Mercedes Mullins
The World Bank Group's mission is to end extreme poverty and promote shared prosperity on a habitable planet. However, the World Bank has been criticized for investing billions in fossil fuel projects since the Paris Agreement was signed in 2015. While the Bank has ramped up its financing for renewable energy and stopped direct investments in coal and upstream oil and gas, it has been accused of using financial intermediaries and policy reforms to continue supporting fossil fuel expansion. With climate change, poverty, and inequality being pressing issues, there are calls for the World Bank to cease all fossil fuel financing and instead focus on facilitating a global clean energy transition.
| Characteristics | Values |
|---|---|
| World Bank Group's mission | End extreme poverty and promote shared prosperity on a livable planet |
| World Bank's role in climate change | Biggest multilateral funder of climate investments in developing countries |
| Amount spent on climate finance from 2016-2021 | Over $109 billion |
| Amount committed to annual financing from FY21-25 | $25 billion |
| World Bank's fossil fuel investments | Nearly $15 billion since the Paris Agreement in 2015 |
| World Bank's indirect fossil fuel investments | $3.7 billion in 2022 |
| World Bank's direct coal investments | Ended in 2010 |
| World Bank's direct oil and gas investments | Ended in 2019 |
| World Bank's indirect coal investments | Still ongoing |
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What You'll Learn
- The World Bank has provided $15 billion to fossil fuel projects since 2015
- The World Bank's role in the clean energy transition
- World Bank's fossil fuel finance since the Paris Climate Agreement
- World Bank's policy reforms targeted benefits favouring fossil fuel investments
- World Bank's indirect funding for coal projects
The World Bank has provided $15 billion to fossil fuel projects since 2015
The World Bank has provided nearly $15 billion to fossil fuel projects since the Paris Agreement was signed in 2015. This funding has been used to support oil refinery and gas processing, with the Bank also playing a role in facilitating indirect investment in coal projects. The World Bank has been criticised for these investments, which contradict its mission to end extreme poverty and promote shared prosperity on a livable planet.
The Bank's indirect funding streams, channelled through financial intermediaries such as banks and private equity funds, have been described as a "major loophole" in its climate policy. Despite ending direct funding for coal projects in 2010 and ceasing investment in upstream oil and gas in 2019, the Bank has continued to provide financial support for fossil fuel infrastructure. For instance, in India, Indonesia, and Pakistan, mega coal power projects relied on World Bank-funded transmission lines to evacuate power from new coal-fired plants.
In addition to direct funding, the World Bank has implemented fossil-friendly policy reforms in at least 18 countries, driving further investment in fossil fuels. These reforms have included tax breaks for coal, gas, and oil, as well as increased energy tariffs that benefit new fossil fuel power plants. The Bank has also provided technical assistance to over a dozen countries to increase fossil fuel investments.
While the World Bank has disputed the findings of reports exposing its fossil fuel funding, it is clear that its actions contradict its stated commitment to tackling climate change. As the biggest multilateral funder of climate investments in developing countries, the World Bank has a responsibility to align its practices with the goals of the Paris Climate Agreement. Instead, its investments in fossil fuels cast doubt on its claims of alignment with the Agreement and hinder the transition to renewable energy.
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The World Bank's role in the clean energy transition
The World Bank Group (WBG) is the biggest multilateral funder of climate investments in developing countries. It has committed to providing $25 billion on average in annual financing between FY21-25 for initiatives that lower GHG emissions and foster adaptation, while also reducing poverty and inequality and improving development outcomes.
The WBG has been ramping up its finance for renewable energy for several years. In fiscal year 2021, the World Bank (IBRD/IDA) did zero new fossil fuel financing. The World Bank Group stopped investing in upstream oil and gas in 2019 and has not made any coal investments for over a decade. From 2016 to 2020, the Bank financed 34 gigawatts of renewable energy to help communities, businesses, and economies thrive.
The WBG has supported countries in their clean energy transition in various ways. In Nigeria, the DARES project will help over 17 million Nigerians access efficient electricity using distributed renewable energy solutions, replacing over 250,000 polluting and expensive diesel generators. In Azerbaijan, a $173.5 million loan will help strengthen the country's power transmission network, diversify its energy mix, and meet growing electricity demand through a more resilient and reliable power grid. The Bank has also supported a Clean Cooking Fund with a funding target of $500 million, aiming to leverage $2 billion in public and private investments to help 200 million people gain access to clean cooking.
The WBG has also launched the Utility Knowledge Exchange Platform to help various stakeholders identify best practices, improve operational efficiencies, stimulate businesses, and accelerate technological innovation. Additionally, the Bank supports countries in deploying clean hydrogen across critical sectors and has approved more than $1.5 billion in concessional financing for clean hydrogen projects in FY2024.
However, there have been concerns about the World Bank's role in enabling fossil fuel investments. Between 2016 and 2019, 81 countries received budget support, and billions more were invested in fossil fuel-enabling infrastructure and policy reforms, which critics argue have driven billions into new fossil fuel investments.
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World Bank's fossil fuel finance since the Paris Climate Agreement
The World Bank Group has been criticised for its involvement in fossil fuel finance since the Paris Climate Agreement was signed in 2015. The agreement aims to limit global warming to 1.5°C above pre-industrial levels. However, according to a report by Big Shift Global, a coalition of over 50 NGOs, the World Bank has provided nearly $15 billion in finance directly to fossil fuel projects during this period. This includes funding for “upstream” oil and gas projects, despite the Bank's commitment to stop such funding from 2019.
