From July 1, all new operations funded by the International Development Association (IDA), the World Bank’s fund for the poorest countries, will be screened for short and long term climate and disaster risks. Thomson Reuters Foundation spoke to two senior officials at the World Bank about the new policy:
Rachel Kyte is World Bank Group Vice President and special envoy for climate change.
Jane Ebinger manages the bank’s climate policy and finance team.
Why did you bring in these measures?
RK: We had come to the conclusion that without aggressive action to arrest climate change, the work of the World Bank in terms of trying to end poverty and build prosperity was going to become much more difficult. It put our mission success in jeopardy, and it also meant that things were going to be expensive in some cases and more complicated in others.
Why is this important to the World Bank’s work?
RK: It is important because it is about whether or not development funds achieve their objectives. It is important for developing countries to be able to use the funds they have access to for the greatest effect.
If you were going to use a lot of funds for some infrastructure work, and you were not really thinking through what climate change would mean for the geography, topography, weather patterns or movement of people, you are not going to be getting the development objective you want from the funds you are spending.
We are recognising that climate risk is a really fundamental part of the planning process now in all the countries in which we work.
What will these measures mean for the World Bank’s projects?
JE: We have been working with teams in the bank that are supporting Cote d'Ivoire, Cameroon and Ethiopia, and what we have been doing is having a discussion at the national level about how those countries might be exposed to potential climate and disaster risks.
We have also been working with some teams at the operational level, for example in the roads sector in Mozambique and on water resource management in Nepal, looking at how those project-based activities might be exposed to similar risks.
RK: This is the beginning of systematically doing this across everything that we do.
Was there much resistance or scepticism inside or outside the bank to incorporating climate risk?
RK: Clients are asking us for very specific help. They might not use the word climate change but they are looking for solutions to food security. This means they are looking for large scale agricultural projects which will increase yield, nutritional value, employability of the rural poor population or whatever else, and they know that the project has to have climate taken into account to be successful.
The client demand is absolutely clear that they want solutions and responses to climate as part of what they want us to do.
JE: We have been piloting some of these tools that were developed before July, and the general feedback is that they have been very useful in providing a structured way of thinking about climate and disaster risks.
What is the Bank’s position on carbon pricing?
RK: We think countries should put a price on carbon, but we are agnostic as to how they do it. That is a decision based on their political economy, the particular situation that their country is in, and their development trajectory.
We think a price on carbon is a necessary but not sufficient tool to actually drive investment in your economy towards cleaner and more resilient development. You can do lots of things, but absent a price on carbon and getting prices right, you are going to have to work a lot harder.
This week Australia voted to repeal its carbon tax. Is this a worldwide trend?
RK: If you look at Asia alone, China is experimenting with pilots in carbon pricing in its emission trading scheme. Korea is struggling with the introduction of an emissions trading scheme but the commitment is there to price carbon through it. There are other South East Asian countries looking at putting an effective price on carbon.
New Zealand has a trading system, California has a successful trading system, we think the direction of travel is quite clear.
Will climate risk screening become the norm in other major institutions?
RK: I think if you are a taxpayer and are funding development, you want to know if that development is being effective. To be effective today the process has to be aware of the risks and challenges that climate impacts are already posing in the countries in which we work, and that will intensify going forward unless there is aggressive action to mitigate climate change.
This is an edited transcript of the interview.