Tag Archives: World Bank

Climate Justice Durban – Climate Finance

What is Climate Finance?  The idea behind this is that the wealthy, polluting nations of the world need to pay poorer, less polluting countries – which also happen to be the ones getting it in the neck because of climate change – so that the latter can adapt to the impact of climate change. Not so surprisingly, climate financing doesn’t exactly live up to what it’s billed to do.

This panel picked up on a discussion begun in the morning, but focused on climate finance in Africa more specifically. The panel began with a rousing choral anthem, in which members of COSATU (the South African Conference of Trade Unions) sang in stirring counterpoint with one another, ending with a powerful cry of “Amandhla – Mowetu!). After this powerful anthem, one of the singers explained that the words spoke of how we don’t like what global capitalism wants of us.

The first presenter was Liane Schalatek of the Heinrich Boll Foundation North America. Schalatek showed slides whose flow chart-like complexity illustrated the chaos of climate financing.  What’s happening is a shift from the UNFCCC, the UN system that was largely responsible for climate finance, to multilateral development banks like the World Bank and the African Development Bank.  They have set up a number of specified funds, but cause climate change through their development programs, and then also try to offset that impact through climate finance funds.

Africa as a continent is benefiting little from climate financing in general, and adaptation is not getting much support, Schalatek argued.

She also underlined that climate financing should be based on grants rather than loans, and should be seen as mandatory and compensatory transfer payments from North to South. But at the moment the system is based on voluntary payments that countries often do not come through on.

The amounts we’re talking about are approx $67 billion per year for adaption and $200 billion for mitigation. These are large sums, but are really peanuts in comparison with current EU bail-out fund. Schalatek explained that little of the money actually pledged has actually reached African countries. In addition, more is spent on mitigation than adaptation. The most money spent has been by the Least Developed Country Fund, although this spending ($60 million) has been slight. A new program run by the World Bank, the Pilot Program of Climate Resilience (PPCR), supports only a few countries, but with lots of money.  But the PPCR does not just give grants but also loans, which of course hooks countries into debt. This is unacceptable under establish notions of climate debt, and also obscenely forces people to pay for impact on their lives wrought by others.

South Africa, as a country, has profited most from Clean Development Fund. It’s getting $350 million for Eskom Clean Development Fund, which is greenwashing project to make up for and cover up the Eskom Madupi Coal-Fired Power Plant. The African Development Bank loaned Eskom $2.5 billion for this plant, a figure consistent with the fact that 84% of lending by the ADB has supported conventional fossil fuel projects.

Next up, Tricia of the Institute of Security Studies in Cape Town talked about the proposed Africa Green Fund.  This is a proposal made by the ADB to establish a fund that is exclusively meant for Africa, to manage and deliver the continent’s share of finance.  The stated goal is to support development in Africa.  Relatively little money goes at present to adaptation, although African countries have stated that this is their primary need.

The main question she posed was whether another climate fund is really necessary when there are so many already existing, most of which are highly ineffectual.  Shouldn’t we try to improve the working of existing funds like the Adaptation Fund, which is relatively democratic in terms of governance, rather than attempting to start a new one.

Oscar Reyes of Carbon Trade Watch spoke next about carbon offsetting schemes. His verdict was damning. The effort right now, he argued, is to get rid of the targets of the Kyoto Protocol, and keep the market elements. Carbon offsets are not reductions – they actually just move carbon around, according to Reyes. It usually involves large industries moving their pollution to poor areas.

Geographical concentration of where these projects happen is very uneven. Only about 2% of the projects are sited in Africa, and most of these projects are in Egypt and South Africa. Example of large factory in Egypt that is “clean,” thereby allowing large dirty energy projects in Europe to continue. A future main area of offsetting is gas-flaring reduction projects in Niger Delta. These are not projects for reducing flaring (which is already illegal), but actually these credits go to encourage expansion of the gas industry.

On the table at Durban are proposals for expansion of carbon markets into agriculture. Originally in the Kyoto Protocol, agriculture wasn’t included because no one knew how to measure carbon from agriculture accurately. Attempt here at COP17 is to put “soil” carbon trading program into place. Once more organic matter is in the soil (a good thing in itself), it just legitimates continuing pollution in North. A project in Kenya demonstrates the dangers of these programs. Half of funds go to middle men (carbon accountants and consultants); less than $1/year goes to each farmer.

One of the other factors at play at the moment is the collapse of the price of carbon. So money isn’t going to materialize.

Major battles, moving forward: it’s essential that carbon markets be kept out of climate finance, because they can often lead to collapse of financing.

In answer to a question about carbon taxes, Oscar argued that such taxes tend to be set too low to have much effect, and that, as such taxes are implemented, we need to watch carefully to make sure that they are not regressive and do not reduce people’s access to energy.

Janet Redman of the Institute for Policy Studies’ Sustainable Energy and Economy Network offered a whole series of proposals to fund climate financing: a “Tobin-tax” on financial transactions, a redirection of fossil fuel subsidies given to companies in the global North, an end to wasteful military budgets, and closure of tax loopholes. These funds could be directed towards a green carbon fund.

