Report: At World Bank Group, U.S. Supports Fossil Gas Financing
WASHINGTON – Two years after the U.S. Treasury issued guidance to shift financial support from multilateral banks away from fossil fuel buildout overseas, a new report the U.S. has voted to support nearly $400 million USD in direct fossil fuel financing at the World Bank Group alone through March 2023.
Treasury’s Fossil Fuel Energy Guidance for Multilateral Development Banks was created in direct response to President Biden’s 2021 Executive Order on Tackling the Climate Crisis at Home and Abroad, which directed the agency to “promote ending international financing of carbon-intensive fossil fuel-based energy,” and promote financing that supports the goals of the Paris Agreement.
As the largest shareholder at the World Bank Group and several other MDBs, the U.S. government has significant influence over energy investments. With the guidance from the Treasury, the U.S. could be a leader in moving these institutions and their shareholders away from fossil fuel investments and towards renewable energy and diversified economies around the world. But as the report reveals, Treasury’s guidance does not effectively restrict fossil gas investments, demonstrating that the U.S. is not a serious leader in shifting public finance away from fossil fuels, as President Biden’s Executive Order aims to do.
Key takeaways:
- Any fossil gas project that the US votes to support at MDB Boards must meet 5 criteria outlined in Treasury’s Guidance, yet none of the projects identified in the report accomplish this. (The 5 criteria are: no upstream; only IDA countries; must have credit alternatives analysis; must provide significant development impact; must be Paris Aligned).
- The vague nature of Treasury’s Guidance creates a subjective and discretionary approach to implementation, making it difficult to hold decision makers accountable for how they apply the Guidance.
- The report identifies 4 gas power plants directly funded through the World Bank Group in the last two years with US support (two in Mozambique, one in Bangladesh, and one in Uzbekistan), with the following troubling characteristics—
- Publicly available project documents indicate that one project will rely on upstream fossil gas, which Treasury’s Guidance opposes
- One project has public documents saying that the gas plant will switch to diesel after the first 14 years because the supplying gas fields will run out, which would violate the oil section of Treasury’s Guidance. However, Treasury told us that this is not their understanding, but this is based on confidential documents which we have no way to verify.
- There are no credible public alternatives analyzes demonstrating that there is no technically or financially viable way to get the same development impact in a cleaner way. Indeed, we have been informed that the alternatives analyses that the US and other shareholders relied on when making its determinations are confidential, only WBG staff and shareholders are allowed to see them.
- The “significant development impact” of these projects is up for debate, when in many cases energy is being exported under questionable terms and local communities sacrificed.
- Finally, none of the projects that received US support align with the goals of the Paris Agreement to limit the average global warming to well below 2°C above pre-industrial levels, and to aim for 1.5°C.
- Fossil fuel projects present social and ecological harms to local communities, risks and delays to countries’ development, contribute to climate change, and should no longer be subsidized with public money. Developing countries are owed financing and technical support to equitably transition their energy sectors to renewables and to diversify their economies.
Luisa Abbott Galvao, Senior International Policy Campaigner for Friends of the Earth, said this:
The U.S. cannot be considered a climate leader unless we put our money where our mouth is. Despite strong climate pledges from our president, it is clear that U.S. agencies are using weak directives to excuse further public financing for fossil fuels.
Treasury’s weak guidance continues to pour U.S. funds into polluting fuel sources, harming lower-income nations while benefiting rich corporations. We can no longer delay developing countries’ energy and economic transitions but must pursue a just energy transition for all.
Contact: Shaye Skiff, [email protected]