CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 710-ii

House of commons

oral EVIDENCE

TAKEN BEFORE THE

Environmental Audit Committee

The impact of UK overseas aid on environmental protection and climate change adaptation and mitigation

Wednesday 9 March 2011

Ruth Davis, Dr Nick Hepworth and Dominic White

Evidence heard in Public Questions 57 - 106

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Environmental Audit Committee

on Wednesday 9 March 2011

Members present:

Joan Walley ( Chair )

Peter Aldous

Neil Carmichael

Martin Caton

Katy Clark

Zac Goldsmith

Simon Kirby

Caroline Lucas

Sheryll Murray

Caroline Nokes

Mr Mark Spencer

Simon Wright

________________

Examination of Witnesses

Witnesses: Ruth Davis, Chief Policy Adviser, Greenpeace UK, Dr Nick Hepworth, Director, Water Witness International, and Dominic White, Head of Government Partnership s , WWF-UK , gave evidence.

Q57 Chair: Can I welcome all three of you, Dr Hepworth, Ruth Davis, and particularly Dominic White, who I know has come in at very short notice to the session this afternoon, so thank you for that. We are conducting this inquiry into overseas aid and we are very keen to have your perspective on it. We hope that your views will come out in the course of the questions that we have this afternoon.

Could I start by asking you what your perception is of the Government’s overall environmental impact overseas , p articularly, how positive is the effect that it has; how negative is the effect that it has ? We would be interested in your perceptions of where it is at the moment.

Ruth Davis: Well, I am happy to start. Could I just say thank you very much for giving us this opportunity. It is very nice to see you all.

It is a very broadreaching question and I think I want to address it first by narrowing down and thinking a little bit about the way in which the aid budget impacts environmentally. Then it is worth thinking more broadly about what the impact of wider Government activity is, because I think it is fair to say that the further one gets away from a kind of centre of gravity, and DFID, Defra and DECC , and moves out into the rest of Government, the less likely you are to see a positive environmental impact of what Government is doing. That is not altogether surprising but it is worth saying.

There is no question, I think, that DFID, Defra and now DECC have some very experienced and very dedicated staff who are doing so me extremely useful things at project and increasingly at programme level, both to invest in the protection of natural resources and increasingly to look at mitigating climate change. I think t he challenge they face, however, is that even if one looks across the whole of the aid budget , it is obvious that embedding environmental concerns across that aid budget is still in a very early stage. You only have to look at the scale of fossil fuel lending still coming out of the World Bank at the moment to realise that there is a major challenge there.

If you then get beyond that and start asking the question, for example, what is the impact of something like the Export Credits Guarantee De partment, and recognise that i t has for many years been a high carbon lender and very recently was investing in things like deep - water drilling in Brazil , y ou can see that the problem expands itself. Beyond that, the re is then the question about the overall impact of UK plc as a high consumption economy and what we can do collectively to address that. I don’t think as yet that question has r eached out beyond some very far- sighted but rather small numbers of people inside those core departments.

Q58 Chair: Just before we move on, what you said then is very interesting. I know that in your evidence, Dr Hepworth, you are talking about the architecture that is needed to embed sustainable development. Do you want to add to that?

Dr Hepworth: Yes. In my experience, DFID are taking a very progressive and important leadership role in the strategic planning response to climate change in some of the developing countries, where they have dedicated climate change advisers to deal with the complexities involved. For example, in Ethiopia, Bangladesh, Kenya and Tanzania they are supporting a nationally owned and ambitious planning process on the response to climate change in terms of adaptation and mitigation.

My fear-as I said in our written evidence-is that there is either a reluctance within DFID or a lack of capacity to focus on some of the key functionalities of government in developing countries that will determine the efficacy of the climate change response. For example, things like water resource management and agricultural extension work, particularly land planning and development control; these things are the crux of an effective mitigation and adaptation response and we would like to see DFID take more of a leadership role in those areas. Because if you look at what DFID have done in other sectors, in particular education and health, you see the things that they can achieve if they focus specifically on sectors with their skills and staff.

Just to build on Ruth’s comments in terms of UK Government impact more broadly, if we think of the UK nationally I think we all understand that levels of consumption in the UK are at unsustainable levels and that that impacts broadly in a negative way on developing countries. A good example is the UK’s water footprint. For example, the work that WWF did a couple of years ago shows that 62% of the water we consume in the UK is sourced overseas indirectly, which amounts to about 65 billion cubic metres of water a year; in simple terms, about 50 bathtubs of water per person per day of other people’s water. That is not necessarily a bad thing if that water use is sustainable, but our evidence shows that in many cases it is not. Those kinds of issues simply seem to be off the radar for the UK Government at the moment.

Q59 Caroline Lucas: I just want to push a little bit further on that because although the focus of the inquiry is on the aid budget and DFID it is really important to see whether there are contradictions between what might be being pursued by DFID, DECC or Defra and, as you say, some of these wider departmental issues. I wonder if you could say a little bit more about UK trade and investment policy, for example, or indeed any other bit of Government you might want to cite, and whether you think it is compatible with some of the objectives of our environmental and development policy.

Ruth Davis: I have given the one relatively obvious example of the ECGD, but I think there are quite a lot of other places where one can point to problems. For example, there has been an ongoing series of negotiations in the European Union between the EU and the Indonesian Government over a range of different trade engagements, which have consistently failed to take into account the potential damage of European biofuels policy as a driver of deforestation in Indonesia. There is clearly a tension there. There is no question that the harder we apply safeguards on those biofuels policies the more difficult that is for a trade environment for the Indonesian palm oil sector.

The problem is, though, that those two parts of policy do not actually join up. It is particularly difficult to get them to join up in the EU-as Caroline will know better than anyone else-because there are many different countries trying to engage in that process. The result is either that environmental considerations tend to get steamrollered by the kind of broader concerns around trade, or you get a kind of endless and irresolvable tension between different parts of Government competing with each other to come up with a sensible outcome.

Another example might be one that has been in the news relatively recently: the tension between trying to ensure quite high standards for fuel quality in the European Union and the desire to sign a trade agreement with the Canadian Government, who are putting huge pressure on the European Union to allow tar sands into the fuel system. Now, there are inevitable tensions about government, but it does seem to me that the effort is not being made by trade negotiators to take on board the implications and the seriousness of the environmental concerns that are coming from environmental departments and from development departments.

Dominic White: Perhaps I can add to that, building on the earlier example that Nick gave around UK consumption and Defra’s lead, obviously, in terms of looking at the UK sustainable development pathway and DFID’s role in needing to understand how UK consumption impacts on developing countries. Potentially, there is an opportunity for the two departments to work much more closely together on this agenda. The concern is that where UK consumption is driving positive change, as well as, of course, the obvious negative change that we can imagine, there are huge opportunities to not only tackle some of those issues, mitigate some of those impacts and promote positive impact where those opportunities arise too, but also to engage the UK public in understanding the links between what happens in the UK and the impacts on developing countries.

In WWF’s work we track this link through what we call the Living Planet Report, which tracks the decline in biodiversity around the world with the global consumption of resources in the world as well. We can correlate a link between our consumption overall and developing country impacts. There are opportunities to improve it through certification systems or standards of purchasing-improve different sectors, such as forests or fisheries or the water sector, as Nick was referring to. There are elements of UK consumption where we can reduce impact in other countries.

Q60 Chair: Presumably, you would all agree that because there is no extra money in terms of the available funding, that is a huge opportunity to make progress as well?

Dominic White: Sure, yes.

Q61 Martin Caton: Good afternoon. What has changed with DFID’s performance on the environment since this Committee reported on the Department in 2006?

Dominic White: The obvious thing is that, of course, DFID is probably a leader in terms of climate change in the development community. Since we discussed this in 2006, the commitment to the climate agenda across the development community has increased enormously leading up to Copenhagen and since then.

