Turning the Tide
How the climate movement is helping sever the romance between multilateral development banks and the fossil fuels industry
Bankwatch’s new documentary exposes, for the first time, the extent of financial support four of the world’s leading multilateral development banks (MDBs) – the World Bank, the European Investment Bank, the Asian Development Bank and the European Bank for Reconstruction and Development – have been providing to the global fossil fuels industry over the past 13 years.
Our analysis shows that since 2008, the oil, coal and gas business has been enjoying no less than EUR 81.5 billion in support from these government-owned financial institutions in the form of loans, grants, credit lines and guarantees.
Source: CEE Bankwatch Network; Oil Change International’s Shift the Subsidies database; Mainhardt-Gibbs, Heike. 2009. World Bank Energy Sector Lending: Encouraging the World’s Addiction to Fossil Fuels, Bank Information Center, February 2009. https://www.rbf.org/news/world-bank-loans-encourage-fossil-fuel-dependency’
Multilateral financial institutions (MDBs) have been enabling the fossil fuels industry for years
The very fact that multilateral development banks invest in fossil fuels gives a signal to the market and to other investors. Their support for such projects gives them a kind of stamp of approval, suggesting their risk is lower.
Moreover, as civil society experts featured in this documentary say in the documentary, MDBs have been enabling the fossil fuels industry in a multitude of other, little acknowledged ways, thus entrenching societies’ dependence on fossil fuels and further fuelling the climate crisis.
Some of these banks have been instigating policy reforms, such as raising energy tariffs and introducing tax breaks for new energy investments to help make them more profitable.
In addition, these institutions offer various forms of technical assistance to governments, such as advice on lowering tax liabilities that would help attract new fossil fuels investments.
They have even provided cash injections to national budgets that would in turn be funneled to fossil energy projects.
Alternatively, such projects could be funded by MDBs through financial intermediaries like commercial banks, equity funds and state-owned banks. Ultimately, however, it’s people, including those not yet born, who will be footing the bill.
Civil society mobilising
In the face of MDBs’ backing to the fossil fuels industry, civil society has been resisting both individual projects and the energy lending policies of these banks.
Slovenia has seen a broad mobilisation against plans to build the Sostanj 6 lignite power plant. Despite repeated warnings from civil society about its potential ramifications, this project was pushed through, courtesy of hefty loans from the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), only to end up generating gigantic financial losses, a series of court cases over corruption and massive greenhouse gas emissions.
In Kosovo, plans to build a new lignite-fired power plant, promoted by both the World Bank and the EBRD, threatened to exacerbate both air pollution and greenhouse gas emissions. But a mobilisation of both local and international civil society has made both banks withdraw, in turn leading ContourGlobal, the company hired to build the plant, to pull out as well.
Banding together, the climate movement – activists, communities, as well as local and international civil society groups – has proven that mobilisation can delay or even thwart some of the worst fossil fuels projects enabled by public money.
MDBs changing course
In recent years, the tide is turning. In 2013, the World Bank, the EIB and EBRD all announced they will no longer provide financial support to coal projects. In December 2017 the World Bank declared it will restrict its funding for fossil fuels by 2020. This announcement was largely replicated by both the ADB and the EBRD in 2021; and in 2019 the EIB, the world’s largest multilateral lender, made history when it committed to ending financial support to all fossil fuels by the end of 2021.
As a matter of fact, all these milestone decisions were preceded by bitter experience with iconic fossil fuels projects such as Sostanj 6 and the New Kosovo lignite plant and the civil society resistance.
The EIB’s decision to cease financing for fossil gas also came after it had supported, in spite of relentless civil society pressure, the controversial Southern Gas Corridor – a massive chain of fossil gas pipelines from Azerbaijan to Italy. This project benefited, not only from the European Commission’s staunch political backing, but also from a raft of loans from the EIB, the EBRD, the ADB and the World Bank — all while steamrolling local communities in Turkey, Greece, Albania and Italy; creating a mammoth of a climate liability; and empowering Azerbaijan’s authoritarian regime.
Beyond fossil fuels
Now, science tells us in no uncertain terms that humanity must halve global emissions within less than a decade if we are to have a chance of averting an all-out climate breakdown.
The EBRD, the ADB and the World Bank must urgently put an end to financing all fossil fuels. This is a crucial step, but only one step. The great energy transition we are facing requires a systemic and creative approach. What is needed now is nothing less than reinventing our societies and re-calibrating our economies.
In this historical moment, what role for public money? Will multilateral development banks be part of the process?