Credit for the climate – The World Bank wants a new, green role

Climate protection is not free. On the contrary, it will cost trillions of dollars to replace oil, gas and coal with clean energy worldwide. To deal with heat waves, floods and other disasters already raging in some countries as a result of climate change – and affecting poorer countries in particular.

But even in rich countries, there is a political fight for climate for every billion. Poorer countries, which are getting deeper and deeper into debt anyway due to high interest rates and inflation, certainly don’t have the money for that.

This is where a reform of international financial markets should begin, which will be discussed in Washington this week at the spring meeting of the International Monetary Fund and the World Bank. In the picture: the World Bank, whose main task has so far been to lend money to poor countries on favorable terms with the aim of strengthening their economies and reducing poverty. It is given a new core mandate: to intervene in global crises such as climate change and species extinction.

“Redistribution of trillions”

In concrete terms, the World Bank should help poorer countries to access cheap money through loans, while at the same time directing the money flows where they are needed to combat the climate crisis. Experts speak of “the shifting of the trillions”, a redistribution of trillions. According to UN estimates, global climate investments of USD 125 trillion will be needed by 2050 to limit global warming to 1.5 degrees.

According to the reform initiative, the World Bank should give countries that promote climate protection attractive interest rates. Moreover, the amounts it makes available are expected to increase considerably. To do this, however, the bank would have to make better use of its equity and relax its previously conservative approach. This could mobilize several billion dollars.

Experts do not want to accept that the World Bank could have less for the fight against poverty by investing more in climate protection. “We must make it clear that this does not deviate from the bank’s focus on development,” emphasizes the state secretary of the German Ministry of Development Cooperation. Many of the poorest countries are most affected by climate change, so they would benefit from the investments.

Moreover, World Bank money should be just the leverage to activate a multitude of private capital. The state’s development aid could then be directed more towards the poorest countries.

Fear of declining involvement of rich countries

But development organizations warn that the reform should not put pressure on rich countries to increase their development budgets. The aid from the World Bank looks like a lot of money on paper, but in the end it is just loans, says Jan Kowalzig of the aid organization Oxfam. And here it depends on whether the development of renewable energy sources is promoted or whether a country adapts to floods and droughts.

In the case of renewable energy, the loans can boost growth and move a country forward. With houses on stilts, early warning systems against storms, dams or irrigation systems, however, it is about maintaining the status quo – for such things there should be subsidies instead of loans, the expert demands.

“Lending money to countries to adapt to the impacts of a climate crisis for which they are least responsible is highly problematic from a climate justice perspective.” It only drives poorer countries deeper into the debt trap.

charcoal for charcoal

Moreover, the World Bank itself currently still massively supports fossil energies, as climate activists also criticize. Since 2015, it has mobilized $15 billion in private and public capital for coal, oil and gas expansion, according to a report by the NGO coalition The Big Shift Global. The World Bank has been promising changes here for a long time.

The bank’s proposal to change its mission is also aimed at this: A broader concept of prosperity is being pursued that is not based solely on classic parameters such as gross domestic product. In the future, beyond ending extreme poverty, it will be much more about promoting shared prosperity through “sustainable, resilient and inclusive development”.

“We must continue to focus on the poorest countries, but we need an integrated approach,” said Axel van Trotsenburg, who has worked for the World Bank for some 35 years and is now Senior Managing Director there, during the talks in Washington. After the corona pandemic, it is important to reflect on the current challenges. A pandemic or the climate crisis would plunge poor countries even deeper into poverty.

Diverting large tankers is difficult

The World Bank therefore argues that it makes sense to think about such crises from the start. But far-reaching reforms in a large organization like the World Bank are not easy. The World Bank is a large multilateral organization involving taxpayers’ money and various interests, says Van Trotsenburg.

The reform now coincides with the change at the top of the bank. World Bank chief David Malpass surprisingly announced his resignation in February. The American economist was criticized for a statement about the climate crisis. He is now being followed in the middle of the reform process by Indian-American manager Ajay Banga. (oee/sda/awp/dpa)