FINANCE:

World Bank preparing a new, expanded approach to climate change

World Bank President Jim Yong Kim has instructed his staff to develop a new approach to climate change, a proposal he intends to bring to the board this spring.

At his direction, bank staff members are quietly working up a blueprint that, sources say, is likely to include plans for expanding the bank's work in carbon markets, ending fossil fuel and other subsidies and making cities more resilient to climate change.

But according to board staff and others knowledgeable about the process, the work is being conducted in extreme secrecy. That, in part, is because Kim hopes to avoid the explosive coal debates that inflamed previous energy plans. In fact, management is said to be so fearful of sparking a repeat of disputes that capsized a proposed energy strategy in 2011 that they are deliberately avoiding using the word "strategy" in a parallel attempt to gauge the future of the institution's sector lending (ClimateWire, April 12, 2011).

No matter what it is called, though, avoiding the World Bank's future role in financing fossil fuel projects may be hard. Environmental activists say they hope to make it impossible.

"It's quite clear they understand coal is going to be front and center of whatever strategy they're looking at. It's the 800-pound gorilla in the room," said Justin Guay, coal campaigner for the Sierra Club. "It's going to be a tightrope for them to walk."

The World Bank over the years has struggled with how to reconcile its growing eagerness as an institution to tackle the problem of climate change with its main mission as an institution aimed at reducing poverty.

Coal financing issue will linger

In Davos, Switzerland, recently for the World Economic Forum, Kim warned that rising global temperatures will severely harm already vulnerable communities. At the same time, he argued that the World Bank cannot "turn its back" on poor nations that need coal -- a chief driver of climate change -- because it delivers much-needed energy access.

Activists and bank staff say Kim is without a doubt making climate change a major priority at the bank. He has already mentioned the threat in several speeches, pushed ahead the publication of a major scientific review exploring the ramifications of a 4-degree-Celsius rise in temperatures and met internally with agriculture, water and energy departments to make the case that none of the key development projects in those sectors can be successful if climate is not dealt with (ClimateWire, Nov. 19, 2012).

Development experts involved in early discussions about the new action plan describe it as an effort to think more broadly about what the bank can be doing on climate.

Some ideas in the mix include: developing a carbon reserve, money from which could be used to support the carbon markets; a campaign and policies to eliminate a broad array of subsides including for fossil fuels and water, as well as establish a set of social safety nets to protect poor and vulnerable communities that depend on such subsidies; and targeting short-lived greenhouse gas emissions like black carbon that could significantly reduce overall greenhouse gas levels.

Steve Herz, a senior attorney with the Sierra Club, said he believes the bank is focusing the noncontroversial items first. Kim, he said, "can't just come in and start smashing the china," which is what trying to eliminate coal financing would amount to. But, he argued, focusing on ways to ramp up distributed solar energy is one way the bank could marry poverty alleviation and environmentally responsible development.

Greater focus on off-grid and renewable energy

"Where the World Bank gets into trouble is in trade-offs. What they should be doing is thinking very strategically about where the synergies between those two agendas are and focus on those. Those should be their sweet spot," Herz said.

Indeed, some activists say privately that they believe the climate change approach should ignore the coal question altogether. Leading staff members on the boards of several countries told ClimateWire that the positions of China, India and other developing nations that have insisted that they retain the right to access financing for coal plants have not changed.

Rather than take on and likely lose that fight, some argued, the better strategy would be to help shift the bank to make it more capable and more devoted to developing off-grid and renewable energy in growing nations.

"We would love if [Kim] were willing to go to his board and confront it. But it is not clear whether confronting it at the board and winning by a small margin would serve this world," said one expert involved in recent discussions. "It might make Greenpeace happier, but it doesn't do anything for the world. What would do something is to make a commitment on renewable energy."

Environmental groups, though, insist that coal is their litmus test for how ready Kim is to truly confront climate change. With decisions looming on a World Bank-financed coal plant in Kosovo and a mining-related coal plant in Mongolia funded by the bank's private investment arm, activists say the institution needs a clear new direction in its lending.

Said the Sierra Club's Guay, "You can make all the pronouncements you want about climate change, but if you still fund coal, it's not enough."