Eco Business–The World Bank’s budget (or policy) support to key countries in the struggle against climate change continues to support fossil fuels, our new report finds. The report, co-produced by Recourse, Trend Asia (Indonesia) and Alternative Law Collective (Pakistan), shows how the World Bank’s Development Policy Finance in Indonesia and Pakistan is accelerating the use of natural gas and supporting fragile energy sectors that are heavily invested in coal.
The DPF Retrospective is asking how effective DPFs have been in supporting countries to achieve their development goals.
In the last six years, the World Bank has provided $81 billion to countries in DPF[1]. This figure is likely to rise in future as this type of financing becomes increasingly popular for crisis response. DPF differs from project finance as it is non-earmarked budget financing that supports policy and institutional reforms.
Individual DPF loans are in the millions of dollars, and often act as catalysts for investment from regional development banks as well. The result is that DPFs can be part of joint development bank financing of over $1 billion for energy sector reform.
The loans are subject to prior actions, or reforms agreed with a government, so DPF is a very important and influential tool in shaping a country’s macroeconomic policies. At the same time it is not subject to the same checks and balances as more direct project finance in terms of transparency and accountability, or fossil fuel finance restrictions.
According to Zain Moulvi of Alternative Law Collective, Pakistan: “The World Bank’s Development Policy Financing and technical assistance programmes have historically dictated the long-term outlook of Pakistan’s energy landscape to detrimental effect on livelihoods, local ecologies, and national cohesion.”
DPF can influence investment decisions toward either carbon-intensive development, such as gas or coal, or low-carbon development. Worryingly, the World Bank’s 2021 Climate Action Plan still identifies gas as a transition or “bridging fuel” and is proactively promoting gas through its lending instruments and advisory services, including DPF, Project for Results (P4Rs) and Technical Assistance (ASAs).
There is overwhelming international consensus today that natural gas is a significant carbon emitter, due to methane leaks, and emissions created throughout its production, transportation and combustion. In most places, building new gas infrastructure is more expensive than providing power through renewable energy.
Just ten years ago the World Bank was promoting coal in Indonesia. A World Bank’s Infrastructure-DPL (I-DPL) programme was the driver behind the Central Java Coal Power Plant, a 2,000 MW coal-fired plant in Batang built in 2016. Today the World Bank seems to be falling into the same carbon-intensive trap with natural gas.
“Indonesian citizens currently need more access to clean energy that does not harm the environment and is affordable to all. This cannot be achieved by using gas which is destructive, costly, and dependent on subsidies. More importantly, emissions from any future gas extraction facilities in addition to the increase of gas consumption are an undeniable threat to the 1.5 C climate target” says Andri Prasetiyo, Trend Asia, Indonesia.
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