When the learning curve is long
Jun 25th 2009
From
The Economist print edition
After an abrupt about-face, an agency frets about its footprint
Still Pictures
Brazil’s burning desire for pasture
IF ANYONE suggested the World Bank did not take global warming seriously, its bosses would bristle: only last October, they would point out, the institution issued a “strategic framework” laying out its thinking on development and climate change. This promised more emphasis on noble things like energy efficiency and renewable power; and more bank support for “sustainable forest management, including reduced deforestation.”
Those words intrigued green campaigners, who were up in arms over a $90m loan by the bank’s private-sector arm, the International Finance Corporation (IFC), to the Bertin group, Brazil’s leading beef exporter. As the greens observed, cattle farming is widely seen as the biggest threat to the Amazon’s trees.
Doubts about the loan were not confined to angry tree-huggers. In a paper that was initially confidential but leaked on the internet, the bank’s own Independent Evaluation Group (IEG)—which is supposed to watch the secondary effects of the agency’s work—had argued that the credit posed “a grave risk to the environment”.
The IFC overruled this advice, saying in January 2008 that its loan to Bertin would help the firm “in establishing sustainable operations throughout its supply chain, especially with its cattle suppliers in the Amazon region.” But on June 12th there was a change of heart. The bank said it was pulling out of the Bertin project: it was no longer satisfied that its concerns over sustainability were being met.
There were yelps of glee from greens—along with harder questions about how possible it really is for the world’s leading development agency to promote growth, satisfy its member governments and protect the planet all at the same time.
Defenders of the bank say that its concerns over climate change are more than verbiage: of the $7.5 billion it lent for energy projects in 2008, a respectable $2.7 billion went to efforts aimed at saving energy or boosting renewable power. This was twice as much as it had lent for such projects in 2007. Admittedly, the bank does also fund coal-fired projects, but it insists that wherever possible, it will opt for greener forms of power.
Earlier this year, a (public) report by the IEG said the bank could congratulate itself on promoting energy efficiency. But as it recognised, this success did not mean everyone’s heart had turned green: rising fuel prices had made energy saving an easy sell in many countries. And this benign atmosphere may not last. There are poor countries that see environmentalism as a luxury that hurts their immediate growth prospects. On June 22nd Ethiopia blamed power cuts on the World Bank’s refusal to fund a 60MW diesel generator.
David Wheeler, a former World Bank economist who is now at the Centre for Global Development, a think-tank, says such tensions are bound to persist. The bank’s regional units are under pressure to meet lending targets and get money out to governments. In that culture, the bank’s bureaucrats won’t work too hard on goals that hold little appeal for client countries.
Still, when countries want to act over climate change, the bank can do a lot to assist. Mexico, for example, has sought help with cutting energy use in city transport and producing cleaner power. The bank is lending it $500m in low-interest credits out of a $5.2 billion Clean Technology Fund to finance new bus networks, replacing the gas-guzzlers that clog Mexico’s roads.
Vinod Thomas, the IEG’s director-general, sums up the dilemma: “Climate change threatens to derail development, while business-as-usual development threatens to destabilise the climate.”
Managing this tension will involve a lot more reflection about the trade-off between growth, the mitigation of climate change and adaptation to its effects. At the bank, some thinking does seem to be going on: that is the topic of its next World Development Report—an annual assessment of the fight against poverty.
Whatever the report says, it will be hard to convince poor countries that action over climate change is a necessity, not a luxury, and that it will not impede growth. The Bertin shambles may go down as a warning for everybody involved in a giant exercise in on-the-job learning.
