Developing Countries Resist World Bank Power Play PDF Print

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Written by Karen Orenstein   
Wednesday, 09 June 2010 14:21

IDN-InDepth NewsViewpoint

(IDN) The U.S., other developed countries, and the World Bank aim for control of climate finance at UN negotiations, but many developing countries and civil society are pushing back.

The Copenhagen Accord, a controversial document "taken note of" but not adopted by parties to the UNFCCC in December 2009, set out parameters for climate finance which have largely shaped the debate in 2010.

The Copenhagen Accord set a goal for developed countries to mobilize $100 billion annually by 2020 from public and private sources that may be multilateral or bilateral. The UN Secretary-General has correspondingly established a High-level Advisory Group on Climate Change Financing charged with studying sources of revenue to generate this level of climate finance.

The Copenhagen Accord also stated that developed countries will jointly provide up to $30 billion for developing countries for the 2010-2012 period.

Developed countries are now gearing up to prove that they can contribute this fast start finance between now and 2012, but there are large questions as to whether these funds will actually be new and additional to Official Development Assistance.

The CIFs are supposed to be interim funds that sunset when a new UNFCCC financial architecture is in place, with the exception of the Pilot Program on Climate Resilience, which is supposed to sunset in 2012.

However, it is clear that the U.S., other developed countries, and the World Bank itself view the CIFs as the platform on which to base multilateral climate finance.

This explains the World Bank's heavy lobbying to capture as much of the fast start $30 billion as possible and the tendency for developed countries to direct their multilateral contributions in that direction.

During the UN Copenhagen climate summit in December 2009, the World Bank maintained a high profile. They announced their fifth fund under the CIFs and their twelfth carbon trading/offsetting mechanism under the Carbon Finance Unit.


In January 2010, a leaked briefing prepared for the World Bank board on Copenhagen asserted, among other things, "The WBG [World Bank Group] is particularly well positioned to serve as a channel for fast track financing for adaptation and mitigation...We have already heard from donors who are developing their strategies. We have sent the message that the CIFs are able to receive additional funding to support the Fast Track Financing."

The memo stated that Bank staff were conducting an "outreach campaign" to "build awareness on our role, not just with our traditional partners ... but also with the Ministries of Environment and Foreign Affairs."

Both the Copenhagen Accord and the text that emerged from the UNFCCC negotiating track dealing with climate finance would establish some sort of global climate fund. The Copenhagen Accord refers to this fund as the Copenhagen Green Climate Fund.

The governance and management of the global climate fund lie at the heart of tensions between developed and developing countries, and the role of the World Bank has been central to that tension. Most developing countries have been clear in their rejection of a role for the World Bank in controlling climate finance, whereas developed countries have been correspondingly clear in their support for a strong World Bank role.

A gaping deficit of trust exists between developing and developed countries when it comes to the World Bank. The High-level Commission on Modernization of World Bank Group Governance, chaired by former Mexican President Ernesto Zedillo, recognized this deficit in their October 2009 report, Repowering the World Bank for the 21st Century:

"The [World Bank] Group's decision-making process is widely seen as too exclusive, offering many member countries too little voice and too few opportunities for participation. Insufficient institutional accountability for results weakens the World Bank's effectiveness and legitimacy.

And certain conventions and practices have contributed to the perception that the institution is accountable and responsive only to a handful of shareholders at best...the World Bank's governance -- forged in the 1940s -- has not kept up with historical change and today is not adequate to deal with global problems that require forward-looking, flexible, inclusive, and legitimate multilateral institutions."


The Group of 77 (G77) and China -- a negotiating bloc representing more than 130 developing countries -- has proposed the establishment of a new climate finance mechanism that would "Operate under the authority and guidance, and be fully accountable, to the COP [Conference of Parties]."

This is itself an implicit rejection of World Bank control of climate finance, because it is highly improbable that the World Bank as an institution would submit to being under the authority and guidance of, and fully accountable to, the COP.

Among other stipulations, the proposed financial mechanism would also allow direct access to funding by recipient countries without having to go through international financial institutions like the World Bank.

In contrast, the United States, in an April 2010 submission to the UNFCCC, places the World Bank at the center of international climate finance, calling for the Bank "to organize a process to take steps to establish the [Copenhagen Green Climate] Fund."

In testimony before the Senate Foreign Relations Committee in November 2009, U.S. Treasury Secretary Timothy Geithner said, "In the context of a new climate agreement, we have argued that a new climate fund should be established at an existing international financial institution to deploy financial resources effectively. We expect such a fund to build on the experience of the Climate Investment Funds (CIF) at the World Bank, which this Administration has strongly supported."

*This Viewpoint is extracted from 'Capitalizing on Climate: The World Bank's Role in Climate Change & International Climate Finance' by Karen Orenstein from Friends of the Earth U.S. Karen Orenstein is international campaigner with more than a decade of grassroots advocacy experience in environmental and international human rights campaigns. (IDN-InDepthNews/04.06.2010)

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