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The World Bank’s Forest Investment Programme – the story so far

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The World Bank is positioning itself as one of the major funders of REDD. One of the Bank’s funding mechanisms is the Forest Investment Program. So far, the FIP has held three design meetings.

Sena Alouka, Executive Director of Jeune Volontaires pour l’Environnement, Togo is one of the civil society representatives at the FIP meetings. He wrote the following account of the FIP so far in the Global Forest Coalition‘s newsletter “Forest Cover“, July 2009.

A useful overview of the Forest Investment Program is available on the Heinrich Böll Foundation and Overseas Development Initiative’s website, climatefundsupdate.org. The World Bank’s FIP website, perhaps not surprisingly, is far less informative.

Forest Investment Program Meets for Second Design Meeting

Sena Alouka, Executive Director, Jeunes Volontaires pour l’Environnement, Togo

The Bali Action Plan calls on parties to “consider policy approaches and positive incentives on issues relating to reducing emissions from deforestation and forest degradation [REDD] in developing countries; and the role of conservation, sustainable management of forests, and the enhancement of forest carbon stocks in developing countries.” This call prompted the World Bank to set up several mechanisms through which it could provide the necessary funding for REDD plans being developed by several countries and multilateral institutions.

During the final design meeting of Bank’s Climate Investment Funds (CIF), held in Potsdam, in May 2008, it was agreed that “a forest investment program should be established by the end of 2008 to mobilize significantly increased funds to reduce deforestation and forest degradation and to promote sustainable forest management, leading to emission reductions and the protection of carbon reservoirs. The FIP should be developed based on a broad and transparent consultative process. That process should take into account country led priority strategies for the containment of deforestation and degradation and build upon complementarities between existing forest initiatives.”

According to the World Bank, the main goal of the FIP is “to support developing countries’ REDD-efforts, providing up-front bridge financing for readiness reforms and investments identified through national REDD readiness strategy building efforts, while taking into account opportunities to help them adapt to the impacts of climate change on forests and to contribute to multiple benefits such as biodiversity conservation and rural livelihoods enhancements. The FIP will finance efforts to address the underlying causes of deforestation and forest degradation and to overcome barriers that have hindered past efforts to do so.” The FIP is supposed to achieve all this by serving as a vehicle to finance large scale investments, promoting transformational change, generating understanding and learning of the links between investments and outcomes, and piloting replicable models to leverage additional and sustained financial resources for REDD.

Design meetings
The first design meeting for the development of the FIP was held in Washington DC, 16-17 October 2008. A working group experts’ meeting was then convened 8-9 January 2009, and a second design meeting organized on 5-6 March 2009. A third design meeting took place in Washington DC, 4-5 May, but no consensus could be reached, and the current version of the proposal stems from an online consultation organized by the FIP secretariat.

Arrangements made for civil society participation in these meetings has been haphazard at best. Some NGOs and Indigenous People were invited to the initial presentation meeting of the CIF in October 2008, thanks to the Development and Environment Group of BOND (British Overseas NGOs for Development) in the UK. Since then, IUCN has been asked to conduct a self-selection process to identify six civil society delegates from the various regions of the world. Another process was arranged for the selection of the Indigenous peoples’ delegate.

Participation in the second design meeting was particularly poorly organized. Because of the extremely late notice and failure to facilitate participants’ visa and travel arrangements in a timely fashion, civil society representatives who were duly elected to attend the FIP meeting, through a formalized selection process, were unable to take part in the end: the delegate from Togo, for example, got his ticket one hour before departure. Even for the lucky few who managed to attend, background materials and the agenda had not been circulated to all in advance, meaning that participants had had little time to review and prepare their inputs to the meeting, let alone consult their constituencies and solicit input in a meaningful manner. In the end, the civil society group wrote a joint letter to express its deep disappointment in the ongoing organization – or rather lack of organization – of the Forest Investment Programme (FIP) design meetings, which is making meaningful and broad civil society participation impossible.

This is of particular concern given that the majority of those unable to attend were from tropical forest countries – the very people whose voices, opinions, and knowledge are essential to ensure the success of measures to stop deforestation and forest degradation in those countries, and to guarantee respect for the rights and interests of forest-dependent communities. The joint letter queries the “sincerity of the World Bank Group’s stated commitment to ensure that the FIP is based on ‘a broad and transparent’ and ‘fully’ consultative process.”

Business-as-usual
Key issues that have been important for civil society participants have included the principles of the FIP, the Special Initiative for Indigenous Peoples and Local Communities, the level of transformational change the Bank and its acolytes are willing to reach, and the broad participation of civil society organizations and local communities. But it is ever clearer that the FIP could be business-as-usual. Several countries insisted on their need for development – the right to keep on logging – and their national sovereignty; but this approach risks reducing compliance, transparency and windows for broad participation from civil society organisations and Indigenous People.

