Foreclosing the Future, by Bruce Rich

Foreclosing the Future: The World Bank and the Politics of Environmental Destruction, by Bruce Rich, Island Press RRP$35, 320 pages

For an organisation whose main aim is to tackle global poverty, the World Bank comes in for a lot of vilification.

Since its birth in 1944, the Bank has channelled hundreds of billions of dollars in loans and grants to developing countries. For this, it has been charged with a litany of ills by critics from across the political spectrum. The left claims it has ignored the social impact of its policies and rammed harsh economic reforms down poor countries’ throats. The right accuses it of crowding out the private sector in middle-income economies.

Now comes a fresh broadside against what has long been one of the Bank’s most painful sore-spots: its environmental record. Some of the ground covered in Foreclosing the Future by Bruce Rich, an environmental lawyer, is well trodden. Inevitably, he touches on the protests in the 1980s and 1990s over the Bank’s support for big dams that displaced thousands of people and threatened fragile ecosystems in a number of developing countries.

The strength of the book, however, is its dissection of the Bank’s approach to climate change. In recent years the Bank has positioned itself, in Rich’s words, as “the world’s leading public climate banker”. In 2008, it was chosen to administer around $6.7bn in “climate investment funds” to help poorer countries adapt to global warming and finance clean energy. Two years later it was asked to administer the first $30bn of a Green Climate Fund that is supposed to be disbursing a large part of the $100bn a year that rich countries have pledged to channel to poorer ones by 2020.

The Bank has also played a large part in promoting the UN-backed global carbon market, which grew out of the 1997 Kyoto protocol and allows wealthy countries to meet their obligations by investing in projects such as wind farms or solar parks in developing countries.

At the same time, however, it continued to fund more of the coal-fired power plants that are a leading source of those emissions, especially in emerging economies. In 2010 alone, Rich calculates, the Bank’s energy lending amounted to about $10bn, of which around $6.5bn was for fossil fuels and only $3.5bn for energy efficiency and renewable power projects. There is a “skull-splitting cognitive dissonance” about the Bank’s simultaneous promotion of fossil fuels and climate action, says Rich.

But this is hardly a surprise. As Rich acknowledges, the World Bank does not have the freedom to follow its own whims. Its largest donor, the US, has not always been a vigorous supporter of climate change action. More importantly, the Bank has given fast-growing borrower countries including India, China, Brazil and South Africa more decision-making power on its board. Many have objected to limits being imposed on borrowing for fossil fuel projects.

Rich argues that one of the chief reasons for the Bank’s environmental failures is a “loan approval culture”, or a drive to get projects launched as quickly as possible, that has persisted despite repeated internal acknowledgment of the risks it poses – not least from successive World Bank presidents and senior managers.

If any Bank president can change that culture, it may be the current one, Dr Jim Yong Kim, a public health expert who was a fierce critic of the Bank before he began leading it last year. Kim has made it clear that he wants the World Bank to be a leading advocate for climate action.

He oversaw the release of a Bank report last November called “Turn Down the Heat” that urgently warned of the dangers posed by a warming world, saying he hoped that it “shocks us into action”. Shortly before this book was published, the Bank’s board decided to limit financing of coal-fired power plants to countries that have “no feasible alternatives” to coal.

As Rich’s work shows, if this turns out to be the start of a permanent shift in the Bank’s policies on fossil fuels, it will represent one of the most significant changes seen in its long history of lending.

Pilita Clark is the FT’s environment correspondent