The making of a miracle: How the
World Bank came out against coal power
By Cheryl McNamara
I stared at my email. I couldn’t believe what I was reading. The World Bank would no longer finance coal power generation projects, “except in rare circumstances.” The email was from Cathy Orlando, Canada’s national manager of the Citizens Climate Lobby (CCL). She was responding to a congratulatory message from Marshall Saunders, CCL’s founder.
Two years ago, I was sitting in a board room of the Office of the Executive Director for Canada, Ireland & Caribbean at the World Bank headquarters in Washington, DC. I was with Orlando, Adriana Mugnatto-Hamu, the Climate Change critic for the Green Party of Canada, John Reaves, a CCL member and Environmental Lawyer based in California, and Loykee Au, a CCL intern and student.
We met with a sympathetic senior adviser to the Executive Director. Our request was simple and ambitious. We wanted the World Bank to stop financing all fossil fuel projects, especially coal.
If someone had told me half a year prior to this meeting that I would be lobbying the World Bank, my jaw would have dropped. And not just because the World Bank is a formidable organization, or that I have absolutely no background in finance and energy policy. My estimation of it was very low. I was thinking of its neo-liberal agenda — the so-called Washington Consensus — that proved disastrous for a number of impoverished countries. I was thinking of Paul Wolfowitz as President (2005-2007) and I shuddered.
Like many people, I found the World Bank to be a vast mysterious institution. I had no idea how it ran itself or how decisions were made, except that the U.S. and other industrial countries held a lot of power. When Mark Reynolds, CCL’s executive director asked me and other Canadians to lobby the World Bank, I was so stunned I said “yes.” I immediately regretted that decision.
At that time, I was preparing to join my American CCL colleagues in Washington D.C. to lobby congressional offices for the first time. That was daunting enough. Now we were piling the World Bank on top of it. I thought of the time required to research and prepare for the meeting. I advised against it, but an invitation was already sent. When the Canadian office granted us a meeting, Orlando respectfully declined, but they came back. They really wanted to meet us.
How could we say “no” to that? Now we were curious.
We rolled up our sleeves and got to work learning all we could about the World Bank and its new energy strategy, with Orlando doing much of the legwork.
We were also expertly guided by Jean François Tardif, then a RESULTS volunteer, who since became the executive director of RESULTS Canada and is now leading the international expansion of RESULTS. CCL’s lobby methodology is based on RESULTS, a 33-year-old organization that is dedicated to ending extreme poverty through the engagement of committed citizens.
The World Bank’s sole mandate is aligned with RESULTS: to eliminate poverty worldwide. This may surprise a lot of people. It surprised me. I thought its mandate was to serve the interests of its donor nations. Tardif, who has 23 years experience lobbying the World Bank as a RESULTS volunteer, has a more practical approach to one of the world’s largest public financial institutions.
“The people I speak with at the World Bank are well meaning and among the smartest in their field,” says Tardif. “They are also responsible for a lot of money. When civil society groups dismiss the World Bank, they miss their opportunity to engage with people who care as much as they do and have access to the biggest dollars that can do a significant amount of good in a particular area.”
Civil society groups tend to have a hate-hate relationship with the World Bank. They have lent their support for the ’50 Years is Enough’ campaign — now ’60 Years is Enough’ — which calls for the abolishment of the World Bank and International Monetary Fund (IMF).
Their mistrust is not unfounded. In 2010 the World Bank announced that it would invest $750 million to support basic education for girls in some of the poorest countries, particularly in Africa. This was a historical increase and RESULTS applauded this announcement.
In 2011, however, RESULTS was dismayed to learn that funds allocated to basic education dropped by two thirds that year. The Bank clarified that the baseline they were using was a 10 year average, not the funding level of the past year.
The announcement they had made was not a celebration. The bank was drastically cutting funding to this critical area. RESULTS mounted a campaign. Volunteers lobbied bank executive directors and senior management. They motivated elected officials to contact the bank and they wrote letters. The outcome was positive. In 2012 and this year, the bank allocated significant increases to basic education.
“The World Bank is still not fulfilling its $750 million promise, but it’s close. We will continue to lobby until that number is reached,” says Tardif.
The World Bank may behave deviously, but clearly, civil society groups wield considerable power in holding it accountable. And in that meeting two years ago, the senior adviser clearly wanted more civil society groups at the table. He and his colleagues hear a lot from corporations, he said, which are all too happy to meet with the World Bank.
