World Bank teams up with Canada to help developing countries transition from coal

Starting in 2019, World Bank Group will stop financing upstream oil and gas exploration and production in developing countries

The World Bank says it will work with Canada to help developing countries transition away from coal-fired power generation. In a separate announcement at the One Planet Summit, the global organization set up to promote economic development and end poverty said it will no longer finance upstream oil and gas investment for developing countries after 2019.

The World Bank Group is one of the largest financers for renewable energy and energy efficiency for developing countries, playing a key role in facilitating the energy transition through lending, support to emerging clean energy sectors, and by working with governments to strengthen energy institutions, develop legal frameworks, and improve policies, according to a Government of Canada press release.

Together with the United Nations, the Bank Group recently launched the Invest4Climate platform to mobilize additional finance for climate action.

Canadian Environment Minister Catherine McKenna.

“Phasing out coal power is the right choice for Canada, and I’m very pleased that we can also support developing countries in their transition to cleaner power,” said Catherine McKenna, Canadian minister of environment and climate change.

“We can’t forget workers and coal communities as we make this transition, and our new collaboration with the World Bank and the International Trade Union Confederation will provide analysis of best practices to Canada and others.”

The World Bank says it is on track to meet its target of 28 per cent of its lending going to climate action by 2020 and to meeting the goals of its Climate Change Action Plan, developed following the Paris Agreement.

Starting next year, the WBG will report greenhouse gas emissions from the investment projects it finances in key emissions-producing sectors, such as energy.

To align its support to countries to meet their Paris goals, the World Bank Group says it will no longer finance upstream oil and gas after 2019. The organization provided a Q&A on its website about its decision:

Q. How will this decision impact the World Bank Group’s portfolio in upstream oil and gas?

Current projects in our portfolio would continue as planned. However, no new investments in upstream oil and gas would be undertaken after 2019, unless under exceptional circumstances as noted in the decision.

This decision underlines our stated commitments to help countries accelerate the transition to sustainable energy and our support for the Paris Agreement goal of keeping global temperature rise to below 2C.

Q.  How is “upstream” oil and gas defined?

Upstream is an industry term that refers to exploration of oil and natural gas fields, as well as drilling and operating wells to produce oil and natural gas.

Q. What about countries that have energy needs? How does this decision impact them?

Technological shifts and evolving markets mean that for many countries there are now a wider set of low-cost options for countries to tap to strengthen energy supply and extend access to energy. In the past decade, solar photovoltaic costs have fallen by 80% and wind power costs have fallen 60%. For those countries with oil and gas resources, commercial financing is often readily available for exploration and production.  In exceptional circumstances in the poorest countries where there is a benefit to energy access, the World Bank Group will consider upstream natural gas projects.

The World Bank Group will continue to provide technical assistance that helps our client countries strengthen the transparency, governance, institutional capacity and regulatory environment of their energy sectors – including in oil and gas.

The World Bank Group is committed to helping countries extend access to reliable, affordable and sustainable energy for all their citizens.  We have a long track record of supporting the expansion and improvement of energy access, both on and off-grid – through power generation, transmission and distribution, support to the private sector, and technical assistance and policy work.  Tens of millions of people have gained access to energy as a direct result of World Bank Group support, and we will continue this work.

Q. How does this affect World Bank Group projects in poor countries?

As stated, in exceptional circumstances in the poorest countries where there is a clear benefit to energy access, and this is consistent with countries’ NDC commitments, we will finance upstream natural gas projects.

Q. Will you continue your support of ongoing natural gas projects and why?

The World Bank Group will continue to support and finance midstream and downstream natural gas investments for transport and distribution to consumers and for power generation.  In some countries, natural gas still plays an important role during the energy transition. Gas has the lowest CO2 emissions of any fossil fuel. We support natural gas as a flexible energy source that can help countries make the transition more quickly to renewables, expand access to energy for the poor, and displace carbon-intensive coal.

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