The World Bank’s Misguided Green Energy Policies To Persist

From Forbes

Tilak Doshi

Energy I analyze energy economics and related public policy issues.

Protesters demonstrating against the IMF and World Bank hold a street theater across from World Bank headquarters in Washington, DC, Saturday, April 16, 2005. Photographer: Jay Mallin / Bloomberg News

Protesters demonstrating against the IMF and World Bank hold a street theater across from World Bank headquarters in Washington, DC, Saturday, April 16, 2005. Photographer: Jay Mallin / Bloomberg News

President Trump’s nominee to head the World Bank, David Malpass, was formally approved by a unanimous vote of its board of executive directors last week. When Malpass, an outspoken critic of the bank, was nominated in February, there were hopes that his successful appointment would represent a chance for the institution to break from its green policy orientation of the past three decades to return to its original charter of reducing global poverty.

Yet, in a news conference held on his first day in office, Malpass signaled no fundamental changes in the bank’s energy policy priorities. As part of the World Bank’s efforts to mitigate climate change, he said it would support policies which continue its ban on the financing of coal-fueled power plants. “With regard to coal, the board and its governors have established a policy on that and I don’t expect a change in that policy”, he said.

The World Bank imposed its ban on coal power project financing in 2013, followed by a stop to all new investments in oil and gas resource development projects shortly after. Its objections to fossil fuels development despite their importance to economic growth and poverty alleviation can be traced to the intellectual evolution of the institution’s management under the long tenure of James Wolfensohn during his decade as president (1995 – 2005).

If the ancien regime at the bank emphasized the classical liberalism of Adam Smith with its policy package supporting free trade, competitive markets, entrepreneurship and sound money, the new focused on dirigiste economics that saw a critical government role in attending to the theoretical failures of free markets.

And if the “old” World Bank policy advisers consisted of the likes of Lawrence Summers (Clinton’s Treasury Secretary and previous Chief Economist of the World Bank) who promoted free enterprise and human capital development, the new consisted of a melange of interests including social and environmental non-governmental organizations, the left-leaning UN specialized agencies and development aid groups.

The intellectual environment of the bank that gestated during Wolfensohn’s reign is personified by economists and political philosophers such as Joseph Stiglitz and President Barack Obama. Stiglitz, a Nobel Prize winner for economics and Chief Economist of the World Bank (1997 – 2000), wrote in a 2015 court brief for a climate lawsuit brought on behalf of a group of children against the US Federal government that “fossil fuel-based economies imposed ‘incalculable’ costs on society and shifting to clean energy will pay off.” As for President Obama, his noted flights of oratory include his hubristic 2008 speech that promised that the future would look to that moment (on his winning the primaries) “when the rise of the oceans began to slow and our planet began to heal.”

In an assessment of the role of the World Bank in the late 1990s when global capital markets had expanded tremendously and the development role of the Bank was by no means obvious, the notable economist Anne Krueger (then Vice President of Research at the Bank) elaborated on three possible outcomes. First, shut the bank down given the tremendous progress in reducing world poverty already becoming apparent by then; second, continue to exist but with a sharply narrowed focus on only the poorest of nations (primarily in Sub-Saharan Africa); or third,  serve a wider set of “societal issues” that include the panoply of “civil society” concerns with gender, social justice and climate change that we have become so familiar with.

As history would have it, the third option was the one chosen. Rupert Darwall, a former adviser to the United Kingdom’s Chancellor of the Exchequer put it as follows:

The World Bank’s mission has been subverted by green ideologues who assert that a low-carbon world benefits the world’s poor but fail to acknowledge that making energy much more costly increases poverty. The World Bank tags itself as ‘working for a world free of poverty’. Its prioritization of renewable investment and its embargo on coal investments demonstrate this is no longer the case. In making its choice between development and sustainability, the World Bank has decided it is going to try and save the planet on the backs of the poor.

Environmental activists rarely acknowledge that there has not been a single instance of a poor country successfully developing to middle income status without the extensive use of fossil fuels. Indeed, universal access to affordable energy based on fossil fuels is a defining feature of modern life and its comforts. The cities of Western Europe, North America and Japan have been rid of urban smog while ensuring clean, reliable and affordable energy with improved fossil-fueled power generating technologies and cleaner transport and cooking fuels.

But, as Darwall and other development professionals have noted, the World Bank has taken a lead role in denying poorer countries the pattern of economic growth and environmental improvement that the now-rich countries had taken so successfully since the 1970s. The bank’s enthusiastic support for intermittent, low-yield renewable energy such as solar and wind power comes at the cost of its central charter to help reduce the remaining pockets of global poverty afflicting an estimated one billion people.

The US Treasury Guidance for the government’s position on multilateral banks regarding energy projects and policies includes the sensible objectives to “help countries access and use fossil fuels cleanly and efficiently” and “support development of robust, efficient, competitive, and integrated global markets for energy”. Is David Malpass, the President Trump-nominated leader of the world’s foremost development bank, forsaking the institution’s central charter to help the world’s poor in favor of the uncertain prognostications of climate change?

Tilak Doshi

Tilak Doshi

Contributor

I have worked in the oil and gas sector as an economist in both private industry and in think tanks, in Asia, the Middle East and the US over the past 25 years. I focus

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32 thoughts on “The World Bank’s Misguided Green Energy Policies To Persist

  1. “there has not been a single instance of a poor country successfully developing to middle income status without the extensive use of fossil fuels”

    And before 1900 there was not a single instance of a car driving from coast to coast on fossil fuel.

