In July 2013, the World Bank Group (WBG) released the report Toward a Sustainable Energy Future for All: Directions for the World Bank Group’s Energy Sector (Energy Directions Paper). The approach outlines commitments for securing affordable, reliable, and sustainable energy and closely mirrors the objectives of the Sustainable Energy for All Initiative: achieving universal access, accelerating improvements in energy efficiency, and doubling the global share of renewable energy by 2030. BIC examined whether the public sector side of the WBG (IDA/IBRD) fulfilled the major commitments set out in the Energy Directions Paper by comparing the Bank’s energy sector portfolio before (FY2010-13) and after (FY2014-17) the energy strategy’s publication. Specifically, we sought to answer if the Bank had corporate indicators sufficient to measure its success and had met its Energy Directions targets. While we identified some positive results, largely the Bank has not met the pledges it made in the Paper.
We evaluated all 30 commitments made in the Paper but only 18 had data available for review. Of these 18 commitments, we determined the Bank’s progress was sufficient for six commitments, not adequate for nine, and not quantifiable for three. The Bank successfully phased out direct support and public finance for coal power, increased support for large-scale renewables, and continued supporting projects for off-grid distributed renewables, electrification of rural communities, and access to clean cooking and heating, albeit at modest levels.
However, the Bank also scaled up support for gas, a commitment rationalized as a “bridge fuel” to replace coal. The negative impacts of gas and oil co-development, particularly gas leakage and the extremely high short-term warming impact of methane, along with declining costs of renewable energy, undermine any justification of such efforts as climate-friendly or sustainable.[1] Following the implementation of the Paper (FY14-17), the Bank’s non-renewable energy investment projects totaled $12.5 billion, including $5.9 billion for fossil gas, while renewable energy and energy efficiency (RE/EE) projects together received $7.7 billion in financing. The fact that non-RE/EE financing exceeded RE/EE by more than 60 percent leads one to question the Bank’s priorities in this sector. Moreover, we found little progress on supporting universal energy access.
The Bank has an important role to play in financing renewable energy expansion and achieving universal energy access. To address its shortcomings and improve energy outcomes, the Bank should:
To read our findings and more on how the World Bank can improve the sustainability of its work in the energy sector, see the full paper: Has the World Bank Met its Targets for Sustainable Energy?
[1] See e.g. Union of Concerned Scientists, The Climate Risks of an Over-reliance on Natural Gas for Electricity, Oct. 15, 2013; and Environmental Impacts of Natural Gas, June 19, 2014 (accessed 6/16/20).
[2] The EIB’s energy policy covers all EIB activities including advisory services, technical assistance and all intermediated operations (including through investment funds or commercial banks)
[3] However, even the EIB approach leaves room for improvement. A more robust approach is laid out in Raising the Game on Paris Alignment, Germanwatch, NewClimate Institute and World Resources Institute, March 2020.
[4] The Bank has avoided sectoral strategies for several years, but energy policy is important enough to warrant one, as other banks have done (EIB, 2019) or are doing (ADB). Such strategies are subject to consultation and Board approval. A new ‘directions paper’ could provide similar substance, but would not benefit from full consultation.