The World Bank has also been accused of using financial intermediaries, such as banks and private equity funds, to indirectly fund fossil fuel projects. This indirect funding has been described as a “major loophole” in the Bank's climate policy. Kat Kramer, the author of the Big Shift Global report, stated that the World Bank's direct funding of $14.8 billion is likely just the "tip of the iceberg" when it comes to assistance to high-carbon development.
In response to the report, a spokesperson for the World Bank Group disputed the findings, highlighting that in fiscal year 2022, the Bank Group provided a record $31.7 billion for climate-related investments to help communities respond to the climate crisis. However, another report by Oxfam raised concerns over the group's transparency in reporting its climate finance, with $7 billion of $17.2 billion in spending unverifiable.
Since the Paris Climate Agreement, the World Bank has provided $12 billion in direct project finance for fossil fuels in over 35 countries and $10-$20 billion annually as government budget support. In at least 18 countries, World Bank policy reforms have targeted benefits favoring fossil fuel investments, including tax breaks and increased tariffs for new fossil fuel power plants. These reforms have resulted in increased profit margins for fossil fuel companies.
While the World Bank has taken some steps to ramp up its finance for renewable energy, with zero new fossil fuel financing in fiscal year 2021, there are still concerns about its continued support for fossil fuel projects and its transparency in reporting climate finance.
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World Bank's policy reforms targeted benefits favouring fossil fuel investments
The World Bank Group is the biggest multilateral funder of climate investments in developing countries. In recent years, the World Bank has ramped up its finance for renewable energy. In fiscal year 2021, the World Bank did zero new fossil fuel financing. The World Bank Group stopped investing in upstream oil and gas in 2019 and has not made any coal investments for over a decade. From 2016 to 2020, the Bank financed 34 gigawatts of renewable energy to help communities, businesses, and economies thrive.
However, some sources suggest that the World Bank has driven billions into fossil fuel investments. Between 2016 and 2019, 81 countries received budget support and billions more in fossil fuel-enabling infrastructure. In at least 18 countries, World Bank policy reforms targeted benefits that favored fossil fuel investments. These countries included Burkina Faso, Colombia, Egypt, Ghana, Gambia, Indonesia, Iraq, Jordan, Liberia, Mozambique, Niger, Pakistan, Papua New Guinea, Romania, Senegal, Serbia, Tunisia, and Ukraine.
Examples of such policy reforms include tax breaks for coal and gas in Mozambique, tax breaks favoring oil and coal in Colombia, and higher electricity tariffs resulting in higher profits for new coal-fired power plants in Pakistan. In 29 countries, the World Bank targeted energy tariff reforms, and it is believed that the majority of these energy tariff increases benefited new fossil fuel investments. These tariff increases typically increase the profit margins for new coal and/or gas power plants or new oil and gas field developments.
The World Bank has also provided technical assistance in over a dozen countries aimed at increasing fossil fuel investments. For instance, Pakistan’s Thar lignite coal fields – the largest in Asia; Mozambique’s coal and liquified natural gas (LNG) blocks; and Brazil’s pre-salt offshore oil fields. In 2022, an estimated $3.7 billion in World Bank trade finance went to oil and gas.
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World Bank's indirect funding for coal projects
Despite the World Bank's commitment to move away from funding coal, the organisation has been criticised for its continued indirect funding of coal projects. In 2023, the Bretton Woods Project reported that loopholes in the World Bank's financial intermediary lending allow finance to continue supporting coal power projects.
The World Bank's private lending arm and its private sector subsidiary, the International Financial Corporation (IFC), have been found to hold stakes in client banks that are funding numerous coal developments. In 2023, the IFC was linked to 76 coal power projects via financial intermediaries. The IFC has also been found to have invested in banks and other financial institutions that are funding at least 39 coal developments throughout China, Indonesia, and Cambodia. These developments could generate more than 68 gigawatts of new coal-powered capacity and have been linked to severe impacts on the health, quality of life, and livelihoods of affected communities.
The World Bank has also been criticised for its fossil-friendly policy reforms in at least 18 countries, which have increased fossil fuel profits and driven billions into new fossil fuel investments. Examples include tax breaks for coal and gas in Mozambique and tax breaks favouring oil and coal in Colombia. Additionally, the World Bank's energy tariff reforms in 29 countries have often resulted in increased profit margins for new coal and/or gas power plants.
While the World Bank has disputed some of these findings and emphasised its commitment to climate-related investments, there are ongoing concerns about its transparency in reporting climate finance and its alignment with the Paris Agreement.
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Frequently asked questions
Yes, the World Bank Group has been criticized for investing billions in fossil fuel projects since the Paris Agreement was signed in 2015. However, the Bank claims that it has stopped all direct funding for coal projects since 2010 and has not made any new investments in upstream oil and gas since 2019.
The World Bank Group has been accused of providing financial support for oil refinery, gas processing, and coal-fired power plants in various countries. This includes funding for infrastructure, such as transmission lines, as well as policy reforms that increase fossil fuel profits.
The World Bank Group has stated that its mission is to end extreme poverty and promote shared prosperity on a livable planet. The Bank has committed to providing billions in climate finance to developing countries and increasing its support for climate adaptation. However, critics argue that the Bank should do more to facilitate the global clean energy transition and end its support for fossil fuel projects.