Concerning the Special Initiative for Indigenous Peoples and Local Communities, civil society participants stressed that activities eligible for support should include capacity building; securing and strengthening customary land tenure, resource rights and traditional forest management systems of Indigenous Peoples and local communities; support for the development of pilot project proposals from Indigenous Peoples and local communities; and support for their involvement in monitoring and evaluating forest activities. Additionally, there is also a need to ensure that support for Indigenous Peoples and local communities is fully integrated into national forest-climate policy, REDD/FIP processes and investment plans. This means that activities supported through a dedicated mechanism should not be isolated or marginalized from the design and implementation of national REDD/FIP plans, nor should the existence of such a mechanism stop Indigenous Peoples’ and local communities’ accessing funds through other mechanisms or for other activities.

One point that has drawn a lot of attention is the “Illustrative Examples of Potential Investments under the FIP.” While this could be useful, civil society participants indicated their preference for an exclusion list, detailing activities that will not, under any circumstances, be supported by the FIP. As the FIP is designed to “support countries’ REDD-efforts” and maximize benefits of sustainable development, particularly in relation to biodiversity conservation, rural livelihoods, and ecosystem services, it should never be used to finance deforestation or forest degradation.

Concerns were also raised around Sustainable Forest Management, which may hide an intention to promote industrial-scale logging or ‘certification’ systems, plantations (monocultures, potentially including genetically modified trees), and destructive mining and infrastructure projects, with the pretention of making participation of civil them more sustainable.

In the end, for the FIP to be truly transformative, it should support efforts to reduce demand for wood and agricultural products altogether, and halt the production and purchase of products derived from degraded or converted forests, as well as conserving intact or primary natural forests – not just ‘high conservation value or pristine forests.’ CSOs decided to participate in the FIP sub-committee as active observers, rather than full members, to avoid the possibility of legitimizing harmful projects. In general, however, they were relatively satisfied with the openness of the FIP secretariat and the positive attitude displayed by several participants (apart from some developing country governments that seem to regard the FIP as a means of financing and legitimizing industrial logging).

Finally, taking into consideration the sunset clause in the CIF, which obliges it to come to an end by 2012 (unless otherwise requested by the UNFCCC), there is reason to ask about the relevance of the FIP as well, since most institutions, are already calling for a redrafting of the REDD or REDD+. Fingers are crossed that future meetings address these profound concerns, before the FIP’s Design Document is finally validated by the Strategic Climate Fund Trust Committee.


PHOTO credit: Shiny Things on flickr.

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  1. Thanks for the link, James. The report “Convenient Solutions to an Inconvenient Truth” starts with this statement: “The World Bank’s mission is to alleviate poverty and support sustainable development. Climate change is a serious environmental challenge that could undermine these goals.”

    So isn’t is about time that the World Bank stopped funding coal-fired power stations? In 2008, as I’m sure you know, World Bank lending for coal increased by 256 per cent.

    But the World Bank is not only increasing its lending for coal projects, it is also promoting carbon markets which will allow pollution in the North to continue: “The World Bank is in the forefront of facilitating the development of market‐based financing mechanisms and piloting new avenues to deepen the reach of the carbon market,” as Tony Whitten notes in his blog post.

  2. As energy experts know, energy financing from year to year is “lumpy”, meaning that one new power plant more or less in a year can lead to wild swings in percentages. For instance, in the previous year 2007, World Bank Group financing for coal went down 55%. Which is why most people talk about three-year rolling averages. And the World Bank Group’s record in this area can be seen differently.

    Over the last three years for which we have final figures (FY06-08), just one third of our financing was for fossil fuels. Of that, most was for natural gas –the cleanest of them. Coal financing represented less than 10 percent of our total energy financing worldwide, and only 4.1 percent of all Bank Group financing that year.

    Furthermore, many leaders in developing countries would argue that any increase in funding for coal projects is a good thing. It means that hundreds of thousands of poor people in developing countries will finally have access to electricity. It means that hospitals can function safely, schools can operate fully, and factories can operate efficiently, creating jobs and building an economy.

    For the World Bank, it also means that we are finding ways to help countries move on to lower carbon growth paths. The coal projects we help to finance follow our stringent environmental and social safeguard policies, as well as our strict guidelines on which fossil fuel projects to finance.
    Mr. Lang and others seem to make the all-too-frequent erroneous assumption that developing countries have to choose between economic growth and poverty reduction or environmental protection. We think they can – and should – have both, and that is why we work with them to find the best ways to achieve these win-wins.

  3. @Roger Morier – perhaps you should read this year’s World Development Report: “Developing countries are disproportionately affected by climate change – a crisis that is not of their making and for which they are the least prepared. Increasing access to energy and other services using high-carbon technologies will produce more greenhouse gases, hence more climate change.” This isn’t about economic growth and poverty reduction versus environmental protection. It’s about climate justice and human rights. Last year, the World Bank and Asian Development Bank funded a coal-fired plant in Gujarat, western India, to the tune of US$850 million. It will be one of the biggest new sources of greenhouse gases on the planet, emitting 26.7 million tonnes of CO2 a year for the next 50 years. Here’s what Tim Jones of the World Development Movement says about Bank lending for coal projects: “The World Bank is acting in the interests of Western countries and companies and not in the long-term interests of the world’s poor.”

