One way to make a huge difference
On Tuesday leaders from the Group of 7 industrialized nations are wrapping up a summit in Germany, and climate was supposed to be one of the main items on the agenda. Unfortunately, it didn’t turn out that way. The meeting was dominated by the war in Ukraine, very much at the expense of climate.
We thought it would be a good moment to talk about what rich industrialized countries actually could be doing to help less wealthy countries prepare for a warmer world.
There’s a system of financial institutions, known as multilateral development banks, already in place to help fund economic and social development projects, including climate initiatives, in these countries. The most powerful one is the World Bank. There are smaller, regional development banks, too.
The World Bank has unique power and tools to help developing countries prepare for climate change. But critics say it’s not doing enough. In the last year, the United Nations secretary general, António Guterres, and the Biden administration have repeatedly called on these banks to step up their efforts on climate.
It’s not just a question of avoiding human suffering. It’s also crucial for our collective future that big emerging economies like South Africa and India can grow without relying so heavily on fossil fuels. Here is what critics say the World Bank could do better on climate.
The World Bank claims to be the biggest source of climate finance to the developing world among institutions of its kind. By its own calculations, it contributed $26 billion to climate finance in developing countries in 2021.
But researchers and activists say the bank is not transparent enough for them to verify where all of the money is going and whether the climate projects it’s funding are actually effective.
Jon Sward, who tracks the environmental aspects of World Bank policy at the Bretton Woods Project, a nonprofit group based in London, said one example of inadequate transparency was the budget loans the bank gives to support programs.
The World Bank says that, while it doesn’t track how countries are using the money, it is very judicious about which policies qualify and the impact they had. It also publishes databases and reports describing them.
“We account for over half of multilateral climate finance to developing countries and over two-thirds of much-needed adaptation finance,” a spokesperson for the bank said in a statement. They declined to address specific questions on the record.
But there isn’t a lot of clarity, Sward said, on how policies are deemed to have climate benefits, or scrutiny into where the money actually goes.
“It’s tagged as climate finance on the assumption that the policy reforms are having a positive impact on climate action,” he said. “And some are better than others.”
More ambitious leadership
In 2019, the World Bank calculated the planet needed to invest over $90 trillion by 2030 to make the transition to a low-carbon economy that would limit warming to 2 degrees Celsius, the Paris Agreement target.
This is how desperately the world needs a leader to help raise money and direct those funds to the right places.
But the World Bank isn’t a climate lender, it is a development bank. Its client countries tend to be concerned with poverty reduction as much as, if not more than, climate change. But the planet needs both, and critics say the World Bank is one of the few institutions, and possibly the only one, that has the tools to be a climate finance leader.
Experts say this may mean investing more in climate-related projects, like renewable energy power plants and early warning systems. It would also quite likely oblige wealthy countries to give more money to the World Bank to make further investments, and require the bank to coordinate with other financial institutions on additional climate investments.
No one institution is going to address this scale of need by itself, “even the World Bank,” said Scott Morris, senior fellow at the Center for Global Development. “So there is a sense we just need better coordination.”
Close the door to fossil fuels
The World Bank has, so far, avoided halting all support for fossil fuel projects.
It has not financed any coal power plants in over a decade, and hasn’t financed any new projects to produce more oil and gas since 2019. According to the bank’s calculations, 92 percent of loans to power generation projects went to renewable energy in the last four years.
But it still funds downstream projects like gas power plants. It considers gas to be a transition fuel from dirtier ones, such as coal.
Supporters of the World Bank’s policy say that closing the door on gas would mean postponing access to energy in poorer countries. Still, some experts believe there is room to do better.
“In our mind, if you’re Paris aligned, you wouldn’t be financing fossil fuels,” said Gaia Larsen, a climate finance expert at the World Resources Institute. “We should be transitioning from coal to renewables.”
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Essential news from The Times
Coal below, bombs above: Ukraine has the world’s sixth-largest coal reserves, most near the front lines of the war. Many miners have continued working despite the danger.
Risks from natural gas: A new study found that the gas delivered to homes contains low concentrations of several chemicals linked to cancer.
Beating high fuel prices: Americans are getting creative to cut gasoline costs. Strategies include changing work hours, car-pooling and using apps to find the cheapest stations.
Keeping Paris cool: Paris officials are planning a redesign of the area around the Notre-Dame Cathedral to mitigate the effects of rising temperatures on visitors.
Two ways to soak up the sun: Some companies are betting on dual-use solar, a technology that allows solar panels to share space with crops in farms to generate electricity.
Before you go: Italian supercars struggle to go electric
Lamborghini and Ferrari face an existential threat as the auto industry moves inexorably toward battery power. So, they’re trying to design battery-powered cars that inspire the same devotion as their costly internal combustion models. It’s a huge challenge, and it matters to more than just a few wealthy car enthusiasts: Italian pride and prestige are on the line.
Thanks for reading. We’ll be back on Friday.
Claire O’Neill and Douglas Alteen contributed to Climate Forward.
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