Is the World Bank springing into action on energy access?

Myself with Melanie Robinson and David Kinder, UK representatives to the World Bank

Sharing our new report with Melanie Robinson and David Kinder, UK representatives to the World Bank

 

Last week I joined hundreds of government representatives, business executives and civil society organizations at the World Bank Spring meetings in Washington. I returned home with the overall impression that the World Bank is taking steps in the right direction on climate change. But this action needs to speed up and scale up to meet the Paris Agreement targets and achieve universal energy access by 2030 (Sustainable Development Goal 7). In particular, the Bank needs to phase out fossil fuels more quickly, and increase investment in renewable energy, with a focus on off-grid sources for the poorest populations living in remote communities.

The situation so far

In 2017 the World Bank President announced the phasing out of finance for exploration for oil and gas after 2019; this was an important step forward, but there were few details given at the Spring meetings last week about how this would be implemented. In the meantime, the Bank continues to invest in fossil fuels.

The focus of these Spring negotiations was a capital increase for the Bank; an additional $13 billion which is to be loaned to middle and low-income countries. The UK Government – a leading shareholder in the Bank – engaged with management and other shareholders to support the capital increase package, while securing important reforms to further enhance the the World Bank Group’s efficiency and effectiveness. This focus on capital increase meant, unsurprisingly, that there were no significant new announcements on climate change. These reforms did, however, include investment in projects with climate change benefits being increased to 30% of International Bank for Reconstruction and Development support by June 2023 and 35% of International Finance Corporation support by June 2030. The UK government played a key role to secure this and highlighted that the increase in the Bank’s lending to an average of around $100 billion annually up to 2030 may allow a larger share of spending on access to energy in the future.

And there are reasons to be hopeful about the Bank’s ongoing commitment to align with the Paris Agreement. Speaking at a side event on that very issue, the Bank’s Climate Director, John Roome, said:

“Addressing climate change is fundamental to the World Bank Group’s twin goals of achieving shared prosperity and ending extreme poverty: it will hit the poor the hardest. The recently published Groundswell report by the World Bank suggested that 140 million people in developing countries could be forced to undertake internal migration by 2050, without significant interventions.

“The Bank is on track to meet climate-related finance targets under the 2016-2020 Climate Change Action Plan, which calls for 28 per cent of our investments to be climate-related by 2020. We’ll be announcing updated climate targets (beyond 2020) at the UN climate change conference, COP24, in Poland later this year, where we will give a transparent update on progress.”

The World Bank’s Development Committee used their communiqué to urge the Bank to work on climate change as a global development challenge, implement its environmental and social safeguards, and consider the needs of vulnerable countries. The Committee’s voice is important because this is the group of government ministers, including DFID’s Secretary of State Penny Mordaunt, which steers the Bank’s work on this issue.

Images of people benefiting from off-grid renewable energy

More funding for energy access?

A World Bank representative spoke at a side event on improving people’s access to energy, which was organised by Tearfund, Oil Change International and the Swedish Society for Nature Conservation. The World Bank has been investing more in energy access and distributed renewable energy like off-grid and mini-grid solar systems. It has spent over $5 billion on energy access since 2010 and is on track to spend $500m on off-grid and mini-grid in 2017/18. This is a great step but further investment is needed to meet SDG 7. The UK representatives on the World Bank Board have been pushing the Bank to get on track to meet the global goal of universal access to energy for all by 2030.

Investment needs to be shifted away from fossil fuels and towards affordable, renewable energy. The focus of investment to date has been the central grid, which is important for powering urban areas. The grid, however, will take a long time to reach many of the poorest rural populations in Africa and Asia. Tearfund and ODI’s recently published joint report, Pioneering Power, highlights that for such communities, off-grid renewables are often a cheaper, faster, more reliable, safer and cleaner option than kerosene or the grid. The report also lays out the range of additional benefits that solar and micro-hydropower bring for people living off the grid, including better health, education, gender and income generation.

One such person is Grace Khatib*, a 66-year-old entrepreneur who lives in the Dodoma region of Tanzania and is featured in the report. Grace uses a solar panel to make money from charging other people’s phones. She’s also seen a change in her own health:

“Before I bought a solar panel I used to use a kerosene lamp. I used to have a lot of health problems, the smoke affected my chest and I felt chest pains. My eyes didn’t work properly, even the atmosphere was not good. Now I feel that my life has changed because I have solar.”

Public or private investment leading the way?

I noticed a strong narrative throughout the Spring meetings that the private sector is key to achieving the goal of ending poverty and that the Bank needs to conserve scarce public resources for where it is most needed. The World Bank’s Development Committee’s communiqué also stated that as the main driver of investment, innovation and jobs, the private sector needs to play a much greater role in developmentand called on the Bank to “continue to crowd in private sector resources to contribute to stability and growth potential, quality infrastructure, and human capital.”

It is undeniable that the private sector plays a key role in development. It is important to strengthen the enabling environment to unlock more private sector investment for key opportunities like renewable energy. However, the World Bank needs to finance development through the private sector in a responsible and transparent way. It must ensure that investments through the private sector are really helping the poorest and most vulnerable communities, and not just private investors. This means tracking the impact of investments to ensure that they are reducing poverty, whilst ensuring the right balance between public and private investment. When this happens, we can be confident that more people like Grace will prosper.

 

* Names have been changed

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