  4. Then there’s oil. Kamal Dorabawila, IFC’s top investment official for the oil and gas sector in Africa, recently told Reuters:

    “The IFC has a portfolio worth some $2 billion in the oil and gas sector globally, of which 20 percent was in sub-Saharan Africa or a little less than $400 million, said Dorabawila.

    “We definitely would like to have that increase… Africa is a focus area,” he said.

  5. A recent article on Grist takes a critical look at the World Bank’s lending for fossil fuels: “World Bank can’t wean itself off fossil fuel lending“. It’s interesting because it looks at the World Bank’s reaction to NGOs’ comments about Bank funding for fossil fuels:

    At a press conference, Greenpeace and the World Wildlife Federation in Turkey noted that the World Bank continues to invest far more in fossil fuels than in renewable energy [PDF], pointing out that from 2007 to 2009 the Bank doled out, on average, three times more public money for climate destroying fossil fuel investments than for environmentally sustainable, climate smart renewables.

    A handful of World Bank staffers tried to disrupt this message, arguing about the NGO figures and handing out press releases about Bank lending for renewable energy.

    [W]when you take the energy efficiency projects, the so-called low-hanging fruit, out of the equation, you’re left with a disturbing fact: for the fiscal years ending in June 2009, the Bank’s lending for actual power generation still favored fossil fuels over renewables ($1.9 billion versus $1.4 billion).

    The World Bank remains heavily in denial about the coal, oil, and gas projects it continues to subsidize with low interest loans in the developing world, most often with devastating social, economic, and climate effects.

  6. @Roger Morier – Here’s another World Bank-funded coal-fired power station, all US$3.75 billion-worth of it. Looks like World Bank energy finance just went “lumpy” again:

    World Bank approves loan for Eskom coal plant

    By Lesley Wroughton

    WASHINGTON (Reuters) – The World Bank on Thursday approved a controversial $3.75 billion loan to develop a coal-fired power plant in South Africa despite the lack of support from the United States, Netherlands and Britain.

    The countries, all major donors to the World Bank, said they abstained from supporting the loan for South African state power utility Eskom due to environmental and other concerns.

    Eskom has defended the 4,800 megawatt Medupi plant in the northern Limpopo region, saying there is no immediate alternative to easing the country’s chronic power shortages and ensuring power supplies to neighboring states.

    It is the first World Bank loan approved for South Africa since the end of apartheid in 1994.

    “Without an increased energy supply, South Africans will face hardship for the poor and limited economic growth,” said Obiageli Ezekwesili, World Bank vice-president for Africa.

    The U.S. Treasury said it abstained due to “concerns about the climate impact of the project and its incompatibility with the World Bank’s commitment to be a leader in climate change mitigation and adaptation.”

    It urged the World Bank to increase its support for clean energy projects and cautioned that it should not propose similar coal projects in middle-income countries without a plan that ensures there is no net increase in carbon emissions.

    A Dutch Foreign Ministry spokesman said it had advised its representative at the World Bank to abstain, citing concerns that not enough is being done to develop alternatives to coal.

    “The Netherlands believes Eskom is doing relatively too little to develop alternatives to coal, so we don’t think this is a good proposal,” the spokesman told Reuters.

    “We also understand that South Africa is in need of extra energy capacity to support its economic growth. Therefore, the Netherlands has advised our (executive director) for our constituency to abstain,” he added.

    World Bank board decisions are arrived at through consensus among member countries rather than through voting, and countries can indicate their lack of support by abstaining from discussion of the issue.

    Asked what message the abstentions sent to the Bank, Ezekwesili noted that while countries abstained they did not oppose the project through a “no” vote.

    “It was a signal by the board that it supports the Bank engaging in balanced development of power to help deliver urgently-needed electricity to countries like South Africa… while concurrently charting a path toward a greener energy future,” she told Reuters.

    GREENING OF ECONOMIES

    The U.S. Treasury said the project was inconsistent with guidelines issued in December by the Obama administration on coal-related lending by development banks.

    It said the project was also incompatible with the World Bank’s strategy to help countries pursue economic growth and poverty reduction in ways that are environmentally friendly.

    The Treasury said while it recognized South Africa’s pressing energy needs, the project would produce “significant” greenhouse gas emissions and there was uncertainty future efforts to mitigate them.

    The UK Department for International Development said the project raised “several sensitive and potentially controversial issues” that it was unable to resolve due to an election campaign in Britain ahead of a May 6 vote.

    The opposition to the Eskom loan has raised eyebrows among developing countries who note that Britain and the U.S. are allowing development of coal-powered plants in their own countries even as they raise concerns about others.

    The controversy over the Eskom loan goes to the heart of the divides between the developed and developing countries over tackling climate change. Both camps failed to seal a new climate agreement in Copenhagen in December due to differences over emissions targets and who should pay for poorer nations to green their economies.

    The South African plant is using the latest so-called clean coal and carbon storage technologies available on the market, which is used by most rich countries to limit the environmental impact of burning coal.

    Environmental and development groups slammed the World Bank decision, calling it a setback for development.

    “This was a missed opportunity for the U.S. and the World Bank to move away from a traditional focus on fossil-fueled growth,” said Peter Goldmark, director of the Environmental Defense Fund’s climate and air program.