World Bank Worried About Fossil Fuel Investments
by Jim Lobe
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by Jim Lobe |
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(IPS) WASHINGTON --
The
World Bank Group, which has invested some $2 billion annually in oil, gas and mining and other non-renewable energy projects in developing countries over the past decade, is increasingly concerned about the public relations and environmental risks created by these projects, according to recently leaked documents.
One document, part of a recent presentation to staff at the Bank's private sector arm, the International Finance Corporation (IFC), labels the oil, gas and mining sector a "clear and present danger" to the agency's work due to "global concern over (the) inherent sustainability of extractive industries." It cites the same level of risk posed by non-renewable power projects, such as coal-fired power plants, given "compelling evidence of accelerating global warming (and the) anticipated international clamor for action on GHGs," or greenhouse gases. In both cases, the document suggested that the IFC should do more to address these concerns, although it did not make specific recommendations as to how to do so. The document appeared to be part of an ongoing review by the IFC and the Bank on extractive industries. The review's first stage will be concluded with the release of a "formal paper" in several weeks, according to an IFC spokesman who would not comment on the authenticity of the document. "We look forward to engaging in a constructive discussion with a wide variety of external stakeholders on these issues," he added.
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Activist
groups see the documents as evidence that the Bank is beginning to grapple seriously with investments in these sectors. Last year, the IFC alone approved some $644 million in new commitments to oil, gas and mining, out of a total portfolio of $5.8 billion.
"We have an indication that the Bank is recognizing the fact that, while this is one of the most profitable sources of revenue, it is also one of the most problematic in terms of its global image and the global environment," said Daphne Wisham, an analyst at the Washington-based Institute for Policy Studies (IPS), which obtained the documents. The Bank's concern comes within a much larger context of growing concern about the impacts of extractive industries on both global warming and the environment, and on developing countries themselves. As the global economy has expanded over the past decade, the need for raw materials, particularly in the energy sector, has grown quickly. The result is that oil and mining companies have been pushing deeper into remote regions which previously were relatively untouched by modern industries and societies. As these companies have staked their claims, they have called on governments to provide security for their operations against local residents, a pattern that has resulted in serious human rights abuses across much of the developing world, most recently in countries such as Indonesia, Burma, Colombia, Nigeria and Sudan. Many of the same projects have damaged sensitive and often unique ecosystems. Human rights and environmental groups, such as Amnesty International, the Sierra Club, Friends of the Earth and Human Rights Watch, among others, are putting unprecedented pressure on these companies to act with much greater consideration for the needs and rights of local people and, in any event, not to condone, let alone encourage, abuses by state authorities. Apart from the human rights concerns, however, companies are also under growing activist pressure to address global warming by increasing their investments in renewable kinds of energy, such as solar and wind power, rather than in non-renewable fossil fuels, like oil, coal, and gas, which only add to the problem. The world's largest oil company, ExxonMobil, for example, faces a shareholder resolution sponsored by Greenpeace at its next annual meeting, for example, accusing it of misleading shareholders by minimizing the risks of global warming. Other companies face resolutions calling for more investment in renewables. The World Bank Group has found itself in the middle of this controversy for several reasons. As the single biggest source of development assistance for poor countries, it plays a key role in determining what sectors in those countries deserve its support. In many cases, the oil, gas, and mining sector can be the easiest to exploit and the most attractive to foreign investment. Indeed, a second memo, prepared for an IFC directors' meeting last December, asserts that "Oil, Gas and Mining had by far the highest equity return after specific provisions (26.6 percent)" of all sectors in the agency's portfolio. Another argument for the Bank to support oil, gas, and coal projects in poor countries is that they remain the cheapest sources of energy -- still much cheaper than renewable sources -- needed for the countries' economic development. Finally, the Group, particularly the IFC, also acts as a catalyst for investment by private companies, including some of the world's biggest oil firms who, without the Bank's support or guarantees, would otherwise be unwilling to risk large-scale investments on big projects. "In many cases, these big projects would not move forward without the help of the World Bank," according to Wisham, who noted that export credit agencies (ECAs) of wealthy countries have also provided hundreds of millions of dollars to promote private investment in mining and non-renewable energy resource development in poor nations. Since the Climate Convention, the first international instrument to address global warming, was signed in 1992, the World Bank Group has invested some $15.7 billion in oil, gas, coal, and fossil fuel-power projects around the world, according to a recent study directed by Wisham. At the same time, the Group has invested only $1 billion in renewable energy and energy efficiency.
Albion Monitor
June 4, 2001 (http://www.monitor.net/monitor) All Rights Reserved. Contact rights@monitor.net for permission to use in any format. |
