• 20.06.2024
  • Ecological justice
  • Array

The fight against climate change is a battle for our very survival, demanding every cog in the global machinery to work seamlessly towards the Paris Agreement’s goals. Multilateral Development Banks (MDBs) are pivotal in this effort, tasked with ensuring their vast financial flows don’t exacerbate the problem but instead actively drive solutions. Yet, when it comes to their methodologies for Paris alignment—especially in Development Policy Finance (DPF)—there are glaring flaws that threaten to undermine this vital mission. One year on from the implementation of these methodologies by the World Bank and other MDBs, we take stock.

First is the vagueness in criteria and standards: The MDBs’ current frameworks for Paris alignment are convoluted. Without a universally accepted, rigorous set of guidelines, we’re left with a patchwork of criteria that vary between banks and within them. This ambiguity means that DPF, which requires government policy reforms, can inadvertently end up bolstering fossil fuel industries.

Imagine a policy aimed at energy security that ends up propping up coal, oil and gas as it has done in Senegal. The second World Bank Development Policy Finance for Senegal explicitly supports Senegal’s Gas Code 2020, which aims to bolster investor confidence and facilitate the growth of the gas industry. This undermined the potential for investment to rapidly expand its significant renewable energy potential.

Second is the insufficient focus on a just transition: The World Bank is one of the MDBs that is pushing to become a key player in climate finance whilst it continues to invest in fossil fuels in highly climate vulnerable countries. For example, the World Bank Paris Alignment Method for DPF considers a Prior Action (or conditionality agreed with a government before finance is disbursed) to be Paris-aligned if it “generates significant greenhouse gas (GHG) emissions but is in line with the country’s long term decarbonisation pathway and has a low risk of locking in carbon-intensive patterns.”

This is at odds with the letter and spirit of the Paris Agreement and the consensus made at the UN climate talks in Dubai in 2023 to phase out fossil fuels.

“The Paris Agreement isn’t just about cutting carbon—it’s about ensuring the transition to a low-carbon economy benefits everyone, especially the vulnerable. But MDBs’ Paris alignment frameworks often gloss over this critical aspect,” explains Mamadou Barry of Action Solidaire International in Senegal. “In Development Policy Finance, this oversight can mean reforms that widen inequalities or fail to support those people hardest hit by the transition. It’s as if we’re racing towards a greener future, leaving the most vulnerable stranded on the starting line.”

The World Bank frames gas as a cleaner alternative to coal or oil, failing to recognise the contribution of gas and methane to GHG emissions and how the development of gas infrastructure perpetuates dependence on a fossil-based energy model for decades to come. By advising countries on outdated energy models via its DPF, the World Bank remains a climate dinosaur.

In Bangladesh, for example, the World Bank’s Development Policy Credit required approval of the country’s Energy Sector Strategy (the Mujib Climate Prosperity Plan (MCPP)). This plan emphasises energy security and the transition towards a greener economy and sets a vision for Bangladesh. But the MCPP aims to achieve energy security through a mix of fossil fuels and renewable energy, which conflicts with the imperative of rapid decarbonisation, and is leading to carbon lock-in. In fact, Bangladesh’s increased reliance on imported Liquefied Natural Gas (LNG), combined with very low domestic renewable generation, has left Bangladesh highly vulnerable to energy shortages and blackouts.

Moreover, supporting gas development through DPF carries a serious risk of creating stranded assets in the future. New combined-cycle gas-fired power stations built today can have a 40 year life span, taking us well beyond 2050 when the world must achieve net-zero emissions according to the climate scientists. As the world moves towards decarbonisation and renewable energy technologies become more affordable, investments in gas infrastructure will become economically unviable. This will result in significant financial losses for both the governments and private investors involved in these projects.

Bhekumuzi Dean Bhebhe of Don’t Gas Africa explains: “Continued investment in gas infrastructure is a dangerous and short-sighted ambition that contributes to the worsening impacts of the climate emergency, which disproportionately affects vulnerable communities in developing countries. The World Bank’s continued support for gas infrastructure in countries like Senegal and Bangladesh through DPF is incompatible with Africa’s current and future energy needs.”

In the global fight against climate change, MDBs have an influential role. Yet, their current methodologies for Paris alignment, especially in Development Policy Finance, fall disappointingly short. Ambiguous criteria, insufficient focus on a just transition, a lack of transparency, and failure to drive systemic change—all these flaws must be addressed.

MDBs must rise to the challenge, ensuring their financial investments and policy advice genuinely support the Paris Agreement’s aims, fostering sustainable, equitable development pathways that mitigate climate change and promote a just, inclusive transition to fully renewable energy systems. Only then can we hope to avert the climate catastrophe that looms ever larger on our horizon.

  • Image : A floating production storage and offloading (FPSO) vessel for the Grand Tortue Ahmeyim LNG project in Senegal and Mauritania. Credit: BP
  • The report is also available in French here: Fin de partie pour les gaz fossiles