Redman also talked about so-called bunkers: taxes on aviation and ship fuel.  This, she argued, could be good if instituted in a progressive manner, but there’s a danger that it’ll be linked into European carbon trading network.

The forum for discussion of these proposals is Eurozone financial transactions tax, currently being discussed at G20. South Africa, Argentina, Brazil, Ethiopia, Germany, France and Spain are a “coalition of the willing” who are being asked to step up.

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Commodifying the Environment

While the half-hearted climate talks drag on in Cancùn, World Bank president Robert Zoellick has announced that his organization will be creating a fund of $100 million to encourage developing countries to establish carbon markets.  Cynically enough, funds for adaption to the destructive impacts of climate change sweetens this bitter pill.

This new fund is rather like the US banking system: despite having crashed and thereby demonstrated its deep structural flaws, it continues to make money hand over fist for Wall Street insiders.  Similarly, the European Union’s carbon trading mechanism has been plagued by fraud and has crashed several times, and yet here comes the World Bank with a plan to extend this scheme to the rest of the globe.

Zoellick, it should be noted, as a US trade representative and deputy secretary of state under George W. Bush.  Why, one wonders, would anyone doubt the integrity of his motives as World Bank president?


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Addendum to the Will to Power

After publishing my last post, I discovered that Democracy Now, always on the ball, did a segment about the World Bank’s loan to South Africa for the Medupi power plant.  The segment points out many of the same things that I mention in my post.  In addition, the interview also underlines an additional important point: the ANC also has a significant financial stake in the development of the Medupi power plant.  This means that issues of corruption also loom large along with the environmental issues that I outlined.  Here’s the segment:

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The Will to Power

The World Bank yesterday approved a $3.75 billion loan for a new coal-fired power plant in Limpopo, South Africa.  Named Medupi, the 4,800 megawatt plant will draw on South Africa’s abundant sources of coal to provide power for an increasingly power-hungry nation.  It will be one of the biggest coal-fired power plants in the world.

But who precisely will control and who will benefit from this power?  What is the World Bank doing funding the fossil fuel industry to the hilt when we clearly have to make an immediate transition to sustainable energy sources?

These questions are particularly germane since the South African national power company, Eskom, took out substantial international loans during the early years of apartheid from 1951-1967 to build power plants that provided some of the world’s cheapest electricity exclusively to large corporations and whites, while saddling the country’s entire population with the significant debts associated with these loans.  South Africa is still grappling with the debt of the apartheid era.

Admittedly, as a recent piece by Andrew Revkin on the “energy gap” and the climate crisis points out, access to energy is an increasingly important issue globally .  As Revkin argues, the world’s growing population is already marked by yawning inequalities of access to energy supplies that might provide reliable sources of light at night and heat for cooking.  Yet little research is being done to develop clean, sustainable sources of power.  In fact, almost precisely the opposite is the case: according to a recent report by the Environmental Law Institute, the U.S. spent approximately $72 billion on subsidies for fossil fuels while supporting renewables with only $29 billion during the period from 2002-2008.

The World Bank decision on the loan to South Africa continues such unsustainable trends.  Medupi will emit 25 million tons of carbon dioxide per year.  Although the South African energy minister Dipho Peters argues that, with 25% of the country still lacking access to power, Medupi will fill a much needed demand.  Yet such populist rhetoric obscures the fact that the majority of the plant’s power will benefit large, transnational corporations, many of whom had secret, apartheid-era agreements with the racist regime that completely shield them from costs associated with construction of the plant and repayment of the World Bank loan.

If local people are unlikely to benefit much from the power generated by Medupi, they will inevitably suffer from its dangerous side-effects.  As with all coal-fired power plants, local air quality will decline, sulphur dioxide levels will skyrocket, and mercury residue in the area’s water, air and land will increase.  According to Earthlife Africa, the plant would also be responsible for diminished access to water and land degradation in what was formerly a predominantly agrarian area.  Anticipating these damaging effects, residents of Limpopo filed a complaint with the World Bank inspection team earlier this week, apparently to no avail.

Another justification for the project was articulated by World Bank vice-president for Africa Obiageli K Ezekwesili, who said recently that the project is vital for providing access to energy and fighting poverty.  But, as Sunita Dubey from the activist group Groundwork argues, South Africa’s energy crisis is a product of sweetheart deals between Eskom and large corporations, which provide these large firms with some of the cheapest electricity in the world.

The approval of the World Bank loan, a vote from which the U.S., Great Britain, and the Netherlands all abstained from, is a huge defeat for South African and international climate justice movements.  It is also a great setback for efforts to promote a shift away from unsustainable energy sources.  Although it’s important to acknowledge that the will to power is likely to figure increasingly prominently in a world in which billions of people lack the most basic amenities of modernity, we cannot simply focus on producing more power.  The Medupi defeat should underline the urgency of building a stronger global movement for climate justice, one that targets the unsustainable energy policies of institutions like the World Bank in the same way that the global justice movement targeted their unjust structural adjustment policies.  Sustained critique of the World Bank’s history of flawed energy sector lending policies – as well as local activism to challenge the adverse impacts of such policies – should be high on the climate justice movement’s list of priorities.


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