WORLD BANK PLAN MAY THWART CARBON REDUCTION

WORLD BANK PLAN MAY THWART CARBON REDUCTION

Early this year, the World Bank announced a new international program intended to help developing countries adopt energy technologies that use less fossil fuel and thus produce less global warming pollution.

This pollution, mainly carbon dioxide from the combustion of coal and oil, will likely increase the average temperature of the Earth by as much as 3 degrees Fahrenheit in this century. Such warming threatens destructive sea-level rise in coastal areas, severe droughts especially in the southern hemisphere, and extreme weather events across the globe.But the World Bank's proposed solution, the Prototype Carbon Fund (PCF), may actually thwart efforts by nations to rein in climate change with better policies that will promote truly sustainable development.

Industrialized countries agreed at the 1997 Kyoto climate conference to reduce emissions of carbon dioxide and other ''greenhouse'' gases by 5 percent below 1990 levels by the period between 2008 and 2010.

Ostensibly promoting this goal, the World Bank's program encourages companies to invest in projects that will emit less than the allowable amount of greenhouse gas pollution than conventional technology. These ''credits,'' in turn, can be sold to corporations that produce excess carbon dioxide pollution.

The bank's initiative takes advantage of a provision in the Kyoto treaty allowing industrialized countries to offset their emissions by investing in carbon-saving technologies, called Clean Development Mechanisms, in less-developed countries. But there are several problems.

First, the program introduces an inherent conflict of interest. Most of the bank's investment portfolio lies in the energy sector, and about 80 percent of these loans have financed construction of carbon-intensive, coal-burning power plants.

An analysis by the Institute for Policy Studies has found that between 1993 - after the international climate change convention was signed at the Rio Earth Summit - and 1998, the World Bank invested $13.6 billion in projects that will increase carbon emissions by at least 37.5 billion tons over their lifetimes. To put this in context, 30 billion tons of carbon dioxide were emitted worldwide last year.

Now, however, the bank has created a program to attract investment (in projects that will clean up the very pollution it helped create in the first place) to be repaid with certified emissions credits. These can be sold to entities that are unable or unwilling to cut carbon output any other way.

The temptation for World Bank managers is obvious: to continue investing in fossil fuel-intensive industries, whose pollution will then be eligible for grants from the PCF.

Secondly, the fund diverts attention from the real sources of carbon-dioxide pollution - industrialized nations - by its focus on developing countries. This raises moral questions over shifting the onus for addressing global warming from rich, polluting nations to less culpable, poorer ones.

Proponents of carbon trading schemes respond that emission reductions in, say, India, are cheaper per ton of avoided pollution than in Germany.

On the contrary, many studies, including one commissioned by the U.S. Department of Energy, clearly show that even the United States can reduce domestic carbon emissions by more than half of its targeted amount at little or no cost through simple means such as improved energy efficiency.

The PCF also will lead to the exploitation of developing countries by industrialized ones. World Bank investments will ''pick low-hanging fruit,'' enabling investors to profit from carbon credits for the cheapest, most-available options to limit emissions.

This will leave poorer nations the far more complicated and expensive task of solving their most intractable emissions problems, such as high pollution levels from millions of cars and trucks, or weaning their economy from energy-intensive industries.

Finally there is an ethical dilemma in the World Bank's loan program. Setting a baseline from which to measure a project's reduction of carbon emissions can be a very slippery slope. Both investors and borrowers may be inclined to set the base, typically a ''business-as-usual'' scenario, artificially high to gain the largest credit possible.

The World Bank's carbon fund has the appearance of window dressing by an international lender bent on making itself as attractive as possible to investors.

In its present configuration, the carbon fund fails a number of rudimentary tests, and bank officials should reconsider their approach before an ill-conceived ''prototype'' drives out more viable - and more effective - alternatives.

By spending its scarce resources this way, the bank imposes a steep opportunity cost on the poorest of the poor communities in developing countries - the very people it purports to help.

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