The World Bank Group (WBG) this spring will decide what future direction it will take regarding "extractive" industries such as oil and gas production in developing nations.
At the group's 2000 annual meeting in Prague, World Bank Pres. James Wolfensohn made what environmentalists called "the bold and laudable step of acknowledging the legacy of environmental and social problems that have plagued oil, gas, and mining projects." Wolfensohn commissioned an independent study of the bank's role in those sectors called the Extractive Industries Review (EIR).
The EIR team delivered recommendations to Wolfensohn last month, and the WBG managers will make an initial decision, subject to public comment Feb. 25. A final decision is expected in April.
Controversial finding
The EIR report is a sweeping, six-volume study that looks at the bank's current mission to alleviate poverty through sustainable development. EIR team leader Emil Salim organized stakeholder workshops, visited bank-funded projects, and studied the results of existing research reports on WBG activities.
In a Jan. 12 letter to Wolfensohn, Salim said, "In principle, all stakeholders agree that WBG needs to focus more on promoting good governance, improving its own corporate accountability and transparency, promoting low-carbon-intensity energy in poor countries for the poor, and observing and promoting human rights in all WBG projects."
Salim acknowledged, however, that the oil and coal industries have serious problems with one of the recommendations; the report urges the bank to favor funding natural gas-related projects in the future.
The call to phase out financing of coal and oil "is feared by some in the industry as a signal to withdraw their 'social license' to operate," Salim said. "This of course is not my intention."
But based on his EIR experience, Salim said he is confident that oil and coal companies don't need WBG funding to move forward, "especially if the WBG continues to help poor countries with rich extractive resources to improve the quality of governance in the sector, which I believe should continue."
High expectations
Meanwhile, leaders from 11 major environmental and public health organizations Jan. 28 urged Wolfensohn to adopt all EIR recommendations.
"Endorsement of only some parts of the EIR report would fail to address important root causes of extractive industries' destructive effects on broad-based poverty alleviation and sustainable development," the groups said.
Environmentalists said they were particularly pleased that the EIR has stipulated a number of recommendations to address what report authors view as the negative environmental impacts of oil, gas, and mining projects.
"It identifies gaps in the application of environmental assessments, such as the failure to conduct mandatory upstream assessments of the environmental and social impacts of policy-based lending, particularly for countries with significant extractive industry sectors. This gap should be addressed in the revisions of the bank's structural adjustment policy," environmental and public health groups said. "The report also correctly highlights the need for better compliance with WBG safeguard policies in general."
