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December 06, 2010

World Bank and Climate Finance: Kicking the Coal Addiction

As the World Bank Group positions itself to play a central role in delivering climate finance the incoherency in its lending practices screams out for attention. The Bank's impressive initiatives - such as the 5 million CFLs distributed in a single day in Bangladesh – are being overshadowed by a highly destructive coal habit it just can't kick. The institutions continued commitment to coal -- the most energy intensive and destructive fuel source on the planet –- is a black mark on its record that no amount of rosy public relations spin can scrub off.  

In 2010 the Bank approved $3 billion dollars –- nearly the entire amount spent on energy efficiency and renewable energy for all of 2010 –- for a single highly controversial destructive coal project in South Africa. Sadly, the firestorm of protest that met the Medupi coal project was merely the latest manifestation of a checkered history of energy sector lending (see the Narmada Dam movement in India). The fact is the Bank is like a junky that just can't quit the short term high of pushing large energy loans out the door despite the devastating effects they have on the poor, the climate, and the Bank's institutional reputation.

In order to credibly deliver climate finance with this historical baggage it is clear the institution must make a strong and credible commitment to clean up its act. Fortunately, it has the opportunity to do so by revising its energy strategy to phase out fossil fuels, ensure energy access for the poor, and guarantee that all large scale hydropower lending meets stringent requirements (for a fact sheet on world bank energy lending and civil society demands go here). A strong strategy, which will serve as a guide for the institution's energy investments for years to come, can send an important signal to civil society that the Bank is serious about its commitments to deliver climate finance.

Without a strong energy strategy however, it is tough to imagine the Bank can justify its climate credentials. A weak energy strategy would represent a failed "intervention" for this coal addicted institution leaving all parties alienated by its actions. Because beneath its glossy brochures and pro-poor rhetoric civil society advocates and the public will know that the majority of its energy sector lending is going to destructive coal projects.

The fact is the world is changing rapidly and yet the Bank remains hopelessly addicted to a 19th century fuel. There are 1.2 billion reasons to get energy lending right and if the Bank is serious about playing a role in climate finance its high time it cleaned up its act by finally demonstrating a commitment to the billions around the world suffering from the dual burden of energy poverty and climate change. If it wants to help build the 21st century economy it must help heal the wounds it has inflicted in the past. It can start by ending its coal addiction.

-- Justin Guay, Sierra Club International Climate Program

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