The adviser also told us that the bank functions as a democracy. This statement is not free of controversy. Countries that bring the most money to the table have the greatest share of the vote. Major voices include Japan, China, Germany, the U.K., France and, yes, Canada. With more than 15 per cent of the vote, the U.S. has veto power over final decisions. The bank’s presidents have always been Americans. You could say that the U.S. is the World Bank’s puppet master. But the bank’s 25 directors, some of whom represent numerous developing countries, are committed to decision by consensus. And, in 2010, voting powers were revised to increase the voices of non-G8 nations.
Recipient countries also have a voice in how they will use World Bank funds, especially if they are expected to reimburse the funds and pay interest. If a country wanted to improve its standard of living by building coal-power plants, then this request required serious consideration. When we met, South Africa was about to introduce two new coal-fired plants to its energy supply. Once online they would be among the largest in the world. These plants were made possible by World Bank financing.
In our meeting, John Reaves eloquently argued that any World Bank loans for fossil fuel projects, such as the South African coal-fired plants, are ultimately going to add to the very misery of millions of people who the bank seeks to help. Anthropogenic climate change, caused by the burning of fossil fuel, leads to rising sea levels, droughts, diseases and extreme weather events. It will have a profound effect on everyone, but especially the world’s poorest people.
So what happened in two years to make the World Bank board of directors vote in favour of ending support for coal-fired projects?
CCL staff and volunteers met with the World Bank five times during that time, including the Office for the United States. Other civil society groups were also pressuring the World Bank to end funding to fossil fuel projects.
Did our lobbying make a difference?
“The question of attribution is a problem,” says Tardif. “This is an organization that makes decisions on a portfolio of projects of several hundreds of billions of dollars. When you consider the number of players involved, any decision is not due to one factor.”
That said, Tardif points to a couple of key changes in the past couple of years. First, the bank appointed Jim Yong Kim as President. Kim turned heads when he was director of the World Health Organization’s HIV/AIDS department. Kim set an ambitious goal to put three million people in developing countries on anti retro viral therapy by the end of 2005. He was two years shy of reaching this goal, but it placed treatment in the hands of more people faster than what was otherwise expected.
“Jim Kim created an aura that no project was too ambitious,” says Tardif.
Second, the World Bank has commitment to decrease the percentage of people living on less than $1.25 a day to no more than three per cent by 2030, and promote shared prosperity. This requires promoting income growth of the bottom 40 per cent of the population in each country.
Tardif knows Kim. He met with him on several occasions, and he was the keynote speaker at a RESULTS conference about 10 years ago.
Kim has expressed his concerns about climate change and its danger to the world’s poor. According to Tardif, “he is aware of two impacts associated with climate change. First, the health impacts from natural catastrophes. And second, it will undermine the livelihood of populations already at risk. This challenges the bank’s new specific objectives to decrease the number of people living in extreme poverty and promote shared prosperity.”
Kim’s role is to recommend and implement board decisions. Tardif says he must have delivered a passionate speech to the board of directors about coal’s role in undermining the future prospects of the world’s poor. Kim values the input of citizens and civil society groups, something he articulated to RESULTS volunteers, and he was likely aware of our lobby efforts. Happily, he was already on side.
Indeed, in the last year, fighting climate change has become an urgent focus for the bank.
So what is the impact of this decision?
Coal, the world’s most polluting energy source, accounts for approximately 45 per cent of global energy-related CO2 emissions, according to the International Energy Agency. The World Bank decision takes billions of dollars off the table for the development of new coal-fired plants, and it starts a trend that other institutions follow. A week after the World Bank announcement, the European investment bank (EIB) followed suite, announcing that it too would stop financing most new and refurbished coal-fired power plants.
The question remains, will private banks and countries like China step in to fill the void, financing these plants elsewhere? That’s hard to say. The World Bank and EIB are sending a strong signal that coal is now a risky investment.
The downside is that the bank has renewed its commitment to large-scale hydro dams, which are notorious for displacing people and causing local environmental damage. Whether its decision on coal will increase the bank’s emphasis on wind, solar, geothermal and small-scale hydro and smart grid technology remains to be seen.
Now we just need to hold the World Bank to its promise on coal, and recommend innovative renewable energy alternatives to large-scale hydro. We also want to take the bank’s commitment to climate action to the next level: end financing to all carbon-based projects.
Cheryl McNamara is the Group Leader of the Toronto Chapter of the Citizens Climate Lobby.