I would say that perhaps we have some concerns that with an emphasis on climate change being so dominant in the public arena, that possibly it has become synonymous with environment. There is a risk that when we talk "climate, people are assuming environment is part of that equation, and I think we need to be careful that DFID’s capacity on environment is retained as well, because issues of forests, fisheries, fresh water and other primary resources that poor people depend on are actually where climate plays out.

When DFID say, "We work on climate change", what it means is we are understanding how climate change manifests itself in poor people’s lives, where people’s soils are becoming degraded; where they are exposed to flooding; where sea levels are rising and coral reefs are being bleached. Primary resources for poor people are being eroded. When climate change is being discussed, actually the impacts are environmental, and what we need to be careful of is that DFID do not lose their capability of leading on the environmental sectors that are impacted by climate change. So I think we have seen a big shift in DFID on climate, which they should be credited for, definitely, but we just need to be cautious that that is not assumed to be sufficient.

We would still be concerned-reading the EAC 2006 report-on how we can assess whether environment is mainstreamed in DFID and what that looks like. We said previously-I was reading the evidence again from 2006-that DFID are intellectual leaders on the links between poverty and environment, and historically have produced plenty of excellent evidence along these lines. I think recently perhaps that has slipped a little bit off the radar in terms of some of their actions, and trying to understand how environment actually is mainstreamed through DFID is quite difficult to assess. We hear about this new environment and climate assessment procedure as part of DFID presenting the business case. Of course, we haven’t actually seen that yet or been part of that process, but it sounds extremely positive. What we would hope is that it is a process that is upfront and embedded in any design of any new programme of DFID’s and not just an afterthought, which we have seen in the past. Again, a very positive move, and we look forward to seeing how it plays out in DFID’s work, but as yet it is early days.

Chair: Would you like to add anything?

Ruth Davis: I don’t have anything to add.

Dr Hepworth: No.

Q62 Martin Caton: Are there any specific things that you would like to see DFID doing differently, and are there some types of programme that you think they should just stop funding?

Ruth Davis: You start and then I am very happy to carry on.

Dr Hepworth: Yes. It comes back to this point: there is a need for more explicit focus on what I call the key functionalities of developing country Governments to allow them to respond to climate change and to develop in a sustainable way. Adaptation and mitigation will depend on institutions in developing countries that have the capacity, the authority and the incentives to make sensible resource allocation and use, and protection decisions for the local public good. Now, in most developing countries that functionality simply does not exist or it is working for private good.

For example, water resource management. There is a need for sound water resource management to ensure that in droughts priority uses are prioritised and protected, and to plan for flood events. Land planning and development control are essential to match development and resource use to the availability of resources, and to try and plan in low-carbon good ideas into the development of things like rainwater harvesting. Then there are things like agricultural extension and environmental health, which are key functions of Government that simply have not had the focus that they need to activate them-certainly in the past few decades.

The key thing for me is that having all those things is a good idea with or without climate change. Given the uncertainties around future climate models, these are really sage investments for the British Government to invest in, to underpin genuinely sustainable development. As I said, there is the success that DFID can demonstrate in other sectors; DFID are known for doing very good development, and I think that sometimes there is a perception in DFID that other people, other donors, are dealing with these key areas. My belief is that they are simply not doing as good a job as DFID could do.

Ruth Davis: Yes, there are a couple of things where it would be good to see less activity rather than more. In particular, I do not think it is possible at the moment to find an excuse for continuing to fund unabated coal-fired power stations, in middle income countries in particular. There is a huge wealth of evidence that building those coalfired power stations does not deliver poverty alleviation, and it does not deliver energy access, which are the only excuses I can think of for funding a very, very high carbon-

Chair: Sorry, could I just interrupt you?

Ruth Davis: Of course.

Q63 Chair: Which coalfired power stations are you referring to?

Ruth Davis: I am referring to coalfired power stations that have been funded over time by the World Bank. I have a particular reference that I can supply to the Committee, if it would be useful, of a study that looked at 23 specific fossil fuel projects, through, I think, 2009 and 2010, and was able to determine that in no case was poverty alleviation or energy access a specific objective of those projects. This could apply to individual cases-for example, the Eskom loan that went forward to support the coalfired power plant in Medupi-but actually the case is true across the vast majority of the World Bank’s fossil fuel lending, if not all. There is no obvious evidence at the moment that those sorts of projects support poverty alleviation or energy access. They clearly are a problem in terms of climate change. It is very difficult for me to understand why we would continue to support, through our aid budget, the funding of those sorts of projects. I would want to hear a very clear poverty alleviation or energy access argument for why those projects should go ahead.

Q64 Martin Caton: DFID used to complete environmental screening notes for all projects and investments over £1 million. From January this year, it has introduced a new business case process. How effective are the new processes in ensuring DFID’s work does not cause environmental degradation?

Dominic White: As I mentioned earlier, I think that process is yet to be unwrapped and I don’t believe there was an open civil society engagement in developing that new tool. Certainly, we were not engaged in that process and I am not aware of others having done so.

As I say, I think potentially it could be extremely positive. I think if it is applied at the design stage, obviously if it integrates climate change, as it suggests it does, and identifies the opportunities as well as the risks in terms of damaging environment further, it could be quite useful. I think what we need to be very careful of here-I don’t know how it is going to play out in DFID, at what point in their processes-is certainly previously, with the environmental screening note, it was very much treated as a tick-box exercise. It was an afterthought where, unfortunately, programme teams would fill it in and file it. Certainly, when we have asked under Freedom of Information requests for certain screening notes they were written subsequently.

Let us hope we have gone beyond that; let us hope that we have a mechanism now where presenting the business case with environmental opportunities and risk mitigation is upfront in DFID’s planning. I think that would be extremely positive but, as I say, we have not seen what the process is right now.

Chair: Just before we move on, I think on that point Mark Spencer wanted to come in.

Q65 Mr Spencer: It was on coalfired power stations, just to say I did not know if the technology existed to deliver those coalfired power stations with carbon capture and storage, whether you would be comfortable with the World Bank funding those sorts of projects, or whether it was coal in general you had an issue with.

Ruth Davis: I think the answer to that is that we should be seeing the bank take a very clear view that either what it is doing is mitigating climate change or it is delivering energy access or it is delivering both. Preferably, it is delivering both. Now, the real win-wins are, in our view, in terms of smaller scale development, often energy efficiency, more efficient transport in urban areas and small-scale renewable technologies. We know that those are win-win environments because they are low carbon technologies, but they are also the kind of technologies that actually deliver energy access to people on the ground.

There is an argument about whether or not the development of CCS technology is a significant global project in terms of the overall mitigation of climate change, but in the context of DFID’s work, where it has a very specific mandate around poverty alleviation and it has objectives in relation to energy access, applying CCS to a coalfired power station, even if that were a possibility, would not deliver on those energy access objectives. I do not think it would hit the sweet spot, if you like, between climate change mitigation and providing clean, safe energy for poor people on the ground in developing countries.

Q66 Martin Caton: In 2009, DFID established its research and evidence division, which we understand has four climate environmental senior research fellows. Is this division’s environmental work being utilised in your view?

Dominic White: I am not fully up to speed with the full range of that research programme. I know that recently DFID have been building their Ecosystem Services for Poverty Alleviation r esearch portfolio. Obviously , that is a critical piece of research where we get back to some fundamental building blocks for poverty alleviation in terms of the variety of ecosystem services and functions that the natural environment provides. W e are looking forward to seeing the research that comes out of that . I would assume that that would be directly applicable to programming in bilateral and multilateral programmes. I am not otherwise aware of the nature of their climate research portfolio.

Chair: I think Dr Hepworth wanted to come in.

Dr Hepworth: Yes, I have a little bit of experience of working with, certainly, the outputs of that research. I think it is vitally important given that climate change is a new agenda that is in any case complicated, and understanding is developing all the time. I think the outputs of that team are vital, not just to help DFID and the British Government understand what to do about climate change, but importantly to help developing country Governments and other key players there-stakeholders-to understand the complexities of what the science means and what we can do and can’t do based on the science. It is vitally important.

