Spending on fossil fuel exploration by development bank increased in 2013, according to new analysis
Source: Flickr/Tommaso Galli
By Sophie Yeo
World Bank spending on fossil fuel exploration projects went up in 2013, according to new analysis released yesterday, with nearly US$ 1billion spent searching for new resources of oil and gas.
The findings undermine the World Bank’s own commitment to maintaining global temperatures beneath 2C, at which point the impacts of climate change become more serious.
Analysis released by environmental campaign group Oil Change International found that, while total spending on fossil fuel projects had dropped in recent years, more money is being poured into schemes to expand existing reserves of fossil fuels.
“The World Bank itself has laid out a stark picture of what a world with four degrees of warming looks like, yet it continues to pump billions into projects exploring for new fossil fuel resources that must not be burned in any reasonably safe climate scenario,” said Elizabeth Bast, head of Oil Change International and co-author of the analysis.
Exploration work is particularly frowned upon by campaigners, as analysts agree that the volume of carbon locked into existing reserves is already enough to tip the world over 2C.
In 2012, the International Energy Agency warned that “no more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2C goal.”
A World Bank spokesman told RTCC that most of the World Bank’s fossil fuel exploration was for natural gas, which was consistent with their “commitment to energy access and intention to scale up support for natural gas, the fossil fuel with the lowest carbon intensity.”
They said: “Over the last five years the Bank Group’s support for renewable energy and energy efficiency is almost four times greater than our support for upstream oil and gas projects.”
Fossil fuel money
The World Bank, which provides loans to poor countries to aid development, has explicitly drawn the link between climate change and extreme poverty.
“If we don’t confront climate change, we won’t end extreme poverty, and we’ll leave an awful legacy for our own children and grandchildren in the process,” wrote Kim Yong Kim, World Bank president, last month.
Fossil fuels are both a help and a hindrance in the mission of global development: while cheap and reliable energy provided by fossil fuels can help lift the poorest out of poverty, they ultimately exacerbate the problem of climate change, which scientists say will have catastrophic impacts by the end of the century if left unchecked.
Last year, the World Bank agreed to limit its financing of new coal-fired power plants to all but the most extreme cases.
Its overall spending has also decreased: from 2008 to 2010, the World Bank spent an average of $4.7 billion a year on oil, coal and gas projects. Between 2011 to 2013, this dropped to $2.3 billion.
But finance for fossil fuel exploration increased over the same period, contribution nearly $1 billion out of the total $2.7 billion spent on fossil fuel projects in 2013.
Environmental campaign groups such as 350.org are encouraging investors to move their assets away from fossil fuels, on the grounds that the need to limit climate change will require these to be eventually left in the ground, ‘stranding’ the money and causing a so-called ‘carbon bubble’.
“To truly protect the poor, the World Bank must end all lending for fossil fuel exploration aimed at expanding carbon reserves that already exceed our climate’s capacity,” said Bast.
“Developing countries can’t afford to be locked into financing schemes for stranded assets, just as they can’t afford the devastating impacts of climate change these new fossil fuels will exacerbate.”
Climate risk
Separately, new research released last week by the World Resources Institute (WRI) found major limitations in the way in which the World Bank addresses the risks of climate change in its projects.
In a study of 60 projects approved by the World Bank between January 2012 and June 2013, researchers found that only 25% took the risks of climate change into account. Only 12% assessed the potential greenhouse gas emissions associated with their developing, limiting the potential to invest in low carbon alternatives.
In the forward to the report, WRI president Andrew Steer wrote that the World Bank “must incorporate climate change as an essential element in the design of all relevant projects.”
He added: “The World Bank’s willingness to adapt and experiment has been its historical strength. We are confident it will address the climate challenge with the same innovative spirit.”
A World Bank spokesperson said: “The recent WRI report, Designed for the Future, looked back at projects financed between January 2012 and June 2013. It raised some helpful suggestions, many of which are already being implemented or developed in the World Bank.”