World Bank:

WRI's Frances Seymour talks lending, environmental policy, developing nations

Should developing nations be held to the same environmental standards as developed nations? How should the World Bank weigh environmental concerns in lending? And how much should citizens be allowed to participate in such decisions? Frances Seymour, director of the World Resources Institute's Institutions and Governance Program, joins OnPoint to discuss how aid agencies and international lenders can be more environmentally efficient, effective and fair.

Transcript

Mary O'Driscoll: Welcome to OnPoint. I'm Mary O'Driscoll. Our guest today is Frances Seymour, director of the institutions and governance program at the World Resources Institute. Welcome to the show.

Frances Seymour: Thanks for having me.

Mary O'Driscoll: You've been critical of the World Bank for not making sustainable development a real integral part of its lending program. Why should the World Bank put environmental concerns on par with the economic development?

Frances Seymour: It's a great question and actually, at least at the rhetorical level, it's not controversial. The World Bank published a new environment strategy about four years ago that laid out the case very well, which is that poor people are, in fact, the first to suffer and suffer the most from environmental degradation. It's poor people who get sick from breathing dirty air and drinking dirty water. It's poor people whose livelihoods get disrupted when ecosystems like fisheries collapse and it's poor people who are most vulnerable to 'natural disasters' that, in fact, aren't natural. For example, the kinds of flooding and landslides that happen in major storm events and the kind of change that we can expect to see with climate change as it progresses. The Millenium Ecosystem Assessment that came out just in March further reaffirms that problem in that the ecosystems that we see being undermined around the world will disproportionately adversely affect poor people. So if the World Bank is not focused on environmental sustainability it's not meeting its mandate for property reduction.

Mary O'Driscoll: But haven't some of the criticisms been that focus on environmental sustainability can drive up costs and slowdown project planning?

Frances Seymour: That criticism has been articulated, but I personally don't think it's very well founded on the merits. Yes, sometimes doing due diligence in advance takes longer to do the necessary environmental analysis and to consult with the affected stakeholders, often the local communities, but others as well, to sort of determine is this project the best answer to the particular problem or are there better alternatives? That may take longer upfront, but often if you don't do that due diligence early in a project cycle the problems will be much greater later on and projects often get delayed when some of these projects surface later in the project cycle.

Mary O'Driscoll: OK. Outgoing World Bank President James Wolfenson returned to funding the big interest projects that he called "high risk high reward," how do you see that affecting the banks approach to environmentally sensitive development?

Frances Seymour: I think it's problematic, and it poses a real challenge and it seems that the bank, in order to increase its lending to the middle income countries, which is important for the banks financial viability, is increasingly willing to loosen up the framework of environmental and social safeguards that have been painfully constructed over the last two decades. So for example, the World Bank is now already experimenting with something called the country systems approach, in other words, relying more on the environmental and social safeguards frameworks of the countries, borrower countries rather than the banks. In principle this is a great idea and I think we all want to live in a world where all countries have the equivalent safeguard procedures at least so that affected societies and communities can demand the quality of environmental protection that they want. But I also think we have to admit that we don't live in that world yet and that the World Bank safeguards are in place for a reason. That in the past investment in the name of development caused some very negative social and environmental outcomes and it's probably premature to remove those safeguards that are currently in place.

Mary O'Driscoll: OK. Well why is the bank returning to those kinds of the high-risk projects? They've come under pretty heavy criticism from nongovernmental organizations such as yours. Why are they doing that?

Frances Seymour: Again, I think one of the reasons is a desire to facilitate higher lending volumes to the middle income countries, which of course borrow at a higher rate than the poorer countries and so there's a financial issue involved. I also think that, unfortunately, there's been a subtle but significant shift in the discourse away from the focus, say back in the '90s, which valued environmental and social safeguards and protection is a very important component of development. Now there seems to have been a change where environmentalism is equated with extremism and this argument that it causes unreasonably high costs and delays, which as I said, I don't believe is true, but to the extent that that point of view is reflected in some levels of the banks senior management and on the Board that has facilitated this shift.