Another thing to mention is the systematic review process that that team have instigated, to try and bring unequivocal answers to some of the big questions around these issues. It is early days and the first round of systematic reviews to my mind aren’t produced yet, but I think that is a really good way of getting to grips with some of the unknowns in this area.

Chair: I think on that point Zac wanted to come in.

Q67 Zac Goldsmith: Yes, to ask Dominic White particularly, do you think it is possible to quantify how much base poverty in the world results specifically from ecosystems damage and, if so, what proportion do you think of DFID funding should go towards ecosystems renewal as a means of alleviating poverty?

Dominic White: I would have thought it could be quantifiable. I think it would be quite complex, especially when you a re dealing with ecosystems that are large scale, particularly water systems and obviously ocean systems, and where some of the implications of ecosystem degradation are trans-boundary. That would make it quite difficult.

We should be able to get a good handle on some of the relationships of interruption to dependency on ecosystem services quite straightforwardly, and therefore, by extrapolation, the degradation of those systems would reveal figures on creation of poverty.

Q68 Zac Goldsmith: Has anyone done that work and if so, can you identify them for us?

Dominic White: I would expect some of that work has been done in local situations. I am not aware of immediate cases to hand but we could try and find some for you.

Q69 Martin Caton: How transparent is DFID with regard to its funding decisions and its environmental impact?

Dominic White: We would certainly like to see more transparency in some of DFID’s funding decisions, particularly concerning the environmental dimension, with their process for environment and climate assessment as part of their business case, for example. I think those should be transparent. I think there is no reason why civil society in-country cannot be party to seeing what the interventions in their countries are and how they are going to play out.

More broadly, I think it is an extremely positive step that the Government has made in terms of their Transparency Guarantee. These are obviously early stages to see how that plays out and what the effect is in terms of how people are engaged in that process. I would definitely welcome the opportunity to put into some of DFID’s assessment processes, perhaps, or enable recipient countries to engage in those processes. More transparency is always a good thing, accepting that there is a trade-off in terms of the administration of some of these processes.

Specifically on climate finance we have a very busy field right now, with lots of funds in lots of different places, and now we have the joint Government International Climate Fund between DFID, Defra and DECC coming together to make decisions about the £2.9 billion for climate financing. I think it is early days, again, for that committee and we would like to see some civil society engagement and access to that committee and its decision-making processes, and to understand its agenda. What we need to really be clear on is the allocation of climate finance right now. It can be incredibly turgid, and I think much more rigour in the transparency of which funds have been committed to, allocated and spent would be extremely beneficial all round.

Q70 Chair: Are you saying there isn’t any of that there at the moment?

Dominic White: I am sorry?

Chair: Are you saying that there isn’t that transparency about it at the moment at all?

Dominic White: I think what we have had in the past, so separating the International Climate Fund Committee, which is new and still forming, in terms of access to civil society I think that is a separate issue. I do not believe there is access right now and I think that would be a good thing.

In terms of past climate financing, we know that when the Environmental Transformation Fund was announced-we were all applauding the commitment to invest in environmental transformation, of course-various climate financing was packaged under that and announced several times over and over. It just becomes unclear how many times the Environmental Transformation Fund has actually been committed to, and I think we need to move to a more transparent system.

Ruth Davis: Can I add something to that? On a different point I think we still have a very strong emphasis on funding going through multilateral institutions in DFID, and obviously those institutions by their nature tend to be less transparent and accountable to individual taxpayers in the UK than bilateral support from the UK Government. That problem over time is getting worse, partly because quite a lot of money that is flowing through World Bank Group, for example, or flowing through the IFC, is now going through financial intermediaries. That means it is impossible for me as a taxpayer in the UK to know which projects have been funded as a result of my financial input to the IFC.

One of the consequences of that is that there is an estimated £1 billion-worth of hidden fossil fuel subsidies in the whole of the World Bank’s programmes, some of it going through financial intermediaries. That is an area where I think it would be really helpful for DFID to take an international lead in insisting on some kind of audit and accountability of where their money has gone when it goes through multilateral institutions, which is then reflected back to taxpayers who obviously are contributing that aid budget.

Dr Hepworth: I think the transparency of DFID’s work, the bilateral work, is fine. My concern comes where we are channelling funds through the multilateral agencies, particularly on climate change, because the nature of climate change means that you need a lot of accountability. You need that scrutiny to guarantee value of money against spend, because there is no blueprint for responding to climate change. Everybody has partial responsibility and you can literally blame the weather if you get adaptation wrong. It is not like building a road; you need those accountability and tracking mechanisms to make sure that the spend is getting results.

Q71 Zac Goldsmith: About 40% of UK aid goes through the multilateral institutions, mostly the UN, World Bank and European Commission. Can you first tell me briefly what you think are the main differences in the environmental impact of DFID’s bilateral work compared with the UK-funded multilateral aid?

Dr Hepworth: Can you give me a minute to think about that?

Chair: Does anyone else want to come in?

Ruth Davis: I can come in if that is helpful. I am going to answer in slight generalities, because I do not think it is possible simply to say multilateral good, bilateral bad, or vice versa. It is rather in the nature of playing off the risks and opportunities on both sides. It is no doubt the case, partly because of the kind of culture inherent in the World Bank over time and partly because of the overall lack of accountability, that when things go wrong environmentally with multilateral funding, they can go wrong in a very spectacular way and it can take quite a long time to get that right again.

I think if you look at the $2 billion-worth of funding that went into the palm oil sector since the 1980s, going through there World Bank Group, there is no question if we look back at that it probably contributed to what was basically an environmental disaster in terms of tropical deforestation. It is difficult for a single country’s bilateral aid programme to do that much damage, frankly. It can only really operate at a rather scaled-down level.

Q72 Zac Goldsmith: Is that because of the amount of money involved or because of the speed at which decisions can be made?

Ruth Davis: A combination of the amount of money involved, the amount of political leverage that multilateral institutions bring to bear, because obviously they have multiple donors with multiple engagements across a kind of diplomatic agenda, and partly because of the nature of the scale of the projects that tend to be funded by those large institutions, because large institutions tend to fund very large infrastructure projects. They simply cannot get money in small parcels out of the door. When you look at the impact of a large dam project, there is normally a combination of all those different factors.

Having said that, it is also fair to say that the risks of going down the bilateral route are that there is insufficient capacity, both in the donor country and also incountry, to manage that finance. As DFID’s capacity has been squeezed over time, obviously it makes it rather more difficult for it to make best use of its money in bilateral programmes, but also to be able to scrutinise those, because if you do not have people on the ground you cannot do that job.

Following on from that, inevitably bilaterally the concomitant is if you cannot do that much damage you arguably cannot do that much good either, because you cannot scale up to deliver some of the environmental benefits. There isn’t an easy answer to that question, but perhaps the best way of looking at it is that if we had massively increased transparency and accountability on the multilateral side they would do their job better. If they had hugely increased capacity, particularly in-country on the bilateral side, they would do their job better environmentally.

Dominic White: I have a major concern arising with the International Development Association’s safeguards. The Independent Evaluation Group, which monitors World Bank Group activity, did a study last year that highlighted the very real concern, I think, about the fact that there is weaker preparation and weaker supervision in IDA countries, which already compound the inherent weaknesses in those client countries to be able to manage the safeguards effectively.

I understand now the World Bank is developing what is called a Program-for-Results, which relies on country safeguards and country-led monitoring to its own standards. This moves away from what is regarded as a reasonably high standard of some World Bank safeguard processes, so we could find that those safeguards at World Bank level are being slowly eroded. The Independent Evaluation Group has essentially said that IDA would be making a "colossal mistake if it declared the era of its own safeguards as over". I think for DFID to be spending through World Bank Group, through multilateral institutions that are now removing their own standards of safeguards, we should be very concerned about.

