After nearly two decades of debate and pressure from advocacy groups, the World Bank recently announced it would stop funding oil and natural gas projects after 2019. The $1 billion the Bank has provided annually in recent years for oil and gas extraction will be available to finance renewable energy projects, such as solar and wind power.
The decision was a tectonic shift in global energy finance and a major victory for groups — including several supported by the Charles Stewart Mott Foundation — working to address climate change by advancing clean energy solutions over the burning of coal, oil and other fossil fuels.
“This World Bank announcement will change the thinking about energy finance in boardrooms around the world,” said Sandra Smithey, a program officer for Mott’s Environment team whose work focuses on international finance. “Everyone looks to the World Bank for direction because it has funded projects with the most financial, social and environmental risks.”
After 2019, the World Bank will consider financing oil and gas extraction projects only in poor countries that face extraordinary circumstances. Such projects would have to increase access to energy without violating commitments countries made as part of the 2015 Paris climate agreement to reduce greenhouse gas emissions.
The Bank’s move away from financing oil and gas projects was a huge victory, but the institution must do more to support clean energy, said Andrea Durbin, executive director of the Oregon Environmental Council. She helped launch the global campaign to end World Bank financing for oil and gas extraction while at Friends of the Earth, a Mott grantee.
“The next step for the World Bank is to ensure that developing countries adopt cleaner, more affordable technologies and programs to deliver energy,” Durbin said. “This should include prioritizing small-scale renewables and decentralized energy delivery systems.”
Globally, 1.1 billion people lack access to any form of electricity, according to the most recent data compiled by the International Energy Agency. Most live in developing countries in Asia and sub-Saharan Africa, and many reside in rural areas that are far from existing energy grids.
Increasingly, small-scale solar power systems are being used to produce energy for isolated communities in developing countries. Mott is one of several philanthropic organizations supporting the deployment of solar power systems in remote areas of South America, sub-Saharan Africa and Asia.
“The World Bank decision represents a huge step forward,” said Ridgway White, president of the Mott Foundation. “Because it offers the dual benefit of addressing climate change while increasing access to energy, it’s a real win-win for people and the planet.”
Serious efforts to shift the World Bank’s global energy financing began in 2003 with support from Mott and other funders. Since then, the Foundation has provided more than $10 million to a cadre of groups working to shift the Bank’s focus away from financing fossil fuel projects, including oil and gas extraction, to supporting more renewable energy projects, Smithey said.
Sam Passmore, director of Mott’s Environment Program, said the World Bank decision demonstrates the benefit of patient, long-term support for grantees that are smart, informed and technically savvy.
“These kinds of victories are not easily won,” he said. “You have to be there for the long haul.
Mott grantees that worked to inform the World Bank’s new energy finance priorities created a global coalition, which included: Bank Information Center, Friends of the Earth-US (FOE); the Institute for Policy Studies; Oil Change International; World Resources Institute; FOE Japan; FOE International, based in The Netherlands; the Italian Campaign on the World Bank (now called Re: Common); and Urgewald, in Germany.
In 2013, the World Bank limited its financing of coal-fired power plants to rare circumstances but continued to invest in oil and gas extraction projects.
Bank officials said eliminating financing for oil and gas extraction will help countries meet the goals of the 2015 Paris agreement, a global effort to combat climate change. Supporters of the World Bank decision said it sends a powerful message.
“This sends a clear signal to the world that the fossil fuel era is ending, and that government money can no longer be used to prop up oil, gas and coal production,” said Alex Doukas, a program director at Oil Change International.