Mary O'Driscoll: Yeah, OK. Do you have a read yet on how incoming bank President Paul Wolfowitz feels about this high-risk, high-reward strategy?

Frances Seymour: I don't. He doesn't have a track record on this particular set of issues. So we'll all have to wait and see.

Mary O'Driscoll: OK, interesting to watch. The World Bank recently oversaw a major study that identified climate change as a major risk for developing nations. Should the bank be including an emissions analysis in its development decisions?

Frances Seymour: Absolutely. Clearly, the bank has two roles with respect to the climate issue. One is to help borrower governments deal with the adaptation challenge because developing companies and the poor within developing countries are the most vulnerable to climate change. When you think about farmers in sub-Saharan Africa, who are already on the edge with rainfall patterns as they are, will be tipped over that edge if those rainfall patterns change. What the bank has shied away from doing is addressing more straightforwardly the question of reducing emissions or at least emissions trajectories. Nobody argues that developing countries should take a disproportionate responsibility for reducing emissions. We're all clear that the industrialized countries are responsible for this problem at a cumulative level and need to take the lead in reducing emissions in our countries. At the same time, it's also pretty clear from the science that unless all countries and the world community get together and reduce emissions collectively we're not going to meet any kind of target that is going to lead to a stable climate. I think the bank has been reluctant to directly engage emissions reductions in developing countries for fear of being perceived as going beyond what the climate convention requires and being perceived as imposing emissions reductions on developing countries that they are not required to undertake under the convention. My own view is that there are a lot of things that the bank could be doing or doing more of that would fall far short of crossing that line of inappropriate.

Mary O'Driscoll: Such as?

Frances Seymour: Well for example, as you mentioned, the bank can do a better job of working with client governments to look at more emissions friendly development trajectories, even at the sector level, you know, when you're thinking about how to design a power sector strategy or how do think about a whole transport sector. You know, think about environmental issues in general, which is not always the case, but also, specifically, emissions trajections because there is often a correlation between, for example, air pollution that has local health impacts, forget climate change, that can co-vary with ways to reduce climate emissions. At the project level, I think the bank can do more in helping borrowers to inventory and account for the emission trajectories of the proposed project on the table, but also, alternative ways of meeting that same development objective. So you could actually compare a particular way of providing energy services to the poor that's based on fossil fuels to a way of doing it through distributed renewable energy. In some cases it may turn out that the distributed renewable energy is actually cheaper than the fossil fuels because for people who are way off the grid extending the grid to them and perhaps importing fossil fuels from abroad to service that need may actually be a less desirable alternative than a distributed renewables approach. But even in those cases where it turns out that the low emissions alternative is more expensive than the fossil fuel based alternative it's still worthwhile to do that calculation of what the difference is because that tells us how much the international community needs to get together and pony up in concessional funding to an able developing country bank clients to choose a low emissions trajectory and it's in everybody's interest to do that. So I think it's reasonable to ask the World Bank to exercise some leadership here.

Mary O'Driscoll: OK. Could emissions analysis though wind up, at least in the short term, giving more people less access to reliable electricity? I mean if you're talking about the renewables and that kind of thing, I mean the conventional wisdom is, is that the fossil fuel plants that, you know, the technology is pretty far advanced on those compared with the renewable energy technologies that could, you know, more people have less access?

Frances Seymour: Great question, but the answer is not at all and just to be clear, what I'm proposing, in terms of doing the accounting analysis and doing the options assessment and seeing what incremental costs might be, in no way prejudges the outcome and in no way suggests that developing countries have to choose the lower emissions alternative. It may be that, for the reasons that you suggest, whether it's reliability of the technology, maybe in some cases that isn't the best choice, but I think the citizens of those societies need to have all those choices in front of them to be able to choose wisely and the international community needs to have those choices and the cost of them put before us in some clear way so that we know what the financing challenge is to make some of those options more feasible.