    We all know how that worked out.

  2. One step forward, two steps back. Meanwhile, the people of Africa remain mired in desperate poverty. How much longer will they have to wait?

    • What the World Bank has achieved from its ban on funding fossil fuel in developing nations is a wide open door for Chinese imperialism.

      Chinese companies, with state backing, have been building new coal fired plants, highways and communication infrastructure across African nations and in return have achieved access, control and often ownership of nations’ natural resources.

      All part of China seeking influence and dominance across the globe. Europe is not immune to this as Italy, financially crippled by the euro and EU regulations, is I the final stages of negotiation with the Chinese to finance and build transport infrastructure that the state cannot afford.

      Well done World Bank, enforcing poverty and short life expectancy whilst helping China achieve it’s aims (sarc)

      • “What the World Bank has achieved from its ban on funding fossil fuel in developing nations is a wide open door for Chinese imperialism.”

        That’s right. China will be happy to loan money but there will be political strings attached. Political strings that will not be favorable to the West.

        China has a plan. The West has no plan. Those who don’t have a plan, lose.

    • Have no fear. The China Development Bank will fund fossil fuels development in Africa. The policy stated in the article just makes the World Bank irrelevant.

    • Well, going by the time the South African ANC government, and its wholly owned power company took to build the Medupi and Kusile coal power stations – approximately infinity (if you include the time it will take to fix the built-in faults found before they both are completed).

  3. Perhaps David Malpass had to tell the other members of the World Bank a
    few Porkpies to be accepted. If he has all along been critical of their
    policy, then I think it will be a case of “Softly, softly Cathie Monkey”.

    So do not despair justly yet. I cannot see a nominee of Pres. Trump allowing
    the Bank to carry on what are in effect Green Policies.

    MJE VK5ELL

    • You’ve obviously not realised, that Trump is just another frontman.
      He’s made a few noises, but that’s it. The money being made globally from the climate change scam, is so great, with so many companies & governments involved, that it won’t be reversed.

      • “You’ve obviously not realised, that Trump is just another frontman.”

        No, I would have to say Trump is his own man. He’s going up against powerful forces but there is no reason to believe he is anyone’s puppet.

    • “So do not despair justly yet. I cannot see a nominee of Pres. Trump allowing
      the Bank to carry on what are in effect Green Policies.”

      I have to agree with Michael. Let’s wait and see what happens. I know Trump can’t be in favor of suppressing the use of fossil fuels.

  4. Such a misguided policy appears to enable China’s BRI policy to walk-in and finance those projects the World Bank won’t.

    From the World Bank analysis, Policy Research Working Paper 8814, April 2019:

    “Abstract
    China’s Belt and Road Initiative aims to improve connectivity between China and more than 70 countries through infrastructure investment and regional cooperation. The initiative has the potential to accelerate significantly the rate of economic integration and development in the region, as trade costs decline.
    The goals of this paper are to (i) study the impacts of infrastructure improvements on Belt and Road Initiative and non–Belt and Road Initiative countries’ trade flows, growth, and poverty; and (ii) suggest policies that would help maximize gains from the Belt and Road Initiative–induced trade cost declines. The analysis captures the trade costs reductions as a result of infrastructure improvements. The findings indicate that the Belt and Road Initiative would be largely beneficial. First, global income increases by 0.7 percent (in 2030 relative to the baseline). This translates into almost half a trillion dollars in 2014 prices and market exchange rates. The Belt and Road Initiative area captures 82 percent of the gain, with the largest percent gains in East Asia. Second, globally, the Belt and Road Initiative could contribute to lifting 8.7 million people from extreme poverty and 34 million from moderate poverty. Third, the initiative would lead to a modest increase in global carbon dioxide emissions, with a complex set of positive and negative outcomes at the national level for other types of emissions.”
    (my bold to highlight )

    http://documents.worldbank.org/curated/en/126471554923176405/pdf/The-Belt-and-Road-Initiative-Economic-Poverty-and-Environmental-Impacts.pdf

    With the World Bank deeply involved in allowing China’s tentacle’s to capture Third World countries in a debt trap.
    As here:
    Kenya:
    https://www.scmp.com/economy/china-economy/article/2180026/will-china-seize-prized-port-if-kenya-cant-pay-back-its-belt

    Sri Lanka:
    https://www.nytimes.com/2018/06/25/world/asia/china-sri-lanka-port.html

    Seems like China is pulling strings behind the scenes, and the World Bank is rolling over for some powerful players.

  5. Given the majority of Governments are now left-leaning or socialists, there’s nothing he can do.
    WB is controlled by govs appointed by each member country.
    At the end of his tenure, Malpass will be a wealthy stealthy swamp-creature.
    Forget about Malpass he’s now owned by the dark side . . .

      • It’s in the Leftwing Media’s interests to portray the Right as extreme. That’s why they always say far-right, or extreme right or alt-right or somesuch pejorative. Standard propaganda.

        Of course the Right portrays the Left as extremists, too, but in this case the Right is right, the modern Left is extremist. 🙂

  6. It is only 2 days since the article here ‘Sanity and humanity return to the World Bank?’, so it seems hopes for a change were of very short duration!

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