February issue 2010

The World Bank has always been adept in the smooth makeover of its image when fielding brickbats or seizing new opportunities. When its loans for war-ravished Europe were made redundant by the Marshall Plan’s huge grants, it quickly switched to ‘development financing.’ It makes a billion or two annually on interest-payments alone on the backs of the South through structural adjustment policies and compound interest. After Kyoto, it wanted a share of the carbon market pie where it had no niche, being neither government nor polluter. So it cooked up a scheme.

In 1997, the US government was finalising a mechanism for carbon trading exclusively between industrialised nations. South countries proposed a straightforward “Clean Development Fund” based upon the self-explanatory “polluter-pays-principle” to pay for clean-up. It was at this moment that confidential documents were leaked to a researcher at the Institute for Policy Studies. It revealed World Bank plans to become a self-appointed broker between North and South governments — although no one, not even the US, had invited them to do so — and to charge a 5% commission on carbon transactions.

The Clean Development Fund was hijacked by northern negotiators who converted it into the “Clean Development Mechanism,” a purely market-based carbon trading scheme. In mid-1999, the World Bank finally wormed its way into the carbon trade by setting up a “Prototype Carbon Fund,” and assured NGOs that it would focus exclusively on “entirely renewables — solar, wind, micro-hydro, and geothermal projects.” It turned out to be a flat lie. It now extends over 82% of its oil financing to projects that export oil to the industrialised countries where most of the CO2 is released. Half the 43 billion tonnes of global CO2 emissions are “export-oriented.” Business as usual!

As it turned out, the World Bank lent $11 billion for 128 fossil fuel projects in 45 countries during the first 22 years after the first global environmental conference in Rio. Half of them were for extracting and exploring fossil fuels exclusively for the global market, not domestic need. Today, the ratio of the Bank’s fossil fuel loans to renewable energy and energy-efficiency loans is 17 to 1. It has been accused of a dishonest methodology to deny the full impact of its investments.

In 2004, the World Bank commissioned the Extractive Industries Review, not expecting its chairman, Emil Salim, the former environmental minister of Indonesia, to ask them to completely drop the worst of its projects from its portfolio, particularly oil and coal exploration. The Bank simply ignored the feedback. The same year, the World Bank diversified into other carbon-trading schemes tailored to ensnare the South.

The World Bank has a clear conflict of interest as it is the financier of the biggest fossil-fuel projects while taking part in carbon trading. Then there is the fact that the US is not only the world’s biggest oil consumer (25% of global supplies) but also wields de-facto veto power over the Bank’s decisions, there is a clear conflict of interest on the part of the World Bank. Not surprisingly, 70 countries, represented by their parliaments, are demanding their own veto powers over World Bank programmes.

This post is part of larger article, The Carbon Scam