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How Institutions like the World Bank Group Finance Fossil Fuels 

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  • How Institutions like the World Bank Group Finance Fossil Fuels 

Today, fossil fuel companies like Exxon and Chevron are still receiving billions of dollars in support every year to continue their climate-wrecking operations. This money comes from different sources, and the two main ones are governments and private financiers (for example, big Wall Street banks like Bank of America). 

We often refer to money coming from governments as “public finance” — after all, governments are funded with tax dollars from people like you and me. Public finance flows through several different types of institutions like multilateral development banks, bilateral development banks, export credit agencies. These are all organizations that collect, invest, and distribute our public funds.

Shifting fossil fuel operations all over the world to renewable energy urgently in order to curb the worsening impacts of climate change is something that is in the interest of the broad public, of every human being on earth. Having a livable climate is in our shared interest to ensure humanity’s survival through our ability to grow food, to access water, and to live in safe environments. Governments are supposed to answer to citizens. In most countries, government representatives are elected, and have a mandate to serve the interests and demands of citizens. This gives us as citizens powerful leverage to move decision-makers to make the right decisions in the name of the public interest. 

What does the World Bank Group do?

The World Bank Group (WBG) is an example of a multilateral development bank (MDB). MDBs are banks governed by more than one country. In the case of the World Bank Group, it has 189 country members. The WBG’s mission is to end extreme poverty and promote shared prosperity on a livable planet. 

MDBs provide finance to low- and middle- income countries to help them develop. This finance is public. It comes from governments all over the world — in other words, it comes from taxpayer money from citizens all over the world. MDBs provide finance to lower income countries for all kinds of sectors, like education, health, energy, water, transportation, and more. They also provide technical support to governments and suggest policies to help their economies grow. 

The problem? MDBs like the World Bank are still providing billions of dollars to fossil fuel projects, often in hidden ways

What is the International Monetary Fund?

The International Monetary Fund (IMF) is also governed by more than one country. Out of 195 countries in the world, 190 are members of the IMF. It too is funded with public money from governments (ie. citizens) all over the world. 

Unlike MDBs like the World Bank Group, the IMF does not provide financing for specific development projects. Its mandate is to help countries remain financially stable, and for the entire global financial system to remain stable, to prevent another financial crisis like the one we had in 2008. 

The IMF looks at issues like countries’ economic growth prospects, debt, and national budgets. It provides loans to countries that are in financial distress, and it also makes recommendations on what kinds of policy changes countries should adopt in order to be able to pay their bills.

The problem? The IMF is continuing to recommend that countries continue to invest in fossil fuels — even though this is not only harmful to communities, but financially risky for countries —  instead of using its resources to enable a global just energy transition.

What is an export credit agency?

An export credit agency (ECA) is a little known government agency. The export credit agency called the U.S. Export-Import Bank in the U.S. is part of the government and it lends out money to companies and projects. These projects and companies are usually operating in other parts of the world, but sometimes they are domestic.

These investments are often incredibly risky, so that there is a good chance the U.S. government might never be repaid. Without this money from the government, the project likely would not go forward. Therefore, taxpayer dollars are being used to help ExxonMobil and other fossil fuel companies to get richer in countries all over the world. Many of these projects pollute and harm local communities.

What is the climate impact?

What is natural gas?

There is nothing natural about natural gas. Natural gas is a type of fossil fuel that has harmful impacts on the planet when it is extracted, transported, and burned. Friends of the Earth often refers to “natural gas” as methane gas because it is composed mostly of methane — a powerful greenhouse gas that contributes to climate change. The gas sector emits a large and growing amount of methane emissions. Many people know about the warming impact of carbon dioxide, but methane is actually 87 times more potent than carbon dioxide over a 20-year timeframe. 

To make matters even worse for the climate, natural gas needs to be transported all over the world. This is often done by cooling natural gas to turn it into a liquid. This requires an enormous amount of energy and creates a great deal of pollution that causes climate change. We call this liquefied natural gas. In the United States, we are exporting more and more of this liquefied natural gas through export terminals, mainly along the Gulf Coast. These liquefied gas export terminals harm the local communities and allow for natural gas to be shipped all over the world, encouraging the world to stay addicted to fossil fuels.

How is the U.S. government involved?

The U.S. government provides more money than any other country to the World Bank Group and to the International Monetary Fund. That makes it the largest shareholder of these institutions. As the largest shareholder, the U.S. also has sizable influence on the kinds of projects and policies these institutions support. If the U.S. wanted, it could lead other shareholders to stop financing this destructive industry, and to finance renewables and economic alternatives. But instead, the U.S. government is continuing to support fossil fuel financing at these institutions. This is not only a misuse of taxpayer money towards these harmful projects, but also does a disservice to developing countries, keeping them dependent on fossil fuels instead of helping them transition to the energy and industries of the future. 

In addition, since 2023, two U.S. government agencies — the U.S. Export-Import Bank and the U.S. International Development Finance Corporation — have provided almost $3 billion for fossil fuel projects all over the world. This money has lined the pockets of companies that made tens of billions in profits trading liquefied natural gas exports and other fossil fuel projects.

The post How Institutions like the World Bank Group Finance Fossil Fuels  appeared first on Friends of the Earth.

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