Examination of Witnesses (Questions 80-94)
MR SIMON
COUNSELL, MS
LIES CRAEYNEST
AND MR
ANDREW PENDLETON
13 DECEMBER 2007
Q80 Sir Robert Smith: I suppose this
leads on in a way to the fact that individual projects should
be properly assessed and also involve the community where at all
possible in a proper rights-based approach to deciding how best
to assess the impact. The poverty and social impact analysis (PSIA)
tool is the World Bank's tool for development projects but not
for all investment projects. What is your assessment of how rigorous
the Bank's impact assessment mechanisms really are?
Mr Counsell: I could try and answer
that partially, perhaps. The important point to remember is that
the Bank does not have a formal rights-based approach policy as
such. The extent to which the rights of communities in the areas
in which these projects or programmes are taking place are taken
into account depends largely on the application and implementation
of the various safeguards policies—the indigenous people's
policy, the resettlement policy, the cultural knowledge policy—all
of these have an impact on the rights of communities. The example
that we gave in our written evidence was one where there appears—and
this is certainly borne out by the report of the Inspection Panel—to
have been egregious failures to either trigger or to establish
or implement any of these safeguard policies. In this particular
case, it is potentially having an impact on the rights and livelihoods
of tens of millions of poor people. That is not, of course, in
any way an isolated example, there are many cases where there
have been similar failures, apparently, on the part of the Bank.
To me, there is a wider issue here in this case about the whole
question of accountability, and coming back to the subject of
this Committee hearing which is about the relationship between
the Bank's policies and DFID's policies. What has happened in
the case of the Congo, with these forestry programmes from the
Bank, is clearly not consistent with what DFID would have wished
to happen there, I believe, despite the fact that the UK Executive
Director was forewarned well in advance about some of these projects
which have now proven to have been faulty; was warned in advance
of the Bank board approval of these projects, as indeed were various
DFID staff at the time. Yet, still these projects were approved,
with our UK ED's support and which have now proven to be so deficient.
Questions must be raised as to how this has happened. Are there
questions here about the capacity of DFID staff to thoroughly
check that the appropriate safeguard policies with so many of
these large Bank projects are being properly assessed and properly
triggered and then properly implemented through the course of
those projects. That raises a major question about the DFID resources
and capacity to do this because we are talking about hundreds
of projects every year; and some of them are extremely large and
complex.
Q81 Chairman: Is that a difficult
job for a part-time director?
Mr Counsell: Almost impossible.
He would be reliant entirely on advice from the specialists and
the advisers. In some areas—and I come back to the area
of forests as it is so crucial in the livelihoods of so many of
the world's poor—this is one area where DFID resources internally
have increased a little over the last few years, but it is an
area where there cannot be anything like enough capacity to ensure
that the Bank's projects in these areas are consistent with our
own policies.
Q82 Sir Robert Smith: Is this insurance,
though, to make sure that the Bank's systems are the right systems
and being properly policed, or is there still a point in getting
a multinational institution, to which you are giving the funds
to carry out the project, if you are then going to have to assess
every project yourself as well?
Mr Counsell: It could be that
the systems need to be tightened up such that we do not have to
apply scrutiny to every single one of the projects or programmes
that are coming in front of our Executive Director. One could
also take a sampling approach and pull out a few every now and
again and say "is this working?" In a sense, that is
what the Inspection Panel is doing.
Q83 Sir Robert Smith: Do you think
in the World Bank, it is that they need to change the policies
or is it that the policies that they have need to be applied more
rigorously?
Mr Counsell: Some of the policies
probably could be stronger, yes, but at the moment the struggle
would seem to be to get the Bank to apply the policies that it
has more rigorously.
Q84 Sir Robert Smith: Presumably,
you have a similar view?
Mr Pendleton: If I may, I have
two quick points on PSIA, which is something Christian Aid has
been very supportive of and this was welcomed in the Bank's process.
There is plenty of evidence from the Bank's own reviews that they
are not always conducted, and when they are they do not consider
the range of available options. A poverty and social impact assessment
is one option, when probably they should be considering a range
of options and therefore not just saying yes or no to something,
but be saying, if not this, then perhaps something else. There
are some very good examples of where that has been the case with
some very big policy change, such as through reform of the energy
sector where there are poverty and social impact assessments done
about the potential for private sector participation, but not
public community sector participation, for instance, which might
offer other co-benefits. We would welcome the PSIA system but
would wonder a little about how rigidly it is used and also about
whether it should not contain a range of options.
