7 May 2008

World Bank, Climate Profiteer

In this harsh critique, Janet Redman, a researcher at a "progressive" think tank takes the World Bank to task for facilitating carbon trading between polluting industries. Although it's obvious that the biggest gains from trade are in fact in this sector, she makes several good points:
  • The Bank is looking for a justification for its people and Carbon Neutral is the New Black.
  • Some trade partners in developing countries are expanding their carbon output so as to be able to sell the credits for a profit. (Recall that caps are at the national level; this scramble to fill pollution quotas is akin to the scramble to exploit destroy a fishery.)
  • There's almost no transparency or program evaluation going on. Projects are being funded, but nobody knows if they did anything.
  • The Bank is directing most of its energy and money into working with polluting industries -- not sustainable industries. Although the benefits of action in the polluting sphere are greater, the Bank may be attracted to the fast, big deals in industry -- avoiding the slow, small deals in sustainability.
Although Redman's critique will be seen as extreme (and probably ignored) at the Bank, she's got a point: The Bank should use its considerable expertise on development and poverty to work on the tough projects -- not the easy ones that the for-profit industries could handle.

Although she dismisses the Bank's foray into programs to trade anti-deforestation credits (perhaps because of flaws in execution, not conception), this kind of trading is the way to go. A few months ago, I wrote on the liquidity problems (i.e., not enough money) in the "market for forest services." The Bank could serve a useful role by aggregating buyers and sellers into an international market. Fortunately, a new RFF report gives guidelines on "Policies to Reduce Emissions from Deforestation and Degradation in Tropical Forests"

Bottom Line: The Bank is in the money-lending business, and bureaucrats are fundamentally lazy (no competition). These two factors are sufficient for its programs on climate change to be ineffective or even harmful. The Bank should get out of the money-handling business and offer advice. People will take the advice if it's useful -- unlike today, when they "take" it to get the Bank's soft loans.

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