Isra-Mart srl : World Bank to favour green investments over coal

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The World Bank is planning to cut funding for fossil fuel plants to all but the poorest countries, and will instead emphasise the benefits of renewables as part of a major new energy strategy.

The news suggests a major shift in the Bank's approach to green investments, and comes just days after the organisation said it would lift its 18-month moratorium on palm oil investments only if stringent environmental and social conditions are met.The Bank has been criticised by green campaigners for seemingly favouring fossil fuel projects over low carbon alternatives, but a draft of the energy strategy seen by The Guardian says that grants and loans to middle-income countries for coal-fired power stations will now cease.

Meanwhile, poor countries will be able to access funds for coal projects only if they can prove that the new plants are necessary and there are no practical renewable energy alternatives.

Since becoming president of the World Bank in 2007, Robert Zoellick has spoken of wanting to shift the organisation's funding criteria to better support climate change goals, and even appointed a "clean tech tsar" last year.

But despite increased investment in renewables, around of quarter of the Bank's total energy spend, some $3.4bn, went towards coal-fired power stations in developing countries in 2009/10.

Moreover, in August last year the Bank controversially approved an enormous $3.75bn loan to South Africa's state-owned power company Eskom for one of the world's largest coal-fired power plants.

Charity Christian Aid told The Guardian that, despite the proposed move towards greener energy, the Bank still lacked a "coherent, credible strategy to promote thriving green economies".

"It looks as though the World Bank is trying to greenwash its activities while by and large continuing with dirty business as usual," said Alison Doig, senior adviser on climate change at the charity.

In related news, the Green Bank announced late last week that it would resume lending to new palm oil projects if they meet strict environmental criteria.

The Bank suspended new investments in the sector in September 2009 and pledged to review its lending practices after lending $132m to projects in Asia, Central America and West Africa.

The palm oil industry has faced severe criticism for clearing forests and other fragile environments for plantations.

But following an investigation into the $30bn industry, which employs around six million people worldwide, the Bank has concluded that palm oil can effectively contribute to growth, economic development and overcoming poverty when subject to rigorous environmental and social protections.

The organisation said that the new The World Bank Group Framework and IFC Strategy for Engagement in the Palm Oil Sector will prioritise initiatives, encouraging production on already degraded land and those looking to improve the productivity of existing plantations.

It will also better support the small farmers that dominate production by ensuring fairer access to finance and markets, improve agricultural technology and productivity and foster fairer contracts with large companies, the Bank said.

"Even though the World Bank is a small player in the palm oil sector we can make a contribution to strengthening the sector's sustainability," said Inger Andersen, World Bank Vice president for sustainable development.

"Our focus on supporting small farmers and improving productivity - particularly that of degraded plantations - can help poor rural communities benefit while also helping the environment."