Q85 Sir Robert Smith: We were told
it is used for all development projects but on a case-by-case
basis for investment projects, which goes back to some of the
earlier exchanges about the different role of development as opposed
to investment funding?
Mr Pendleton: I think so, but
more pertinently, where a developing country's central government
policy change is involved, it may well be particularly pertinent
because that is where you need to understand what the impact is
going to be on the poorest. Arguably, in any energy-related project,
that should very definitely be the case.
Mr Counsell: Could I add very
briefly, there is also the point to remember that Budgetary Support
programmes, which have tended to increase, I understand, as an
overall percentage of the kinds of programmes that the Bank is
supporting, are not subject to any of the safeguard procedures
whatsoever, as yet, contrary to arguments and concerns that the
NGO community has been raising for a number of years. Significant
parts of Bank lending, or Bank granting, rather, completely bypass
all of the safeguard procedures.
Q86 Jim Sheridan: Reference has already
been made to the Bali conference and I understand a number of
goals have been set for the conference in terms of sharing knowledge,
best practice and technological advances that may have taken place.
It is on that basis that I would like to ask you to expand on
how you think the Bali conference is going. There are a few points
I would like to make: the role of the World Bank and any international
regime about climate change, could you expand on how you see the
role of the World Bank in any international set up? Finally, on
the question of climate change or any agreement, do you think
that countries like India, China or America are serious and take
climate change seriously?
Ms Craeynest: We have already,
to some extent, referred to some of the ideas on the role for
the Bank post-Kyoto when we were talking about the forest carbon
partnership facility as well as WWF's concerns on international
governance of the environment, so our key demand would be that
the role the World Bank plays within an international framework
could be, for example as Andrew outlined with the adaptation fund,
as a trustee but not as a decision-maker. One of the key issues,
of course, still, with the World Bank is the way it is governed
and there is far too much dominance of developed countries and
too few seats at the table for developing countries. With the
environment being an international issue, a global issue and with
the largest biodiversity being in developing countries—like
the Congo and Papua New Guinea—those countries need to have
a seat on the board. The World Bank can play a role but it needs
to be in line with international agreements and with different
democratic governance systems.
Q87 Jim Sheridan: Could you define
what you mean by a trustee?
Ms Craeynest: A trustee—I
am not a 100% sure how it works.
Mr Pendleton: A bit like a finance
trustee on a board. In effect, the World Bank returning to its
core purpose as a grant-making and lending institution for development
but with the decision-making lying elsewhere. The critical thing
which Lies was alluding to and which I mentioned earlier is that
carbon financing, whatever mechanisms the actors in the international
agreement choose, is not rich countries' money. It is going to
come out of financing, which is essentially about poorer countries
selling parts of their atmosphere in terms of carbon credits in
one way or another. Therefore, those countries will not offer
us any choice in this. They are necessarily going to want a bigger
role in saying how that money is spent, so the days of the system
of having those decisions made in Washington by a board dominated
by the existing shareholders of the Bank may well be numbered.
Q88 Jim Sheridan: Most trustees are
involved in decision-making. Would trustees be involved in setting
limits or targets or things like that?
Mr Pendleton: That is to be decided
and I will be very interested to see. It may be worth the Committee
looking at the decision in more detail around the Adaptation Fund
in Bali. That is going to prove a really interesting model for
how financing around climate change takes place, where the decision-making,
as I understand it, has largely been taken away from the Bank
and the Global Environment Facility and put in the hands of a
specially set up board which is going to be answerable to the
UNFCCC. Given that the agreement is likely to take place, unless
the Americans are successful in derailing it under the United
Nations Framework Convention on Climate Change, and if it is adequate
and sufficient, it will produce an awful lot of finance because
developing countries are going to need a lot of finance to help
them switch to sustainable, renewable technologies in order to
continue their development and also to adapt to the impact of
climate change. That is a really interesting model which deserves
some investigation.
Q89 Jim Sheridan: Is there any tangible
evidence that, with all these best practices, the technological
advances, are coming out of the conference?
Mr Pendleton: It has been a major
sticking point in Bali. There has been an awful lot of wrangling.
