Responding to pressure from the environmental community and U.S. lawmakers, the World Bank plans to estimate the carbon footprints of its future projects.
The Bank, in collaboration with the world's leading multilateral development banks, is creating a common method for estimating a project's associated greenhouse gas emissions. The assessments are expected to bring greater transparency to the financial institutions' development portfolios and to encourage developing-country clients to follow low-carbon development paths, analysts said.
Warren Evans, director of the World Bank's environment department, said the institution has not decided how greenhouse gas analyses would influence the composition of investment portfolios. Whether carbon footprints are factored into project costs - an inclusion known as a "shadow price" - depends on the outcome of this December's international climate change negotiations in Copenhagen, Denmark.
"I suspect that after Copenhagen we will be able to roll that [project-level analysis] out and there will be a greater amount of shadow price accounting as we move forward," Evans said at a Capitol Hill briefing earlier this month. "I do expect this to become a much more substantive part of our operations in, say, a year from now."
The Bank's decision to analyze project-level greenhouse gas emissions comes after decades of pressure from non-governmental groups, such as the Environmental Defense Fund and the Bank Information Center, to shift multilateral lending toward renewable energy and energy efficiency. It also comes at a time when many large corporations and financial institutions are starting to track their emissions - often with
Other development banks are considering similar analyses of their carbon footprints. The Inter-American Development Bank has begun evaluating the direct emissions of some projects, said Emmanuel Boulet, a senior environmental specialist at the IDB.
"In the end, we may have some greenhouse gas accounting of the overall project portfolio," Boulet said in early July at a World Bank-hosted discussion on tracking investment related emissions. "For the time being, on a project basis we're trying to reduce our greenhouse gasemissions."
U.S. Senator John Kerry (Democrat-Massachusetts), chair of the Senate Foreign Relations Committee, has proposed legislation that asks the U.S. Treasury Department to encourage multilateral development banks to include greenhouse gas accounting in their cost-benefit analyses.
Assigning a shadow price to development projects has already piqued the interest of some U.S. Treasury Department economists, according to David Wheeler, a Center for Global Development senior fellow who has lobbied the World Bank to measure its carbon footprint. "People in the Treasury are well aware of this and are quite supportive," he said.
A Large Carbon Footprint
The carbon-intensity of many development bank-supported investments - particularly for coal-fired power plants - has angered environmental groups. According to Bruce Rich, former senior counsel at the Environmental Defense Fund, the top five public international financers of coal-fired power plants since 1994 have collectively invested more than $23.3 billion in 96 projects throughout the developing world. Three of the top five investors are multilateral institutions: the World Bank Group, Asian Development Bank (ADB), and European Investment Bank (EIB).
"The agencies continue to be not entirely transparent. They don't list all individual projects, especially historical [investments]," Rich said at the Capitol Hill briefing.
Despite progress in creating the accounting system, Heike Mainhardt-Gibbs, a consultant with the watchdog group the Bank Information Center, remains concerned that the World Bank's secret tendencies will not improve.
"The World Bank is supposed to be more forthcoming to the public with their development projects. When they talk about their greenhouse gas methodology, they still are not promising any disclosure," Mainhardt-Gibbs said.
The World Bank already analyzes the greenhouse gases associated with its Carbon Finance Unit investments, which include projects in the areas of renewable energy and energy efficiency. In addition, the International Finance Corporation (IFC), the World Bank Group's private sector division, began developing an emissions accounting system in 1997. The lending agency began carbon accounting this year for pilot projects expected to emit more than 100,000 metric tons.
Shilpa Patel, the IFC's climate change chief, said the IFC's accounting system was first met with resistance but is now a prominent feature of her agency's analyses. In recent years, IFC lending for renewable energy projects - particularly wind power - has grown dramatically, and about two-thirds of the agency's energy investments now support renewable energy.
"We have found that the measurement is really just a first step to a deeper analysis of greenhouse gas emissions," Patel wrote in an e-mail. "Often, it leads to a constructive dialogue with the client on energy efficiency improvements which not only save costs, but also reduce greenhouse gas emissions."
Developing Country Resistence
Some developing-country officials are responding negatively to any inclusion of greenhouse gases in World Bank project analyses. Such assessments are viewed as unfair as long as many industrialized countries, mainly the United States, have not yet implemented emissions restrictions on their own economies, Evans said.
"Developing countries said, ‘We don't have an obligation to pay for greenhouse gases,'" Evans said. "‘We don't want to pay for that and we don't want to see [the World Bank] using our resources for that.'"
Eduardo Paes Saboia, a senior adviser to the Bank's executive director for Brazil, Colombia, and the Dominican Republic, said at the July World Bank meeting that he supports the use of emissions data for general decision making, but that these decisions should not affect investments.
"The greenhouse gas accounting efforts being deployed contribute to analytical tools needed to make decisions," Saboia said. "However, decisions on what we focus on, invest in, should be taken on a multilateral framework...and not be used for decision making."
World Bank officials have expressed concern that some projects, notably in the transportation sector, may be disproportionately affected by a greenhouse gas accounting system. An investment such as a highway, for instance, will unavoidably lead to emissions through the clearing of land and encouragement of greater vehicle use.
Wheeler suggests, however, that the inclusion of a highway's shadow price may allow development agencies to compare low-carbon alternatives such as high-speed rail.
"It reveals the extra cost, and donors can decide whether or not they want to pay the added cost. That's fair and fully informative," Wheeler said. "It's not necessarily something developing countries need to be afraid of. It can reveal the grant funds that are needed to reveal the low-carbon path."
Photo credit: Flickr/brownpau, Creative Commons License.