Signaling More Independence from the US, the World Bank Phases Out Its Support for Fossil Fuels

The World Bank, which provides developing countries about US$60 billion a year in financial assistance, is officially phasing out its support for the oil and gas industries.

This move brings its actions more in sync with its overarching commitment to slowing the pace of climate change and keeping the Paris agreement on track.  Based on my research regarding international relations, I see this move — which World Bank President Jim Yong Kim announced in December — as significant for two reasons.

The bank has signaled that the international community is taking the fight against global warming more seriously than ever.  And it shows that the bank intends to keep playing a leading role in that battle at a time when its most powerful shareholder, the U.S., is turning its back on global environmental leadership.

Climate Leadership
Kim has been taking the World Bank in a direction that climate change activists and other critics have long advocated by positioning the institution as a global environmental leader since he became its president in 2012.

In 2013 the bank decided to stop financing the construction of coal-fired power plants, except in cases where no viable alternatives existed.

Three years later, the World Bank pledged that it would make 28 percent of all of its transactions by 2020 advance climate action.

The bank’s climate efforts are wide-ranging.  It lends money to build solar and wind farms, requires its borrowers to take steps to shrink their carbon footprints, and has a goal of “greening the whole financial system.”

U.S. Relations
Kim’s announcement, which rules out new lending but does not affect loans made in the past or in the next year or two, may portend some political drama.  But President Donald Trump has not yet commented on it.

That could change, given that Trump has declared that the U.S. would withdraw from the Paris agreement.  Exiting the world’s most far-reaching global climate compact, signed by nearly every country on the planet, until now has appeared to be a largely symbolic gesture.  Trump has even said that he might “conceivably” change course.

However, his administration has sought to cut some of the funding for the World Bank and similar institutions.

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