World Bank: Changing the Energy Funding Status Quo

On April 7th, four of us gathered into Washington, D.C. for a press conference hosted by Friends of the Earth to address what many could see as an arcane issue – The World Bank’s Extractive Industry Review. Nobel Peace Prize Laureate Jody Williams, along with myself, Father Michael Perry of the US Catholic Conference of Bishops, and Lauren Compere of Boston Common Asset Management briefed over 25 national media reporters why this administrative action affects human rights and the global environment.

RE Insider, April 19, 2004 [SolarAccess.com] The World Bank loans billions to the developing world for energy and mining projects that are supposed to help poor countries – a third of the planet living “on the edge”. In September 2000, The World Bank president James Wolfensohn established a group to look at the issues and report back. The information was startling due to the fact that external Bank economists could not find a single instance where a loan for “extractive industries” actually had a positive economic impact. Generally the wealth from these projects was hoarded by the elites, labor abused, environment degraded, and economic growth stifled. In fact, many in the clean energy industries – biomass, geothermal, hydropower, solar and wind – saw the developing world as the most economic way to export technology and services since energy costs were high, energy delivery non-existent or intermittent, and there were no stable or established electric grids. Exports of US renewable energy technologies are still important, particularly when US tax incentives have faltered for wind and biomass and US policies unclear and unfocussed for solar and geothermal as well. But the World Bank Group and the other multilateral regional banks, while having some small boutique renewable promotion programs, primarily fund traditional energy projects at the expense of renewable, distributed energy, and microlending programs. The global photovoltaics industry met with the World Bank president several years ago asking that the bank’s large infrastructure projects, usually totaling in the billions of dollars per project, include renewable energy in cost effective niches for these projects. In the US, Europe and Japan — clean distributed generation is used to provide power, cathodic protection, security or back-up energy for communications, transportation, pipelines (water, petroleum and natural gas), and industrial parks to cottage industries. Why not for the developing world too? After two years, the Extractive Industry Review (EIR) released its formal report in January 2004 to the World Bank. The recommendations were clear: refuse to support extractive industry investments in situations characterized by conflict, oppression or systematic corruption; obtain free and formal consent of the indigenous people; increase support of renewable energy by 20 percent per annum; and strengthen or adopt a wide range of social, environmental and information disclosure policies. As you can imagine, the petroleum, coal, metal mining and gems industries have gone bonkers. With stories in the March 25th New York Times (“Proposal to Limit Oil and Coal Projects Draws Fire”, by Nicole Itano) and the April 5th Financial Times (International “Banks Contest Ban Proposed for Coal and Oil Extraction”, by Demetri Sevastopulo). But the World Bank is a development bank, and most energy projects are funded by the private sector anyway. So why the furor over World Bank policies? Well, the World Bank and its entities such as the International Finance Corporation (IFC) and MIGA set global examples on lending. Many of us involved in renewable energy projects around the world, marvel on how conventional energy is subsidized, while policymakers say renewables are too expensive and fossil energy is low in cost. Then, why are we still subsidizing fossil globally as well as domestically? The human rights advocates use the Chad Oil Pipeline as an example of supposedly bringing oil wealth to a poor country, yet most of the people near the pipeline have to wait in long lines to get just one bucket full of gasoline. I have seen myself, overseas, gleaming natural gas pipelines and newly-installed electric transmission lines running through communities in developing countries whose citizens will never see a drop of that energy – yet the projects are based on helping them. In March 2004, the European Parliament adopted a resolution supporting the Extractive Industry Review. The Administration in the US has not taken a formal position, yet, and is waiting for an internal World Bank staff review which the Bank staff has already publicly leaked that they are hostile to the recommendations. But we in the clean energy community must make ourselves heard. Should our taxpayer money that goes to fund these multilateral lending institutions be subsidizing coal and petroleum projects in Third World countries? Should the governments be allowed to pocket the resources and profits? Should the people and businesses around these projects be abused, oppressed and left out of the benefits? Doesn’t distributed-based clean power have a far greater chance to benefit the local people (as well as the overall economics of these poor countries)? So four people came together from very diverse backgrounds – a Nobel Laureate Peace Activist, a human rights Catholic Priest, a CEO of a leading social responsibility investment group, and yours truly, a national advocate and businessman for clean energy. Arcane issue, yes. But, important too. About the author… Scott Sklar is founder of The Stella Group, Ltd.(Washington, D.C.) which is a strategic marketing and policy firm for distributed generation. He served for 15 years as Executive Director concurrently of the Solar Energy Industries Association and the National BioEnergy Industries Association in Washington, D.C. He lives in a solar home in Arlington, Virginia and his coauthored book, A Consumer Guide to Solar Energy, has just been re-released for its third printing. Scott Sklar can be reached at solarsklar@aol.com.
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