The World Bank is facing criticism for funding “dirty” sources of energy that are contributing to carbon emissions while seeking to withdraw financing for upstream oil and gas.
At the One Planet Summit in Paris in 2017, the bank announced it would no longer finance upstream oil and gas after 2019 as part of its Climate Change Action Plan. The decision reflected a determination to realign its development assistance with climate commitments, owing to increasing threats of climate change.
Recently, the bank announced a new set of climate targets for 2021-25, including boosting climate action finance to $200 billion over five years and supporting the enabling infrastructure for 35,000MW of renewable energy.
Despite the commitment, a report by Germany-based NGO Urgewald shows the bank’s financial flows undermine the Paris Climate Agreement and contribute to higher profit margins for oil, gas and coal majors. According to the report, the World Bank active energy project finance significantly favours fossil fuels, with financial commitments to the tune of $21 billion, compared with $7 billion for renewable energy.
Over the past four years, the bank approved over $12 billion for fossil fuel projects compared with $5 billion for renewable energy. During the period the Bank committed $1.3 billion of equity investments in fossil fuels, compared with $350 million for renewable energy. Of this, $512 million equity is in 12 upstream oil and gas operations and its continuous involvement in the investments contradict its pledge to end finance for upstream operations.
The Bank’s portfolio includes $4.8 billion to coal projects, although most was approved before 2014, following a 2013 commitment to stop financing coal power plants. Its investments in renewables in Africa is at only $1.7 billion.
In East Africa, the bank’s private sector financing arm, the IFC, has committed equity investments in three fossil fuel projects: In Kenya, the IFC has invested about $100 million in National Cement Company. The investment is also being utilised to build a 15MW coal plant.
The firm has also invested $50 million in Africa oil upstream activities that include oil and gas exploration and appraisal in the South Lokichar Basin.
In Tanzania, the IFC has a $15 million equity stake and $85 million debt in Pan African Energy, a firm involved in upstream natural gas production at the Songo Songo project.