Mary O'Driscoll: OK. I'm wondering if the emission analysis would give hydropower an advantage, considering the opposition by NGOs to some of these large hydropower projects around the world.

Frances Seymour: That's a very controversial issue. Clearly, the concerns about hydropower range far beyond the connection to climate change and some of the biggest problems with the large dam projects in the past have included the displacement of affected communities and the inability to resettle families in a way that leaves them at least as well off, if not better, than beforehand, but the track record is not very good at the ability to do that. The world commission on dams, several years ago, did an exhaustive study of large dam building around the world and found a systematic bias of overestimating the benefits of large dams, whether from the point of view of electricity generation or hydrological control or other kinds of benefits that were promised at the time versus systematic under budgeting of costs, not only the bricks-and-mortar costs, but the costs imposed on local communities, the costs imposed on the environment. For example, it was the rare occasion that people thought to think about what would be the impact on downstream fisheries and all the fishermen that depended on those fisheries for their livelihoods. So I think the big dams controversy is much larger than the link to climate.

Mary O'Driscoll: OK. How do you see the emissions analysis as affecting the size and type of World Bank projects? I mean, are they likely to go much smaller then or can you have, or will there be room for larger hydro projects that might fit the environmental criteria in other ways?

Frances Seymour: That's a good question that would require some more analysis, overall, I suspect that there's current, there currently remains a bias towards some of the larger projects, for a lot of reasons external to the bank. I mean, often borrower governments also want the larger project and that some of the smaller projects have been systematically disadvantaged because of the real or inferred transaction costs. I mean, sort of bundling lots of small renewable energy investments in a disbursed area. It's just a lot harder to do than one big centralized power plant, from that sort of transaction costs point of view. So it would be reasonable to assume that maybe this would level the playing field a little bit more and make the smaller projects look relatively more attractive than they currently do once these projects are analyzed.

Mary O'Driscoll: OK. I want to switch gears for just a second, just a little bit. The author Sebastian Mallaby recently wrote a book about the World Bank and his book accuses the environmental groups of undermining the World Bank's ability to help the poor. He said, NGOs are too concerned with applying, what he called, the Volvo standard to countries that have almost no electricity or water infrastructure. Does he have a valid point? What do you think of his views?

Frances Seymour: First let me say it's a great book. I really enjoyed reading it and I think he gets a lot right in terms of the politics inside the World Bank and the political environment that the bank has to work in and some of the tensions that the institution has to manage. But the point that you raise is the one thing that I think he gets wrong and it's hard for me understand how he could extrapolate from the analysis of a few notorious cases to come to the conclusion that somehow international environmental NGOs pose a major threat to the world's poor, because if anything, based on my experience, the opposite is true. It is the international NGO community working with NGOs in the client countries that have provided a very needed amplification of the voices of affected communities who are often the ones who suffer the negative affects of environmental and other impacts of these large projects. And beyond that, even in some of the cases that he cites, it's been the scrutiny from international NGOs that has revealed other flaws in these projects beyond just the environmental aspect, that has led to bad decisions, you know, being pulled back on. So I really regret that he came to the conclusion that he did in part because, unfortunately, there's a confluence with that conclusion and the interests of certain people within bank's management and on the banks board who would like to water down environmental standards and shut out NGOs from development decision making for other reasons. It's just unfortunate that that's the conclusion that he has come to and promoted in his spin off articles and other speaking that he's done.

Mary O'Driscoll: OK. Well what about that question about the Volvo standard that he talks about, because it's essentially trying to gold plate these programs that maybe they should be doing things on a little more incremental basis. That, you know, maybe gold-plated standards in the developed world probably would apply because we can afford them and that kind of thing, but in these countries where they're just trying to really get out of their economic problems and trying to pull themselves up, that maybe it doesn't apply there. What do you think of that argument?

