestry.
A quick overview of recent Inspection Panel reports, which provide
objective and independent information on Bank projects, reveals
repeated concerns around the governance and transparency of project
management in the Bank. In many cases, this has had a direct impact
on the environment and on fragile ecosystems. Some of the problematic
cases are highlighted below.
22. Democratic Republic of Congo[190]:
The Inspection Panel has recently completed
its investigation of the World Bank funded project in the Democratic
Republic of Congo: "Transitional Support for Economic Recovery
Credit and Emergency Economic and Social Reunification Support
Project". The findings are expected to be released at the
end of October, and raise a number of governance and transparency
concerns, including the failure of compliance of the World Bank
with its own policies (on Indigenous Peoples, Cultural Property,
Environmental Assessment and Natural Habitats). The evaluation
found further shortcomings, such as a lack of attention to capacity
needs of the DRC government to put in place necessary governance
frameworks to manage forest logging, the downgrading of projects
to lower levels of potential environmental risk, and failure to
carry out environmental and social impact assessments. There was
a lack of transparency on project information towards civil society,
and indigenous people were not included in project planning.
23. Ghana/Nigeria: West Africa Pipeline[191]:
No report has been issued yet, but a request
filed by complainants has been declared eligible by the Inspection
Panel, and an investigation is underway. The main allegations
are that the project will do irreversible damage to communities
and precious ecosystems, and that the scope of the Environmental
assessment has been too narrow. Information disclosure and participation
has been inadequate and limited. The Bank has acknowledged that
there has been a lack of information disclosure. It also has started
to take some action in response to the claimants' requests, but
a full investigation is underway.
24. Chad-Cameroon pipeline[192]:
The Chad-Cameroon pipeline was inaugurated
in 2004 amidst complaints from local communities over the social
and environmental consequences of the project. The World Bank's
Inspection Panel investigated the World Bank's involvement in
this and found that there had never been a Strategic Environmental
Assessment undertaken, despite this being one of the largest and
most controversial oil and gas developments undertaken in the
last decade.
25. The above are just a few examples of
governance problems raised through the independent evaluation
body of the Bank. A lot of improvements need to be made to ensure
that the World Bank improves the governance and transparency of
the projects it funds, and ensures it follows its own good practices
for social and environmental safeguards. Considering DFID has
prioritised good governance as a major strategy for achieving
its poverty reduction objectives, it should promote those same
principles in the partner institutions which it funds and with
which it works.
The World Bank and Guidelines for Mining Investment
26. A substantial part of a good governance
agenda at project level is that rigorous social and environmental
impact analysis is undertaken and safeguards are in place to stop
damaging impacts for people and communities. Public participation
and involvement in decision making are crucial to make these safeguards
work and empower people to play a part in their own futures.
27. The International Finance Corporation
(IFC), the private sector arm of the World Bank, has recently
held a consultation on a draft set of guidelines for managing
the environmental and public health impacts of its controversial
large-scale mining projects. However, the draft guidelines ("Environmental,
Health and Safety Guidelines for Mining" [EHS Guidelines])
are marked by significant gaps and omissions which could have
detrimental impacts for local communities and environments.
28. "Undermining Communities and
the Environment[193]",
a review by WWF and other NGOs, including
Oxfam America, of the draft guidelines has revealed that the new
guidelines do not even meet the mining industry's own existing
"best practice". The IFC's social and environmental
policies and guidelines are especially important because they
are used by private banks who are signatories to the Equator principles.
Lowering the IFC standards could result in lowering standards
across the industry.
29. The review lists the shortcomings of
the new IFC mining guidelines in detail, but some of the general
weaknesses are listed here:
— Failure to prevent contamination
of local water sources by toxic chemicals
— Failure to ensure proper disposal
of mine waste
— Failure to guarantee prior community
consent on the design of mine closure plans
— Lack of IFC indicators that report
meaningfully on the poverty reduction impact
— Lack of sufficient quantitative standards
and targets for IFC project approval, meaning that there is no
consistent and measurable way to ascertain whether a project complies
with "best practices" and meets IFC safeguard policies.