Q73 Zac Goldsmith: Do you think the British Government is good at flexing its muscles in relation to the pattern of spending because they are significant contributors?

Dominic White: It is interesting because I think, of course, as a member of the board, the board has grown enormously and DFID’s voice is arguably just one of many now, whereas previously it was one of a few. At a level of good democracy that is a good thing but, of course, it does mean that its own voice is diminished as a result of that. I think it would not be appropriate just because of the high volumes of IDA contributions-I think DFID is now No. 2 in contributing to IDA-that it necessarily should have a bigger voice because of that.

Ruth Davis: To add to that, I think there are certainly examples where the UK has used its influence in an extraordinarily constructive way . I t is easy to see the faults in the way that the climate finance world has developed over time, but I suspect without the influence of the UK we would n o t be in a place where at least the World Bank Group and other multilateral institutions are having to think very , very hard about the fact that climate is an ongoing part of their agenda. I think we should give credit for that.

On the other hand, it is difficult not to get exasperated when you see examples like the 2003 Extractive Industries Review in the World Bank, which fairly categorically laid out the failure of World Bank funding in the fossil fuel sector to deliver anything that looked like poverty alleviation benefits. None of those recommendations has subsequently been followed through. That is quite a long time ago. Now, either the UK were not taking those recommendations seriously or they did not exercise sufficient traction to be able to pull those policies forward in a way that reflected more generally their own positioning and concern around those issues.

Again, in the palm oil sector, I have one good example of recent efforts by the UK to very considerably improve the draft of the new Palm Oil Strategy, which would bring an end to the current moratorium on palm oil lending. They certainly have worked very hard on that and it is very impressive. It does, however, remain in isolation in a context where it seems to me that the direction of travel with World Bank agriculture and forestry lending is still very much in the direction of aggressive intensification and expansion, without necessarily recognising what the potential impacts of that are going to be.

Q74 Zac Goldsmith: Given that, and given that we could probably spend hours criticising endless examples of World Bank funded projects -

Ruth Davis: Exactly, yes.

Zac Goldsmith: C ombined with what we just heard in terms of our relative lack of influence - more and more people involved , more and more decision-makers - is it your view that we would be better off not delegating quite as large a percentage of our budget to these institutions as we do now? Forty per cent. seems very high.

Ruth Davis: I would certainly say that there is a case for greater investment in places where you can be confident of getting a more transformative output. Some of that might be bilateral, some of it might be making the space and time to invest in the new institutions that are developing around the climate change agenda; the adaptation fund, but also obviously, going forward, the green fund that emerged from the Cancun agreements. If you do not invest in new institutions, they do not develop the capacity to grow and become competent and then deliver outcomes that are different from the ones that you have experienced in the old institutions. I think there is a case for that.

I think there is also a case for re-examining the scale of DFID’s bilateral support, because there are some things you can do with bilateral support that it is very difficult to do with multilateral institutions, but with the caveat-

Q75 Zac Goldsmith: What would be an example?

Ruth Davis: For example, operating in an environment where you build up a very longterm relationship with a country and you are able to capacity-build and support governance programmes, but also support at actually a relatively small scale, at a community scale, which the World Bank Group is not good at doing. It would probably be the first institution to acknowledge that it was not good at doing that.

Having said that, I do not think there is any purpose in saying, "Well, let’s do a lot of bilateral aid projects" in a context where the capacity does not exist, either within DFID or on the ground, to make those work properly. It is not really a very simple choice; it is not as if we could take that money away.

I also think that realism suggests that there are all sorts of reasons why we do need a strong UK voice inside the World Bank Group and inside other multilateral institutions. They are not going anywhere. They are going to be a part of IFIs for the foreseeable future. Simply taking the ball away is probably not the solution to the problem, but more money in transformative places would really help.

Dr Hepworth: To add to that, that investment through multilateral agencies should not come at the expense of DFID expertise on the ground to try and guide and make sure that that spend is sensible at a country level. One good example is DFID’s climate change advisers in Ethiopia, where at one point there were four strategic planning processes imposed by bilaterals and multilaterals for Ethiopia that weren’t speaking to each other. DFID through their influence were able to bring those processes together to give it some coherence and added value, and sensible joinedup thinking for what needed to be done in Ethiopia.

DFID’s climate advisers are massively overstretched. The climate change agenda has gone crazy. They really are stretched, and we should not take our eye off the ball in terms of the investment needed in expertise in countries to make sure that the right things are being done with the funds that the UK contributes.

Q76 Sheryll Murray: The results of DFID’s multilateral aid review were announced last week. The review considered, among other aspects, donors’ attention to climate change and environmental sustainability. Do you think that the results of the multilateral aid review will be sufficiently robust, and did it contain any surprises for you?

Chair: Who wants that one? Dr Hepworth?

Dr Hepworth: I confess that I have not had a chance to go through the review in detail. What I have seen has surprised me a little bit-well, maybe not surprised but these kinds of study often lack the granularity and detail to pick up some of the problems that we see in the field. For example, two of the multilateral agencies that I think have problematic issues around their water safeguards, the IFC and the International Fund for Agricultural Development, but they were classified as good in terms of their performance.

Q77 Chair: Could you give us an example of that?

Dr Hepworth: The classic example around the IFC is their support for the development and growth of the export asparagus trade in Peru, which now supplies about 90% of the world’s fresh asparagus. It is grown in Ica Valley, which is one of the driest places on the planet, with 1 millimetre of rainfall a year. The IFC committed to that investment without really checking the water resource management capacity was in place in Peru to manage not necessarily that investment, but the investment that that would seed and the growth of that industry in Ica. Now the ground water levels in Ica are going down at the fastest rate anywhere on the planet.

The IFC are in the process of reviewing their safeguards on water, but what we would like to see is the UK Government use its influence to demand a review of the IFC’s wider portfolio to make sure that it has not instigated the similar water chaos that we see in Peru. As the UK Government is a board member it should use its clout there.

Q78 Chair: On that point, I am aware that there has been some research from the University of East Anglia on asparagus growing in Peru. Am I right?

Dr Hepworth: I led that research, yes.

Q79 Chair: The issue, therefore, is how the academics’ view as well is somehow or another linked to the decisions that have been made as to how viable, in environmental terms, various bits of funding are. Do you see that link with academia in terms of the information and the research that is out there in academia?

Dr Hepworth: It could always be strengthened; the linkages between research and policy always need strengthening. I guess the difficult thing is to link what I call good British inter-disciplinary development research to the decision-making capabilities of people like the IFC and the Peruvian Government. There is lots of good research capacity in Peru that is well aware of these problems. It is just that sometimes the political economy drivers for the kind of unsustainable development we see there are not influenced by good sense research information. It is more about accountability monitoring and incentives around decision; the authority of the Peruvian Government to say no to big business.

Q80 Sheryll Murray: Just to come back to the multilateral aid review, the International Development Association of the World Bank was found to be good value for money, whereas the European Union Commission budget was found to offer adequate value for money. How do you feel about the UK Government’s decision to increase funding to the World Bank’s International Development Association?

Dominic White: Let me start with that. The major concern that we have just identified is this transition away from World Bank Group safeguards to country-led safeguards and monitoring processes-a concern I have expressed already.

The interesting thing in this review is it is quite possible for multilateral agencies to have been identified as meriting further funding because they are deemed to be organisationally effective, even if their poverty reduction results were less favourable. It is an extensive study and I am sure the methodology is pretty comprehensive, but trying to analyse how poverty reduction was assessed is beyond my knowledge right now. We all support the shift towards greater accountability and measures of results. It is imperative that taxpayers know what is happening with their funding. That makes complete sense. The danger with this approach is that it becomes quite reductionist, and reduced down to the very tangible measurable outcomes that we can achieve. We can count bed-nets, we can count vaccinations and we can count food parcels, for example, but what does that really mean?