The US, particularly, which argued some years ago that targets
were less important than transfer of technology, is now ironically
arguing against transfer of technology. There was a trade ministers'
meeting at the weekend which produced some quite worrying words
about the need to cut tariffs on green goods. The definition of
green goods is by no means clear and therefore it could just be
a means by which we sell poorer countries more of our stuff under
the heading of green goods. That is a worrying development because
from our point of view technology transfer is not about flogging
stuff, it is about allowing access to technology which is going
to be essential for people's development but also managing climate
change.
Q90 Jim Sheridan: On the question
of America and India, are they serious do you think about engaging
in climate change?
Mr Pendleton: There is more encouragement
from Christian Aid's point of view and we are observers in the
same way as probably everyone in this room is an observer of the
process, rather than a formal participant. Certainly, our observation
would be that China has set itself some quite tough renewable
energy efficiency targets and is tending to play a much more positive
role in engaging. But, as a country that does not see itself as
historically responsible for climate change to the same extent
as the US and Europe, and also still does not have the same ability
to pay for the impact of climate change and for the cost of switching
to different technologies, sees itself as playing less of a role
in that. It is understandably unwilling to sign up to something
before the big players have got on board, like the US. India is
a country that is going to need a lot of assistance and support
to play a more meaningful part. Christian Aid is certainly starting
to do work with our Indian partners on their role in supporting
their Government to make some clearer decisions about what it
wants out of the climate change discussion. With the US, it is
fair to say, particularly given the EU's comments today, saying
that it will not actually participate in the major emitters conference
after Christmas if the US does not play a more positive role in
Bali. It is fair to say that the US has been wholly divisive.
Chairman: That was clear and succinct.
Q91 Mr Singh: You touched on financing
for climate change a moment ago. What we are seeing in this area
is that the proliferation of funds—the GEF,[11]
the Special Climate Change Fund, the Least Developed Country Fund,
the Kyoto Protocol Adaptation Fund, the CEIF,[12]
and I am sure there are going to be more. My question is, is this
proliferation a good thing or a bad thing? The second issue is
that they are not fully funded at the moment, so what is the prospect
of new funds being fully funded? The account presented at the
GEF Council meeting showed that less than 20% had been paid into
the fund in terms of the commitments. The third area is, what
role should DFID being playing? Should DFID be concentrating on
the full financing of existing funds or committing itself to new
funds, which might be better adapted to meet today's needs. Finally,
should there be a co-ordination mechanism for all these funds—bilateral,
multilateral, through the World Bank, or whatever? How do we handle
all this?
Mr Pendleton: The proliferation
of funding is an interesting question. If we take a step back
and look at the trend with Overseas Development Assistance in
general. The G8 is certainly backing away from some of its commitments
made in 2005, this year in Germany, which is disappointing but
indicates perhaps that further increases in Overseas Development
Assistance are unlikely to come, certainly in the volumes that
may well be required to help poor countries adapt to climate change.
A recent Oxfam report pointed towards the need for probably ultimately
£50 billion or so of additional funding to help poor communities
adapt, with a £1-2 billion necessity right now. That may
well be by some people's thoughts an underestimation, too. There
is going to be large amounts of funding necessary and therefore
the Adaptation Fund model, which is a levy on a carbon transaction,
rather than the other two climate change funds—the Special
Climate Change Fund and the Least Developed Countries Fund, which
are still reliant on political will on the giving of Overseas
Development Assistance in essence, and not additional to the funds
that have already been promised to poor people, then the Adaptation
Fund model provides more hope and perhaps a way forward and we
should look at all carbon transactions and all carbon financing
for a means by which to lever money for adaptation, even in domestic
funds so if the UK Government sets up its own carbon trading domestically,
in auctioning the emissions upfront it should take a small proportion
of that to give towards additional adaptation overseas. Our concern,
to finish off, about DFID's involvement in adaptation funding,
even though its performance is very much better than many other
countries, or the UK's, is that it is still not additional, and
this is an additional financing question.
Q92 Mr Singh: Is it that the Adaptation
Fund could be self-financing?
Mr Pendleton: The Adaptation Fund
is funded through a 2% levy on pre-development mechanism transactions,
so clearly the more of those transactions there are, the bigger
the fund. There will be, as I say, if the Bali process over the
next two years is in any way successful, more carbon financing
then there is more opportunity clearly there for levies and other
measures to ensure that there is money for adaptation, which regardless
of what we do with emissions will now be necessary.
