International Development Banks Still Funding High-Carbon Megaprojects
With finance high on the agenda at French President Emmanuel Macron’s international climate summit in Paris December 12, the Big Shift Global campaign is shining a light on international development banks that are still financing the fossil fuel projects driving increases in the world’s greenhouse gas emissions.
The campaign scored an early win in mid-October, when World Bank President Jim Yong Kim committed his institution to begin reporting its greenhouse gas emissions profile next year. But in a post for Climate Home News, Helena Wright, Senior Policy Advisor at the E3G think tank, pointed to at least one World Bank institution that is still happily enabling new fossil projects around the world.
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The mission of the Multilateral Investment Guarantee Agency (MIGA) is to promote foreign investment by protecting investors from non-commercial risks, like political upheaval. But in 2016, according to new data from Oil Change International, none of that essential support went to renewable energy. Out of US$1.9 billion in loan guarantees, MIGA allocated $900 million to fossil investments, the rest to an “other” category that includes large hydro, but not smaller-scale renewables like solar, wind, or geothermal.
With total loan guarantees of $4.3 billion in 2016, fossil projects made up about 20% of MIGA’s portfolio, Wright notes. In 2015, the agency claimed that every dollar it guaranteed mobilized $2.50 in private sector investment.
Wright’s post links MIGA to several projects that appear highly questionable on climate and other grounds, including $783 million to a largely coal-based public utility in South Africa, $450 million to a risky offshore gas venture in Ghana, and nearly $1 billion in guarantees to support the Trans-Anatolian Pipeline (TANAP), a controversial part of a proposed new corridor to transport natural gas from Azerbaijan to Italy.
“Further development of gas reserves is not in line with the Paris agreement, since the potential carbon emissions from the oil, gas, and coal in the world’s currently operating fields and mines would take us far beyond 2.0°C of warming,” Wright writes. “In fact, reserves in currently operating oil and gas fields alone, even with no coal, would take the world beyond 1.5°C.”
Yet tomorrow’s Paris summit is expected to coincide with approval of a controversial, €1.5-billion loan from the European Investment Bank to support another segment of the natural gas corridor, the Trans-Adriatic Pipeline, The Guardian reports.
“The EU, which considers itself a climate action champion, simply cannot afford its financial arm, the EIB, supporting any component of the southern gas corridor,” said Xavier Sol, director of Counter Balance, a coalition of European environmental groups.
“Granting such a loan, especially after Azerbaijan’s membership in the extractive industries transparency initiative had been suspended in March over its government’s continued crackdown on media and civil society, means the EIB is turning a blind eye to gross human rights violations,” he added.
More broadly, a mid-November analysis by E3G’s Wright showed that the six major development banks have a lot of work ahead to align their investment practices with a low-carbon agenda: of the six, only the Asian Development Bank has a fixed target (and not an excellent one) for portfolio emissions reporting, only three have provided detailed information on the sectors their reporting covers, and one of them—the African Development Bank—still does no reporting at all.
“The Asian Development Bank recently led the way by becoming the first among the group to commit to reducing portfolio emissions,” Wright noted at the time. “However, it has not yet said which sectors will be covered. Moreover, the commitment of ‘peaking’ emissions by 2030 is weak—global emissions need to peak as soon as possible if the world is to have a chance of staying below 2.0°C of warming.”
Wright still urged Kim to follow the Asian bank’s lead and “commit reducing the Bank’s absolute emissions in line with the science. Development banks must catch up with what the science says is needed or they risk making a mockery of their development mandate.”
But even then, their work won’t be done.
“While reporting on emissions over the portfolio is a useful tool, it is not a ‘silver bullet,’” she wrote. “Development banks have significant funding going through intermediaries and other banks, which are not subject to emission assessments. Transmission lines are also not always included in emission assessments.”
Which means the banks “must plug these loopholes and ensure project assessments are comprehensive so the impact of harmful projects are exposed. Public development banks must make sure they are not acting as a shield for some of the most social and environmentally damaging lending. As a logical next step, the development banks must come together to develop a roadmap to align with 1.5°C of warming—the level needed to save many small islands. They must also exclude funding for fossil fuel exploration which is completely out of line with UN climate goals.”