What we lose in an approach like that is a real commitment to the longterm change that is necessary in terms of governance systems and in terms of broader environmental management and sustainability questions; these things cannot be fixed with easily measurable outputs. It is a much more complex system that we have to embrace to lead towards sustainable development. My concern is that the value-for-money questions are driven towards the easily measured results. Development is not easy and it cannot be measured simply. If you have a bed-net, that helps somebody not get bitten by a mosquito. It does not remove malaria from the system, so it is symptoms versus causes. You are measuring something for money but not really the longterm change that we want to see ultimately.

Ruth Davis: I wanted to respond specifically on the robustness of the MAR. Like the other members of the panel, I have not had time to absorb it in a huge amount of detail, but I was a bit disappointed by the thematic assessment around environment and climate change. As far as I could work out, there was not a single mention of tropical forests or the impacts on tropical forests of the aid budget, which just seems bizarre if you are assessing-

Q81 Sheryll Murray: Can I just come in there? Are you saying that the criteria that they worked on, the 10 specific criteria, were wrong?

Ruth Davis: I am not, actually, because they did identify climate change and the environment as being one of the important criteria against which they should assess the spend. That was good in itself, but when you then go back to look at the results-the reason I am being hesitant about this is because I need to dig down in more detail into the individual analyses of the individual institutions-it seems to me very likely that they have looked to see whether the institutions have good safeguards. If they have good safeguards they have given them a tick. They have looked to see whether or not they contribute actively towards particular environment and climate outcomes, in which case they have given them a tick, like the GEF, for example.

They do not seem to me to have drilled any further down into that, to ask the question as to whether the portfolio as a whole is having a negative environmental impact. For example, you would hope that in asking that question about World Bank Group lending they would have looked at and referenced the places where we know that there have been significant environmental failings over the course of the last five years. I think that level of honesty would have made this a better review, let us put it like that. Now, it was done in an extremely short time and it was done with an overarching political objective of trying to think about value for money and being results-based, but in doing that I think a huge amount of useful content has just disappeared in the context of their analysis around environment and climate. I do not think it is that helpful, to be honest.

Q82 Sheryll Murray: In the interests of time, I wonder if I could very quickly ask you what needs to be done to improve the environmental impact of the European Commission’s standing.

Ruth Davis: I am going to pass this question on to Dominic, if that is okay.

Dominic White: Under the previous Government it was decided to put more funds into the EU because it was performing well, and at the MDG summit last year the EU was definitely pushing environmental sustainability, which we found extremely positive. We are still waiting for the EU e nvironmental m ainstreaming s trategy to be agreed, which should be completed towards the end of this year. It will be a general framework for the environment as a cross-cutting issue. T here are some good indications that certain levels of safeguard and consideration of the environment in the EU development programme are well factored into the EU’s plans.

They have had a very strong influence in the Accra Agenda for Action in 2008 on aid effectiveness, and actually pushed quite strongly the role of environment as a crosscutting issue into the principles of the Accra Agenda for Action, which we welcome enormously. I think there are some very good elements in favour of spending EU funds on development because of their ability to embrace environmental factors.

Q83 Sheryll Murray: Why do you think they did not score as well as the World Bank with regard to the review?

Dominic White: I do not know enough of the details of the scoring, unfortunately, to answer that.

Q84 Peter Aldous: If we can go back to fossil fuel power generation, which we have talked about a bit, do any multilateral donors-any particular ones-have a significant positive or negative reputation regarding funding such power stations?

Ruth Davis: I will be brief because I think we may have covered quite a lot of this ground. By far the great bulk of energy lending that is taking place is through the World Bank Group institutions. It is mostly going through the IBRD, through IFC and associated international financial institutions.

That lending has always been large. It increased dramatically partly as a result of the extra money that was given after the financial crisis to kick-start economic growth, particularly in developing countries, and shot up by something like 300% in the case of coal lending over the course of a year. Those institutions have a reputation for bankrolling large amounts of fossil fuel generation. At the same time, let us be fair, there has not been a huge push or focus on clean energy sources globally until very recently. One could argue that the same institutions are those institutions that are increasingly now investing in clean energy sources. That lending, too, has increased dramatically.

Q85 Peter Aldous: You have probably touched on my next two questions. The first one was whether there are any circumstances in which aid for the building of coalfired power stations is acceptable, and the second one was to what extent is UK aid-either bilateral or multilateral-now encouraging the use of alternative energy sources.

Ruth Davis: In answer to the first question, I will just go back to what I was saying earlier: there are only two reasons why I can think one would be putting aid into energy projects, and those two reasons are around poverty alleviation and energy access agenda or climate mitigation.

It is conceivable that there would be a situation where if you were able to be confident that you were guaranteeing the best possible energy access and poverty alleviation outcomes, and you had looked at all the alternatives in terms of clean technology and they were not viable, that in the context of a low carbon development plan for, for example, a least developed country, you might feel that it was appropriate to continue to invest in fossil fuels. I think once those criteria had been applied I would be astonished if there were large numbers of those projects that met that criteria. That is the answer to the first question.

There are some really good things going on in terms of investments in energy efficiency and renewable energy. I won’t go into a huge amount of detail, but I can point you to investment in the Mexican low carbon development plan, where a combination of energy efficiency and support for regulatory change in Mexico to provide subsidies for renewables is an example of the kind of thing that we would like to take forward.

I just want to emphasise, though, in this case the point that Dominic was making. There is a huge amount of difference between investing money in a one-off project-paying for a wind farm in a particular country and seeing that as in some way meeting your obligations in terms of mitigating climate change-and investing in the governance and legal and regulatory structures in a country, which means that that country is put on its feet as a low-carbon economy going forward.

Again, to go back to the issue about having a very strong focus on results-based, the problem is that in the long term you may end up with a whole load of individual projects that are absolutely not transformational, and you lose the opportunity to set a country on the path towards the kind of self-sustaining low-carbon economy that all of us would like to see.

Zac Goldsmith: Could I jump in very quickly?

Chair: I think Neil wanted to come in first and then I will bring you in .

Q86 Neil Carmichael: Following on from Peter’s line of questioning, do you think that we are sufficiently good at transferring knowledge about the systems that we are investing in and, by extension, encouraging the right attitude to climate change and energy production?

Ruth Davis: I will give you a short answer on the climate side, but then I would like to pass over to Nick because I think he has more experience on this.

Chair: A short answer will do.

Ruth Davis: Of all the countries I know the UK has made the most effort to invest in an increased understanding in developing countries both of the impacts of climate change and the potential to adapt to that. There is still a long way to go.

Dr Hepworth: Yes, it comes back to this thing about the areas that DFID are focusing on. They are very good at what they do in terms of building governance around the sectors that are priorities for DFID-health and education-and they are very good at transferring knowledge around things like governance. The issue for me is that we do not give that explicit focus to these nuts and bolts of adaptation and mitigation, and if we can do that and bring our expertise from the other sectors we work on to improve knowledge exchange and governance in those sectors, it is a major contribution.

Q87 Zac Goldsmith: This is a question for Ruth Davis. You mentioned the importance of investing in infrastructure, or Government capacity, in order to lead to something transformational, as opposed to taking a more project-by-project approach. It would be useful if you could point us in the direction of such investment really leading to the kind of transformation and change that you are talking about. Are there any good examples of that kind of capacity investment leading to something very impressive?

Ruth Davis: Most of the climate programmes, as you will know, are ones that are only two, three or four years old. I will point you to the Mexican one as a place where it looks to us as if that is a country that is now set on a much more confident low-carbon pathway. I think we probably have to reach for examples outside the climate sector in order to be able to give you confidence that that was going to work, because that sort of investment in climate has been going on for a very brief period of time.

In the world of forests, this might be a good place to bring in the FLEGT example, where it does seem as if an attempt to try to invest in regulatory structures in the ground in forest countries has paid off quite effectively. I do not know if you want to add any more to that, Dominic.