Ms Craeynest: Following on specifically
with regard to DFID's role, perhaps you might be interested in
the Environmental Transformation Fund in particular, which was
launched this year, an £800 million international window.
As NGOs, we have been working and looking at the Environmental
Transformation Fund, including Christian Aid, Oxfam, CARE, WWF,
RSPB, through the development and environment group and we have
a number of concerns. One of them is exactly in relation to what
you raised, which is the proliferation of funds in response to
climate change. A quick trawl that we did raised just at first
go about nine funds being launched in the past year—the
Australians, the Canadians, the Dutch have launched funds. One
of our key concerns would be, what is DFID doing to ensure that
there is no duplication or contradiction with existing funds.
One of the big problems with the ETF[13]
is that it is capital money so it has to buy a stake for the British
Government into something else, which means that basically has
to be loans. This obviously restricts very much the possibility
of what the Government can do with this money and it cannot necessarily
contribute to a European fund, for example, the European Adaptation
Fund or the European Climate Change Alliance, because of its very
nature. The fact that it is loans is a concern for us because
DFID aims to fund clean energy, forests and adaptation with this
fund. It being loans, we feel it highly inappropriate to fund
these sectors—forestry and adaptation—with loans.
Perhaps in clean energy there might be a role, through the World
Bank, to start shifting what we talked about before, towards new
renewable energy, but we are very concerned about these other
new sectors. On top of that, because this is what the British
Government would like to do, it has asked the World Bank to set
up a new fund—the Transformation Fund for Sustainable Development
at the World Bank, which will be administered by the Bank in a
slightly similar way to the GEF Adaptation Fund, it being just
a trustee. We are concerned that this potentially could set up
mechanisms which conflict with internationally agreed mechanisms
to deal with environment, such as the GEF, for example, which
is agreed by international treaties and conventions. So, there
are quite a number of concerns in terms of coherence and co-ordination
and so far we have not seen evidence that this has been appropriately
addressed yet. There is one final point. To call it the Environment
Transformation Fund we feel is highly problematic because it is
just dealing with a tiny aspect of what the environment is and
there are so many other issues that need to be addressed.
Q93 Hugh Bayley: There are just a couple
of points I would like to pick up on. I hear what you say about
the mushrooming number of funds but I would like you to consider
a further fund that might be established. I was talking to Sir
Nicholas Stern recently. His best estimate of the additional funding
that would be needed to address global climate change needs would
be something like £60-70 billion a year between now and 2050,
which, of course, was not factored into the Monterey/Gleneagles
doubling of aid process; so, substantially more money is needed.
When we were talking to Kathy Sierra, the VP for Sustainable Development,
at the Bank a couple of weeks ago, she said that she thought an
IFF—International Finance Facility—fund to deal with—I
think she was talking about mitigation rather than adaptation—but
mitigation might be a way to do it. I do not know how much background
you have on Gordon Brown's IFF proposals, but the idea was to
bring a lot of the spending of aid forward in relation to the
Millennium Development Goals. As a generalist mechanism it has
not won global support but there has been a very successful IFFIm—International
Finance Facility for Immunisation—which raised hundreds
of millions of dollars to pay for immunisation. It seems, as a
financing mechanism, to work particularly well where you are making
an investment of a kind that gives a bigger return if the investment
is early. If you immunise a million people this year, you will
save more lives than if you immunise 100,000 people a year for
10 years. If you can front-load your spending and then the donors
pay off that spending over a longer period of time that would
help. Because the problem with carbon emissions is not the flow,
the emission year-by-year, but the stock of carbon in the atmosphere,
if you take action early you would have a bigger mitigating effect
if you take it this year than if you take it in 10 little bites
over the next decade. So, do you think it might be sensible to
get the global debate about using an International Finance Facility
up and running again in relation to climate change? The idea being
that the donors will say, we will put in the money over 10 years
but we will use that pledge to raise 90% of the money from capital
markets, private money, and it is a way of spreading the public
expenditure pain for donor countries over a longer period whilst
getting the public expenditure gain for the developing world earlier.