Frances Seymour: I think that argument might have some merit if we were talking about absolute environmental quality standards. Different societies might choose to tolerate different levels of environmental quality, but what we're actually talking about here are procedural standards, things like whether the appropriate stakeholders or affected communities have been consulted. You know, whether the appropriate analysis of environmental impacts have been done, whether the appropriate information has been shared with the appropriate parties. So it's procedural things which I think are universal. I think citizens, no matter what country they live in, ought to have access to information about the projects that are coming down the pike in their backyard, what the social and environmental impacts are going to be. You know, what steps are being taken to mitigate those social and environmental impacts and just sort of be able to have the discussion, for example, about some of those alternatives I was mentioning earlier in the energy sector and to know, OK, well, compared to what? Is this project a good idea compared to what other way we might generate national revenue, provide electricity services, provide hydrological regulation or whatever else it is, the development benefit that's promised.

Mary O'Driscoll: OK. Has this, has the criticisms in the book, has that affected the environmentalists ability to influence World Bank decisions?

Frances Seymour: I think it has precipitated a subtle change in the discourse and I think that's unfortunate.

Mary O'Driscoll: For worse?

Frances Seymour: Yes, for worse.

Mary O'Driscoll: For worse from your perspective.

Frances Seymour: That's right.

Mary O'Driscoll: Are you trying to overcome that now or what are you, how do you try to overcome that if the discourse has gotten worse?

Frances Seymour: Well, I think we need to stick to our principles and continue to do what we think is good analysis and continue to be in touch with our colleagues and public interest groups around the world and continue to put forth the positions we think that are the right ones and hope that our interlocutors in client governments within the World Bank, on the World Banks board are persuaded by the merits of the analysis.

Mary O'Driscoll: I wanted to get just quickly to the issue of the client government ownership that the World Bank confers on these countries. Has this affected the way that they've implemented any environmental safeguards?

Frances Seymour: Well, I think part of what's underlying this shift to the country systems approach, which is still in a very experimental stage. I think, again, in the discourse sometimes country ownership is kind of used as an excuse for not pushing harder on some of the safeguards that are there in place, but it's subtle and often it's hard to recognize from the outside, what's really going on in a particular case.

Mary O'Driscoll: Do you think the World Bank now is more or less open to criticism?

Frances Seymour: Well, it sort of depends on the timeline. Clearly, over the last 15 years there's been enormous changes and that's beyond dispute. And I want to hasten to say that there are a lot of great people working inside the World Bank, who get it and are working to promote the very agendas that I've been talking about now. The problem is, is that the few examples where the bank really is doing a great job working with client governments and others to promote environmental sustainability, it's singled out as best practice, but it's not average practice and there are a lot of overwhelming internal institutional incentives as well as external ones that keep it from being average practice and I think that any president of the World Bank is really going to have to focus attention on this using the sort of Jack Welch management of relentless and boring to just continually hold bank managers accountable for integrating environmental sustainability concerns into everything they do and being clear that this is a fundamental part of the banks antipoverty agenda and not something that can be put off in a paragraph at the end of every report.

Mary O'Driscoll: OK. Do you expect any of that to happen under Wolfowitz or how do you think Wolfowitz will handle these kinds of questions?

Frances Seymour: I'm hopeful that he will be open to this agenda. I worry about the environment that he's stepping into and some of the shift in the discourse that I mentioned earlier and this pressure to increase lending to the middle income countries, but I'm hopeful that he will come in with an open mind.

Mary O'Driscoll: Have you met with Wolfowitz yet? Have you had a chance --

Frances Seymour: Not yet.

Mary O'Driscoll: Not yet, are you hoping to soon?

Frances Seymour: Well, I think, everyone is looking forward to the opportunity.

Mary O'Driscoll: I'm sure, I'm sure. Well thank you so much for coming. I'd like to thank our guest Frances Seymour of WRI. I'm Mary O'Driscoll. We'll see you next time on another edition of OnPoint.

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