Dominic White: Generally, the forest law enforcement and governance and trade initiative that DFID was largely responsible for, taken to scale in so far as it is, underscores the role of good governance in multiple sectors, not just environment sectors, such as forests, fisheries and fresh water. The investment in institutions and structures that can sustain the good work of a project is fundamental because otherwise we really are just tinkering at the edges.

Projects are essential in terms of piloting new initiatives, developing good practice and raising the bar in terms of standards of environmental management, or whatever the initiative is. In and of themselves, they are temporary and they are artificial because they are funded through artificial structures that are not going to be around for ever. The national governance structures are vital in any longterm investment, and this is where we come back to longterm measures.

Q88 Zac Goldsmith: Just to be clear, I am not arguing with the principle. It would be useful if, maybe not now, you could submit something in due course just demonstrating that these kinds of investment s in Government institutions lead to the kind of wholesale change that you are talking about. I am suspicious because I can no t think of any examples.

Ruth Davis: I think we should give you FLEGT feedback, because that is the place where this has been going on for quite a long time and where people collectively decided that the only way that you would actually deal with the illegal logging problem was that you had institutional change. That might be the best example, and if we are able to send some extra information on that, that would perhaps be constructive.

Chair: Anything on the links to governance issues would be important. I think, Dr Hepworth, you wanted to come in.

Dr Hepworth: Very briefly, one of the best examples of an intervention on environment and the links to improved governance that I have seen is probably one of the cheapest or best value for money investments that DFID have made, and that is the REMAK project in Kenya, introducing a risk-based approach to environmental regulation, which saw the secondment of an Environment Agency staffer for five years into the Kenyan equivalent of the Environment Agency. With that support, the Kenyans were able to convert a pretty good environmental legislation system into a reality. I was in Kenya last month and saw the transformation. For the first time, I guess outside of South Africa, in sub-Saharan Africa, you have an operationalised environmental regulation system. You have a team of 120 gazetted warranted officers actually out there regulating and controlling the worst impacts of the highest risk environmental activities.

Q89 Chair: What you are really advocating is an exchange or secondment of skills very much on the basis of the previous knowhow fund?

Dr Hepworth: Often that works better than consultant-led development assistance because consultant-led development assistance tends to be resented by local practitioners. There is lots of evidence to show that practitioner-to-practitioner support is better.

Q90 Caroline Nokes: This is probably directed at Mr White, going back to climate finance. The climate investment funds have received £735 million of the £800 million of UK investments from the environmental transformation fund. Is that major focus on the climate investment funds sensible?

Dominic White: At the time the Environmental Transformation Fund was announced we were all leading up towards Copenhagen, and of course the political energy and public awareness of that, and the imperative of a good solution at Copenhagen, was very much at the forefront of people’s minds. The overall investment required in environmental governance and the systems we need to regulate management of natural resources is, of course, vast. It is a question of prioritisation, and I suppose with Copenhagen the focus on climate financing became the dominant agenda at the time.

As I said earlier, I think there is a risk with some of the climate finance that tends to give cursory attention to the environmental dimensions of how climate change plays out and what that really looks like in terms of environmental management. Climate change is often interpreted as energy, so a lot of the investments are in the energy side. We have adaptation funds, too, which tend to be the funds that normally relate more to environmental change and building resilience among communities.

I am not trying to duck this by saying it was wrong to have such a high proportion of investment in climate financing at the time. I think there are bigger issues around governance of those funds perhaps, but what we have to do now is learn from what has happened with those climate funds; get the best practice from the various pilots that have been initiated and make sure that we take that best practice back to the UNFCCC processes. Perhaps if the sunset clauses in the CIFs are upheld, we will be seeing some good practice coming out of those funds into future climate financing.

Q91 Caroline Nokes: Picking up what you said about the adaptation funds, do you see that there is any element of competition between them and the climate investment funds and if so, is that causing any problems?

Dominic White: I think initially the ways the CIFs were set up undermined some of the UNFCCC adaptation funding. Developing countries supporting the adaptation fund were not in favour of the CIFs, but I think that is slightly historical now. If the sunset clauses in the CIFs are upheld, we should be able to take the lessons learned from the CIFs and transfer those to other future climate funding. I think the focus now should be on making sure we do get lessons out of those CIFs. Not all of them have been fully taken up. They have been slow to start and some of the projects arising are still incomplete.

It is a much longer process, of course, to get decent transformational change coming out of such funding, but I think it is more about looking forward to future funding mechanisms.

Q92 Caroline Nokes: Looking forward, in your view through what channels should the UK’s £2.9 billion of international climate fund be spent? I think you made a reference earlier to involvement of civil society, but what channels should we be spending through?

Dominic White: It depends on what you want to do with those funds. Where is the end state that you are concerned with in a particular mechanism? If you are engaged in improving governance of energy sectors, let us say, then dealing with programmes that are aiming towards better governance includes the state, it includes civil society and, of course, the private sector, too. You need funds that allow for access of the right participants in the aims of the programme, and there is no "one size fits all". There are times when you may want to fund civil society but certainly on other occasions it could be a state-focused enterprise. I do not really have a firm view on multilateral versus bilateral in any specific situation.

What I would say, perhaps, is that there are still concerns that climate financing is seen as different from ODA, and certainly the last Government made a commitment that only 10% of its climate financing would be considered as ODA. I think we have moved away from that now, where a lot of the £2.9 billion is all considered ODA. I think that needs to be considered a bit more carefully because there is a lot of concern that our historic responsibility for generating climate change from developed countries is not really factored in. You cannot use aid to mop up where we have been responsible previously, and it does move towards issues around whether some of these finances should be much more towards grants as compensation for acknowledging our historical responsibility. Of course, that is quite a moot point, accepting that.

I think longterm climate finance needs to be additional to ODA because the demands for that are going to be so hefty. We need innovative financing mechanisms, private sector engagement outside the ODA sort of structures.

Dr Hepworth: Just very quickly on two points: I think a critical key point is to retain flexibility in the way we disburse that. Undoubtedly, we need that kind of high level investment in responding to climate change. We need to retain flexibility so that that spend can respond to the real world complexes that are out there, which might mean big packages of multilateral aid for certain things, targeted bilateral support to certain sectors, but also, as you say, significant support to civil society to make sure that that aid is delivering and is held to account at an in-country level.

The second point is that we need to be careful. I have seen some instances where the amount of aid overloads both the capacity of the donor to spend it properly and the capacity of the recipient Government to handle it, and that can lead to perverse outcomes.

Chair: I have to try and keep us to some kind of timetable. With there being three witnesses it sometimes does takes longer, so we will try and move on a little bit quicker if we can. Caroline Lucas.

Q93 Caroline Lucas: Thank you. It is such a shame you said that because I was just going to say how nice it would have been-but we do not have time-to have explored what you were saying about the limitations of simply an aid budget to deal with the climate funding that we need to put there, looking at our historic responsibility, but I will not go there.

Chair: I think for the purpose of the Committee we want to get as much evidence as we can, so if it is worth exploring we will. It just means that we will have to stay a little bit longer.

Caroline Lucas: I will not annoy my colleagues. I will just merely put a marker down that at some point maybe we can discuss it later for another session , in fact, to look at the whole concept of ecological debt. I think there is interesting work that the New Economics Foundation and others have done, which I think could make a transformation in the kind of funding that we are channelling for developing countries to deal with, with the climate challenge.

Anyway, the question I am supposed to be asking you is going back to the issue of the balance between DFID funding on climate change and on environmental protection. I think, Dominic, you have probably said a lot on this already. I do n o t know if there is anything more you want to add about that balance . M aybe it does come back to how you define climate and it is not just energy; and you were sayi ng earlier about the impacts.

Dominic White: I think that is right. If you said, "We are just going to invest in an environmental programme or sector," you cannot do that without considering climate. Of course, you have to take the two together now, whether it is forest systems or fresh water systems. They are all subjected to climate pressures right now, so you would have to have adaptation as a core part of any programming there.