Mr Pendleton: Christian Aid's
concern always about the IFF, though we felt it was welcome as
an idea, was that there is a moment of truth further down the
line and it is not necessarily that much further down the line
and, therefore, what we did not want to see was the use of development
assistance money to meet the debt when it became repayable further
down the line; that was a concern. Nevertheless, I can see the
point and it is an interesting suggestion. There are a number
of different financing mechanisms that we might want to look at
in terms of leveraging financing now, particularly for mitigation
obviously in order to stop the proliferation of greenhouse gases
in the atmosphere as much as possible. Perhaps it is also worth
looking at taxation systems because there is an awful lot of untaxed
money circulating, or rather, not circulating in the world—something
like $11.5 trillion held offshore by high-worth individuals alone,
which is largely untaxed and that is notwithstanding the kinds
of money that is moved through tax havens by companies. Therefore,
having access to that kind of financing at this point might be
very useful. My concern about having transactions such as carbon
trading as the main response to climate change mitigation is two-fold.
One is that it is difficult to see how those transactions are
going to be very accessible to poor people, given that poor people's
access to markets is always very difficult and fragile because
essentially they lack the market information they require to play
a meaningful part in them. Secondly, governments are going to
need revenue in order to cope with climate change because they
are going to need to be able to incentivise markets in some places
and disincentivise markets in others. Therefore, a system which
at least had auctioning of emissions, if not taxation of emissions
up front, is ultimately probably going to be necessary, and I
know is favoured by increasing numbers of people in the commercial
sector as well as in the NGO sector, such as ourselves.
Mr Counsell: If I could just add
to that in terms of dealing with this problem of tropical deforestation,
a fifth or a quarter of global carbon emissions, we have to appreciate
that there are very serious capacity problems in tackling that
issue. Probably at this stage no amount of money thrown at it
is going quickly to address the problem. We are talking about
very large countries, in some cases with very weak governance,
in fact, no governance in some instances, no institutions, very
weak legal frameworks, and so on, and possibly talking about hundreds
of millions of people in these forests and to some extent involved
in the processes that are leading to deforestation. That is not
a problem that can be tackled quickly. What I would say is that
it is also not necessarily a problem where money is the issue.
One of the most effective ways that has been shown to tackle that
problem of tropical deforestation has been to ensure that these
local people and local communities have secure tenure and rights
access and that they have an incentive to look after the resources
that they are responsible for. In that respect, money is not necessarily
just the issue.
Q94 Hugh Bayley: There is one last
point that I would like a quick response on, which is that as
far as the Bank's programmes are concerned, what do you think
the balance of funding should be between work on mitigation and
work on adaptation? Both Kathy Sierra and Robert Zoellick told
us that most of their work has been on mitigation. Do you think
that is wrong and how should they rebalance that portfolio?
Ms Craeynest: It is a difficult
question, of course, because both issues—mitigation and
adaptation—are enormous areas of work. In the UNDP[14]
report we have been throwing up estimates but a bigger estimate
was from the UNDP recently which said that $25-50 billion for
mitigation and up to $86 billion for adaptation was needed. From
what I have seen from the World Bank, indeed the mitigation aspects
have been obviously much bigger, with the Clean Energy Investment
Framework that has been launched, etc., and adaptation work has
been mainly focused on research, trying to include adaptation
plans, trying to increase awareness for the need for adaptation.
This comes back to very similar issues that we were talking about
before: what exactly is the role of the World Bank? There might
be legitimate areas where the World Bank can work and increase
its investment in adaptation, if more funds become available through
the GEF Adaptation Fund, maybe the World Bank could play a role
in that. It comes back to the question of existing ODA going to
poverty reduction, whether that should be used for mitigation
or adaptation activities, considering this is extra and not calculated
into the Monterrey financing commitment you talked about. More
money will be needed, that is one key issue. Secondly, the most
important issue at this stage is that the World Bank should address
its continuing investment in climate-damaging activities, such
as the fossil fuel investments, as well as its funding of environmentally
damaging mining sectors, where it could make quite a good contribution
to mitigation without pro-actively doing something. These are
two keys areas that could be addressed and if more money comes
in, then the World Bank's knowledge could perhaps be used in the
context of adaptation.
Chairman: I would like to thank all three
of you for coming and giving your evidence. It really is very
helpful for us to get a cross-section of views about how DFID
interacts with the World Bank and obviously where the centre of
gravity of climate change delivery for poor people is going to
settle or how it might. I want to thank all three of you very
much. I hope you enjoyed it.
11 Global Environment Facility Back
12
Clean Energy Investment Framework Back
13
Environmental Transformation Fund Back
14
United Nations Development Programme Back
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