Global Coalition: World Bank needs an oil change

More than 200 organisations from 56 countries are calling on the World Bank and other international financial institutions to end subsidies to the oil industry. In a statement, the groups refer to ‘oil aid’ as one of the most glaring barriers to fighting climate change and addressing energy access in developing countries. As the heads of the World Bank gather in Washington this weekend to discuss their energy lending and climate change strategy, the latest annual report of the International Finance Corporation (IFC) indicates that little has changed in the institution’s approach. In 2007, the private-sector lending arm of the World Bank provided more than $645m to oil and gas companies. This is an increase of at least 40% from 2006.

“The World Bank’s approach to climate change and energy is inconsistent and contradictory,” said Jennifer Kalafut of NGO Oil Change International. “Despite commitments to cut global greenhouse gas emissions, it continues to increase support for oil extraction projects around the world.” In 2006, the World Bank increased its energy sector commitments from $2.8bn to $4.4bn. Oil, gas and power sector commitments account for 77% of the total energy sector programme while ‘new renewables’ account for only 5%. “Investing in renewable electricity will save 10 times the fuel costs than if we stayed on a ‘business as usual’ course with fossil fuels,” said Daniel Mittler from Greenpeace International. “We can cut global CO2 emissions by 50% by 2050, while addressing issues of energy access for the poor and maintaining global economic growth.”

The Bank’s support to the oil sector is also highly inequitable. While the majority of its oil projects are designed for export to wealthy countries, 1.6 billion people, including 500 million in sub-Saharan Africa, still lack access to electricity. “By funding these oil projects the World Bank is undermining its own goals of fighting energy poverty and reducing greenhouse gas emissions. It is also perpetuating problems of conflict and human rights violations often associated with extractive projects, as in the case of the Chad-Cameroon pipeline,” said Korinna Horta from Environmental Defense, a U.S-based NGO. The hundreds of groups and affected communities that have signed this statement are demanding that the World Bank and other public financial institutions stop financing oil projects. They assert that development assistance should be tackling the issue of energy poverty and building clean energy pathways rather than subsidising big oil.

Royal Bank of Scotland: Profits threatened by fossil fuel financing

As the Royal Bank of Scotland (RBS) prepares to announce its interim 6-month profits on Friday, NGOs such as Friends of the Earth and People & Planet warn that the bank’s financing of oil & gas projects may threaten current & future profit margins. Calculations indicate that the bank is carrying unaccounted for current carbon liabilities of up to almost £1 billion, over 20% of the bank’s interim profits. According to a study, in 2006, RBS’ estimated embedded emissions resulting from loans to oil & gas extraction totaled over 43.7 million tonnes carbon dioxide. If costed according to a social price calculated by Sir Nicholas Stern, these carbon liabilities add up to £940m over six months - equivalent to over 20% of RBS’ expected interim profits. Even at the EU’s carbon trading figure – generally recognised as lower than the real cost of carbon, due to overly generous permit allocations - internalising these costs would set RBS back £598m per year.

The bank’s forays into conflict areas bring further risks. RBS is working to source financing for a $6bn gas project in the Niger Delta involving Shell. The Olokola LNG project threatens to displace local communities and cause conflict. The largest rebel group in the Niger Delta, the Movement for the Emancipation of the Niger Delta, has threatened, “It is inconceivable that … they can be protected from our ability to sabotage the Olokola facility. We will test the integrity of that protective measure.”

RBS’ insurance divisions have been particularly hard hit by the recent extreme weather events and floods that hit England, widely associated with climate change, could bring £300 million of claims to Direct Line & Churchill, through which RBS controls 16% of the home loans market. Mika Minio-Paluello from Platform said “Unless the bank begins to recognise its climate responsibility and take its carbon liabilities seriously, shareholders may be in for a revenue shock in the future. On its current course, RBS faces a double whammy – greater insurance losses as a result of climate change; and higher costs should Governments impose financial charges to reduce climate changing emissions.”

"New Global Deal" for energy policy: What role for multilateral banks and the EU?

The European Union is formally committed to keeping global climate change below a 2° Celsius increase over preindustrial temperatures. Around the world, a variety of governments and stakeholders are now arguing that this needs to become a global goal. A crucial step forward on this was taken in Gleneagles in 2005, when G8 and other participating countries asked the World Bank and other multilateral development banks to work on a Clean Energy and Development Investment Framework (referred to here as CEIF). A new paper, published by the German Forum on Environment & Development and VENRO, the association of German Development NGOs provides an analysis of the state of the debate on a global deal for 2 degrees within multilateral banks and European Union institutions, and the policy mechanisms that are needed to achieve this goal. In addition this paper makes recommendations on a new “global deal”, including the Bonn Statement that gives new crucial proposals to achieve the energy goal.