Yes, I think the point has been made that climate should not be synonymous with environment, but we need to see the two; how climate is played out through the natural environment is how people experience climate change. The emphasis certainly has been on climate as energy, and I think we can understand exactly why that is necessary in terms of the mitigation agenda. I think we need to perhaps have a more holistic approach in how that is perceived in future. DFID has what it would call a lot of climate advisers right now, and very few environmental advisers with natural resource skills left. Even the climate advisers are not always coming with experience of climate change, per se; they may be economists or health specialists but they have been tagged with responsibility for climate change. You might call that mainstreaming in DFID, but we do need the specialists who really understand the dynamics between climate change and natural resources.

Q94 Caroline Lucas: Following from that, does the current focus on climate mean that there are some environmental issues that DFID is neglecting?

Dominic White: If you take the fisheries sector, for example, we know that DFID has no fishery expertise now. They have a very good programme running through NEPAD and the African Partnership on fisheries management, but arguably they have nobody in DFID now who can make a judgment-from a technical specialist perspective-on the merits or demerits of the programme.

Q95 Zac Goldsmith: Is that a new situation? Sorry to jump in. The fact that there is no one in DFID who understands the marine environment or fisheries, is that a new development or has it always been the case in DFID that has led to that?

Dominic White: It is quite recent. I think the last specialist adviser left for the World Bank towards last year.

Q96 Zac Goldsmith: Is this a policy decision in DFID or is it just an area that has been overlooked?

Dominic White: I cannot say specifically on that.

Zac Goldsmith: It is an extraordinary factor.

Q97 Chair: I think what this does is raise the issue that if sustainable development is being embedded in all departments of Government, what is the expertise that is available in those departments and how are they equipped to apply this? I think in response to Zac Goldsmith’s question, anything you could let us have about your understanding of the expertise that is there or, if the expertise is not there, what approaches there have been perhaps with academia or anywhere else to get that replacement expertise is something that I think our inquiry is interested in.

Dominic White: Where the knowledge base sits and institutional learning and so on.

Chair: Yes, how it is quantified.

Dominic White: Yes.

Chair: Sorry, I think Dr Hepworth wanted to carry on with Caroline’s question.

Dr Hepworth: Just to reiterate the point, I hope that focus on climate change would not preclude it; for me it follows naturally that if you are interested in climate change you should be interested in these key sectors-water, environment, agriculture-to make the response to climate change. My fear is that DFID disbanded its environment adviser cadre several years ago, and although it is ramping up its expertise through the climate change advisers, there is a real need for that expertise in-country to respond to the realities of the situation. Without that, things will get missed and the focus could tend to be on the big strategic level climate change discussions rather than what is actually needed.

Q98 Caroline Lucas: Could you say a little bit more about the specific impact on water management of the loss of some of that expertise?

Dr Hepworth: Yes. DFID have focused, quite rightly, their water spend and efforts in recent years on improving water supply and sanitation, which is fantastic and much needed. But for me the reluctance to focus on water resource management or invest to support that is problematic for three reasons. The first one is a bit of a cliché, but if climate change is the shark, water is its teeth. Improved water resource management is going to be one of the best ways of reducing vulnerability and improving resilience to climate change and climate variability in the future.

Secondly, if you only invest in taps and toilets without looking at the sustainability of the water that is in those taps, or the sustainability of waste disposal for the waste, that does not make sense to me. You are risking sustainability impacts down the road. You are just looking at one part of the system. It is not common sense.

Thirdly, economic growth in developing countries is heavily reliant on water. Whether it is hydropower expansion, agricultural extension or things like mining, they all depend heavily on water. The Peru case study gives a great example; if you do not get the water resource management right to ensure that that development is happening on a sustainable basis, you are inviting trouble. It is a no-brainer for me that DFID should be looking in greater detail and with greater effort at water resource management.

Q99 Caroline Lucas: Is the expertise there were they to choose to do so, or is that part of what has been lost?

Dr Hepworth: There is a great deal of expertise on water in DFID but it is how it is used and how it is applied. There is certainly a great deal of expertise within the UK that could be better harnessed to deliver on some of these issues.

Q100 Zac Goldsmith: This is a really important point. The composition of DFID, the expertise within DFID, is absolutely crucial for what we are doing. It would be useful to hear clearly from you-apologies if I am asking you to repeat yourself-where you think the gaps are in terms of the expertise and knowledge. Are there any other areas within DFID where perhaps there is an overlap? That may or may not be climate change, it might be other areas, but are there areas where there is disproportionate expertise at the expense potentially of broader environmental concerns? It would be useful to have something on the record.

Dr Hepworth: I do not want to duck the question. It is a very important question but I do not feel as though I have the overview of DFID staffing and priorities to give an unequivocal answer. From my experience, there is a need for more capacity and experience at country level on the nuts and bolts of environmental management.

Dominic White: Broadly, DFID are short of natural resource scientists and specialists, and they have a very strong cadre of climate advisers who, as I say, come with some generalist skills as opposed to specialist skills, but they have a very large climate team. I think we can get back to you with some thoughts on perhaps where some of those shortcomings lie.

Chair: That will be helpful.

Q101 Simon Wright: DFID’s structural reform plan lists six priorities, one of which is combating climate change, and another is pushing a focus on policy towards boosting economic growth and wealth creation. I wonder if you could comment on the extent to which you feel there is a tension between those two priorities and whether DFID should prioritise growth of ability to meet shortterm basic needs over and above green growth.

Dominic White: I suppose in an ideal world you could achieve both but, of course, they have to make priorities. The changes required to reduce poverty have to be oriented towards the long term if we are really to make a substantial shift. For very good reasons in terms of humanitarian responses, of course, we must support countries through times of crisis. In terms of the longer term development objectives, we have to go for the longterm wins. The poor depend very directly on the environment, first and foremost; 70% of poor people live in rural areas. Of course, there is a shift towards urban centres, but that dependency is very profound. You cannot invest in good environmental management to support poverty reduction in the short term; it is a longterm game. The concern is, as I mentioned in terms of the results-based agenda, that we forgo the longterm change objectives because they are too hard to measure. That is one concern.

In terms of shortterm growth versus longterm sustainability-green economy type thinking-there is a strategic choice about whether we want to be able to produce shortterm wins that we can tell taxpayers have been achieved with their money, or are really playing a long game in terms of supporting countries to be set on a sustainable pathway where their dependency on aid would, hopefully, diminish over time.

None of this is easy or straightforward, but I think that we have done a lot of projects and programmes in the aid sector that have produced some fascinating and interesting results in fiveyear time horizons, for example. It is extremely difficult sustaining that change unless we have played for the long game, and built strong and robust institutions that can maintain the outcomes that we have achieved through those projects. Too often, project work has ended up with the donors moving on, for whatever reason, and there being no support for the infrastructure that was left behind supporting those projects. You have to play for national level systems; you have to invest in those to get that longterm gain.

There is a tension, to answer your question. I think that is fair, but I think we would have to say that ultimately we need to invest in longterm sustainable economy.

Chair: I am conscious that we only have a limited amount of time. I know you wanted to come in, Ruth, and perhaps if we could try to get quicker answers we could cover the areas that we wanted to cover.

Ruth Davis: I have two points in response. DFID needs to ask the question and we need to ask the question: what kind of growth are they talking about? Because there are many instances of supporting projects on the basis of saying that they are necessary for wealth creation, whereas an assessment of their impact further on would say that that wealth creation has had no benefit for local people, for the poorest people in that country, and in many cases has eroded the natural resource base upon which they depend.

Go back to the Extractive Industries Review and look at the lessons about resource curves and the way that has been exacerbated by lending in some of those infrastructure projects. Growth for whom? What is it for? Who does it benefit?

Alongside that, there is a question of saying that there are some opportunities for growth, where it is arguable that you can invest at the same time in longterm benefits and in growth. I give the example of a nascent project in North Africa where DFID and others are investing in concentrated solar power, which has the capacity to provide energy access for local people, but also wealth generation because quite a lot of that energy potentially can be sold into the European Union.