— No identification of practices that
will not be supported by the IFC, including projects that
are proposed in sensitive environmental areas, such as strictly
protected areas.
— Not enough consideration is given
to the impacts of climate change on the predictive modelling used
to determine potential impacts of mining on the natural environment.
30. The consultation period closed on 7
September, and the EHS mining guidelines are currently being reviewed.
If the guidelines are to provide adequate guidance to ensure that
new mines meet accepted criteria for best practices in mine design,
operation and closure, they will need to address these very serious
omissions and shortcomings.
SUGGESTED QUESTIONS
TO DFID
Will DFID act on its recognition that climate
change could undo much of the current and future progress in lifting
people out of poverty, and urge the Bank to put in place an energy
finance strategy based on the scientific need to keep carbon emissions
below a safe level to avoid a 2 degree Celsius temperature change,
that is socially and environmentally sustainable?
Will DFID urge the Bank to set ambitious
annual and long-term targets for the reduction of its financial,
technical and policy support for fossil fuels, for increased support
for new renewable energy and sustainable energy technologies,
and for reducing the carbon emissions from its investments (both
total carbon footprint, and emissions per US$ financed)? Will
DFID press for annual monitoring and reporting on clearly separated
categories (new renewables, energy efficiency, low carbon)?
In light of the fact that certain renewable
energy sources have severe social and environmental impacts (such
as biofuels, large hydropower), will DFID call for a refining
of the Bank's classification of "low-carbon" technologies
to ensure that unsustainable carbon emitting technologies are
excluded from the `sustainable low carbon' category?
What mechanisms will DFID put in place to
ensure that any new funds channelled through the World Bank to
tackle climate change will contribute to renewable energy systems
that benefit the poor, and how will it ensure that existing governance
concerns are addressed?
How does DFID intend to improve the accountability
of the World Bank, considering participation processes are often
not adequate, and the current ex-post accountability process (Inspection
Panel) is slow, not well known, and manages to investigate only
a few projects?
What does DFID expect from the Bank in response
to repeated Inspection Panel concerns raised on governance of
its projects to ensure that governance in future natural resource
projects improves?
How will DFID ensure that the final EHS mining
guidelines help safeguard sustainable development and address
many of the shortcomings identified by a coalition of development
and environment NGOs?
October 2007
187 "World Bank" or "the Bank"
in this report refers to all institutions of the World Bank Group.
Where a specific institution is concerned, this is specified. Back
188
"Is the World Bank helping developing countries move to
a low-carbon future", WWF-UK, Alison Doig and Lies Craeynest,
October 2007; "Research on World Bank and Environmental Governance",
Steve Herz for WWF-UK, October 2007. Reports will be available
from the WWF-UK website. Back
189
WWF. 2007. Climate Solutions: WWF's Vision for 2050, WWF, Gland,
Switzerland. Back
190
Briefing from the Rainforest Foundation: The World Bank Inspection
Panel on the World Bank Group's interventions in the Democratic
Republic of Congo. 4 October 2007. Back
191
Final Eligibility Report and Recommendation on Request for Inspection.
Re: Request for Inspection GHANA: West African Gas Pipeline Project
(IDA Guarantee No. B-006-0-GH) Inspection Panel Recommendation
http://siteresources.worldbank.org/EXTINSPECTIONPANEL/Resources/FinalEligibilityreport.pdf Back
192
Chad Petroleum Development and Pipeline Project, Management of
the Petroleum Economy Project, and Petroleum Sector Management
Capacity Building Project (2001) http://siteresources.worldbank.org/EXTINSPECTIONPANEL/Resources/ChadInvestigationReporFinal.pdf Back
193
http://www.earthworksaction.org/pubs/IFC%20Mining%20Guidelines-20070904.pdf Back
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