The Extractive Industries Review (EIR) report, Striking a Better Balance, originated from an independent consultation which looked at the role of the World Bank Group (WBG) in the extractive industries sector and was released in December last year.
The report came to the general conclusion, whilst the WBG could play a part in the extractive industries within certain guidelines, this did not apply to the coal industry. The report recommended the WBG kept along the same lines it has in the last few years, not investing in any new coal mining development projects, and adopt this as a formal policy. Effectively this is a ban on WBG investments in coal mining.
Instead the EIR recommends the WBG redirect funds to projects which reduce pollution and green house gas emissions.
“WBG lending should concentrate on promoting the transition to renewable energy and endorsing natural gas as a bridging fuel – building new pipe lines and renovating leaking ones,” the report said.
The report has been greeted with heavy opposition by coal interest groups, including the World Coal Institute (WCI) and the UK Department for International Development (DFID).
“While we recognise that there are problems in the sector, the tone of this draft report is unduly negative, and fails to acknowledge either the potential benefit of the sector can bring, or the changes made in Bank policy in recent years,” DFID said in a submission to the EIR.
The World Coal Institute has suggested if actioned the recommendation to ban coal investment could damage the industry’s license to operate. Industry stakeholders have also suggested withdrawing from the coal sector would have no impact on greenhouse gas emissions.
“Whilst the WBG has not invested in new coal projects for a number of years, its influence is far-reaching and WBG involvement can send positive signals to other investors. By disengaging from the coal sector, the WBG could effectively set an example to other responsible private investors, discouraging them from funding coal development and therefore enabling a greater proportion of this activity to be in the hands of less responsible investors,” said WCI.
In summary the WCI believe the recommendations are inconsistent with the World Bank’s primary aim of poverty reduction, are contrary to the energy and economic development objectives of many developing countries, over-simplify the complex issues of energy policy, fail to consider the impact of the recommended approach on energy security, would deny a role for the World Bank in a key area of sustainable development and may have serious unintended consequences.