The notion that growth in itself equals poverty alleviation, support for women, support for MDGs, needs to be taken to pieces. It does not necessarily deliver on those things and that is DFID’s core job-to deliver on those things.

Chair: Thank you. I think we are going to have to press on.

Q102 Simon Wright: The definition of sustainable development within the International Development Act 2002 is given mainly in terms of providing, in the view of the Secretary of State, lasting benefits for the country in question. Do you feel that the definition within that Act is appropriate, or is there need to amend or change or update that definition in some way?

Dominic White: I would strongly suggest that it is woefully inadequate. It is slightly bizarre, in fact. I think now DFID have a much better handle on what sustainable development could be defined as. Of course, traditionally, since 1987 when Brundtland came up with the definition, what was generally referred to as the "three pillars model" is broadly accepted. I think at the time it allowed environmental considerations particularly to be taken into account in terms of socio-economic objectives, and it stood the environment quite well in many international processes as a result. I think a clearer definition would definitely be required. As we move towards Rio+20 and we have a bigger conversation going on about what is the development paradigm that the world needs, not just for poor countries but for developed countries too, given our adverse consumption rates right now, the definition is not sufficient and, yes, it needs to be changed.

Q103 Simon Wright: Would all three of you recommend the Brundtland definition that you referred to?

Dominic White: For lack of another sufficient internationally recognised definition, it is better than what DFID have right now, but I think we understand the world much better now. These issues of environment, social development and economic growth are much more complex, and the challenges we face in terms of climate change, migration, population and so on are vastly more interconnected. We need a model and a definition that captures the complexity and interdependency of these various challenges we face. We still have a little bit of a silo approach in the three pillar definition because it is three pillars, and there are dangers in still separating environment from economy, from social objectives. I think that is the weakness, but it is certainly better than what DFID have.

Ruth Davis: I would completely second that. With the three pillars you always end up in a position where somebody is suggesting that you trade one off against each other, and that completely ignores the underpinning of human well-being and health and the existence of healthy ecosystems. The second definition may be better than the first, but there is a clear need to move on.

Chair: Really quickly, Dr Hepworth, because we must move to forests.

Dr Hepworth: People talk about three pillars of the definition of sustainable development. There has been quite a bit of work to add an additional pillar, and that is institutional sustainability, which stresses the need for laws, policies and organisations in place to be sustained to actually deliver sustainable development. So that is an idea to include in the definition.

Chair: I am going to move on to REDD and forestry. Mark Spencer.

Q104 Mr Spencer: Obviously, UN strategies to reduce emissions and deforestation are being run by the World Bank. Are you happy with that? Do you have any concerns?

Ruth Davis: The REDD plans that are currently in front of the bank-in front of the Forest Carbon Partnership Facility on the one hand and the Forest Investment Programme on the other-I think almost without exception risk making the problem worse rather than better at the moment. That is not true about where the Brazilians are coming from, but it certainly is true, in our view, about the current set of proposals that are up there for Indonesia, Guyana, PNG, DRC-most of the large forest countries in the world.

The reason they risk making it worse, not better, is because they come forward with proposals that are more about establishing support for business as usual and bankrolling plantation developments than they are about protecting natural forests. There is an urgent need for DFID to ensure that any money that it is putting into REDD is meeting the basic safeguards that were developed in the Cancun agreement, and is focused absolutely on the protection of natural forests and the protection of the rights of the people who live in and around those forests. That is not the case as it stands at the moment.

Mr Spencer: Very good. You have answered almost all the questions I wanted to ask.

Chair: Does anyone else want to come in on that? No. Katy?

Q105 Katy Clark: Yes, I have quite a specific question, because you have answered quite a lot of the questions that we had earlier, and it is for Dr Hepworth. In your submission you say that the Water Sector Development Programme in Tanzania has been described as "a car crash in slow motion". Could you maybe tell us a bit more about that project and what went wrong, but also what lessons we can learn from that?

Dr Hepworth: Sure. The Water Sector Development Programme is a very ambitious $700 million sector-wide approach to revitalise the water sector in its broadest terms in Tanzania. It is supported through a basket fund led by the World Bank and the Germans and the Japanese. The comment you referred to was made at last year’s joint water sector review, which is an opportunity for donors, civil society and the Government to reflect on progress.

The investment is very much needed, there is no doubt about that. I guess we can split the problems with the Water Sector Development Programme into three areas. First, the context. What the programme is trying to do is to establish effective institutions on water in a 12year period, starting almost from scratch in a hugely challenging environment with endemic poverty. We have been trying to get our water management right for 120 years, so as you can imagine, the challenges of doing that in 12 years are very real. It is a tough job.

The second area of problems is with process. The funding for the programme was unofficially suspended last April, because of a lack of quality reporting from the Tanzanian Government and some discrepancies in the financial auditing of the work. On the problems in the process, there is an impatience within the donors to see progress against this huge spend that they have put there, but there is a lack of capacity within Government to get that spend out there. There are more creative ways of dealing with the problem that the donors could take other than suspending the funding.

The last area is the model of development that the programme represents. I strongly believe, and the research we have done suggests, that the programme was designed without fully understanding all the problems around why water management in Tanzania was not working very well. For example, some of the very real issues in Tanzania are around Government accountability and Government linking to its population’s needs, and there is a real problem with public sector pay and motivation. Public sector pay has not been increased for years. But the programme does not deal with those things. It basically focuses on capital investment and consultantled planning, which simply is not going to deal with those problems that are probably the root cause or a key cause of lack of progress in water in Tanzania. Indeed, DFID are doing lots of work around that to try and unlock some of those problems and we hope to be working with them later this year in Tanzania on building some public sector accountability monitoring for the spend. I guess the crux of this is that investment is desperately needed in Tanzania and it is vital that it continues on course.

Q106 Chair: Just absolutely finally, we have already touched earlier on the Export Credits Guarantee Department, and linked with that obviously is the CDC. Given that that investment code, as I understand it, is under some debate or under some kind of review, how might their remits or processes be changed to build in the environmental safeguards and to apply the holistic approach that you were referring to? Do you think that is something that needs to be addressed?

Ruth Davis: I will answer briefly on the ECGD. I can specifically talk to their role in energy investment as opposed to the broader environmental safeguards. We have a commitment in the Government’s coalition agreement to reframe the ECGD so that it invests in low carbon development and takes its money out of dirty fossil fuels. Unfortunately, the Government has dragged its feet for the last nine months in taking any effort to implement that commitment, and although there is now an intention of taking the ECGD apart as part of a review of the Government’s overall trade and export policy, there is no commitment to a process for developing criteria for its funding going forward.

What we need rapidly is effort on the part of DFID and DECC to ensure that that is carried forward by the Trade Department. There are two things that the ECGD could be doing. One is giving a strong signal to investors that the risks associated with high carbon investment, particularly unabated coalfired power stations and oil extraction, are too high and that we will not be backing those as a Government. The second thing that it can do is to start developing innovative ways in which small and mediumsized businesses in the UK can start to help to deliver low-carbon benefits in the developing world.

The previous model of the ECGD really would not have enabled us to do that, because the way that it worked was that it engaged with two or three very large companies. I think for the last two or three years it has only funded Airbus; it has had one client, effectively. We recognise that is a problem from a trade perspective. It is also a problem from the perspective of developing energy efficiency and renewable energy projects, because they tend not to operate at that kind of scale. There is quite good synergy between looking to support export growth in the UK and deliver sustainable solutions, but it really needs some leadership from within BIS and that is not happening at the moment. They need pressure from other sides of Government to get on with that and deliver that commitment.

Chair: Thank you, that is very helpful. I am afraid there we must leave it, but I think that we have covered ever such a lot of ground. We are really grateful to all three of you for coming in. Thank you very much indeed.