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Finance and climate change

This report is broken into two parts: The World Bank’s climate change agenda: bridging the gaps or widening the North-South divide? and Financing adaptation to climate change in Malawi. The document gathers and analysesinformation on major climate change and finance initiatives by the World Bank.

The report begins by explaining some of the major challenges that have been central to the climate change negotiations, focusing on main differences between developed and developing countries’ positions. The authors discuss the role of the World Bank in the financial architecture set up for combating climate change, which include initiatives such as: the Global Environment Facility (GEF), Clean Development Mechanism (CDM), Strategic Framework for Climate Change and Development (SFCCD), and the Clean Technology Fund.

The authors also present major concerns raised by civil society and several developing countries governments on World Bank initiatives. The major concerns raised are:

• the trust fund undermines the Kyoto principle of differentiated responsibilities. Setting up trust funds within the World Bank is entirely donor-led, and the donors retain a lot of influence on how the funds are allocated and for what purpose
• the process of setting up the climate investment funds (CIFs), and the drafting of the SFCCD have been rushed through with a number of high level meetings and hasty “consultations” with “other stakeholders”, leaving out civil society and indigenous people
• by lending through the World Bank, rich countries distort UNFCCC negotiations. Also, there is no guarantees that the World Bank will give way to the UNFCCC post-2012
• climate change should not reinforce donors and creditors influence in developing countries
• climate change should not be counted as overseas development assistance (ODA) to let donors off the hook in reaching aid targets
• the World Bank should fund increased energy access that reaches the poor instead of expensive and unproven purely mitigating technologies such as Carbon Capture and Storage (CCS).

The report concludes that developed countries have obligations to fulfill because of their historic emissions of greenhouse gases. The authors argue that it would be immoral for developed countries to lend money to developing countries for coping with problems that the richest countries in the world created. There is a danger that this would sideline the UNFCCC convention.

Recommendations given are:

• there is need make sure that intermediate multilateral funding for climate change mitigation and adaptation is provided through the UNFCCC channels, such as the Kyoto protocol Adaptation fund, and not through the World Bank
• instead of further increasing financing for fossil fuel-based development, the World Bank should choose to phase-out fossil fuels funding
• for the Bank to be useful to developing countries having to deal with climate change, it must go through a governance reform that would increase its legitimacy to work for developing countries. It must also redirect its own funding to finance renewable energy.

The paper finally presents a case study from Malawi conducted by the Centre for Environmental Policy and Advocacy (CEPA) on the issue of financing for adaptation to climate change in Malawi.

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