The World Bank and its Defunct Energy Policy

By Tilak Doshi, – Re-Blogged From WUWT

The shock resignation of World Bank President Dr Jim Yong Kim, announced in early January, more than three years before his term would have ended, and the nomination of David Malpass, one of the institution’s sharpest critics in the current US administration, has been seen as yet another disruptive change to the global order under President Trump’s watch.

While disruptive change has become a regular affair under this most impetuous of US presidents, the changing of the guard at the World Bank is potentially of great consequence to the world’s poor. That is, assuming the Malpass nomination is not seriously challenged by the EU which jealously guards its say in the appointment of IMF Managing Director as part of the quid pro quo over the twin Bretton Woods institutions that served the post-World War order.

Malpass has been a strong advocate for accountability at the World Bank and comes with a “back to the basics” focus on pro-growth projects for countries which include people in extreme poverty. He has also been a known critic of the World Bank’s loans to China and India, arguing that these countries have become rich enough to tap global capital markets on reasonable terms.

The post-1945 Bretton Wood’s arrangement, of course, is very much associated with Maynard Keynes, a key founding economist-architect of that order. Lord Keynes’ much-quoted prognostication, that practical men find themselves under the influence of some “defunct economist”, couldn’t be better illustrated than in the World Bank’s intellectual evolution.

It did not take long for Dr. Kim, an appointee of President Obama in 2012, to impose a ban on the financing of coal-fired power stations (in 2013), followed subsequently by a ban on investments in all new upstream oil and gas resource development projects. For this onslaught on fossil fuels, Dr. Kim seems to have been under the thrall of Keynes’ defunct economists and political philosophers who cast votes for the Bank to favour mitigating long run climate change over economic growth to serve the immediate needs of the world’s poor.

There is no shortage of commentary on the World Bank’s flight to defunct economics. Prof Deepak Lal, a former Oxford don and Research Administrator of the Bank remarked that Dr. Kim incredulously “over-ruled the cost-benefit estimates of coal-based power over solar and wind-based power generation produced by his own economic staff, justifying this by reference to a wish to cut global emissions of greenhouse gases“.

Mikko Paunio, a public health expert who has worked at Johns Hopkins Bloomberg School of Public Health, the European Commission and the World Bank, found that the Bank (along with WHO and the Lancet) conveniently forget the “energy ladder” which allowed the now-developed countries to graduate to their current 24/7 access to reliable and cheap fossil-fuelled electricity (mainly coal, and more recently, natural gas) while denying the very same process of development to the now developing countries.

Rupert Darwall, a former special adviser to the United Kingdom’s Chancellor of the Exchequer, charges that during Dr. Kim’s tenure, the “World Bank lost its way and sacrificed the interests of the poor to green ideology”.

The resignation of Dr. Kim, for some, could not have come at a more opportune time. The World Bank and its counterparts such as the Asian Development Bank have taken a lead role in denying poorer countries the development strategy that the now-rich countries had taken so successfully since the Industrial Revolution. By the 1980s, Europe, North America and Japan had already cleaned up their cities of urban smog while ensuring clean, reliable and affordable energy which included high-efficiency, low-emission coal and natural gas-fuelled power plants, and cleaner transport and cooking fuels.

The Bank’s enthusiastic adoption of the “sustainable development” meme – that much-enamoured slogan of special interest groups proclaiming “civil society” interests – has had an insidious effect in development economics. There has not been a single instance of a country successfully developing to middle income status without the use of fossil fuels as the workhorse of industrialisation and modern economic growth. Yet elastic concepts of “sustainability” and the like remain the lead talking points among many pundits of economic development.

The previous chief economic advisor to the Indian government Arvind Subramanian recently warned that India, like other developing countries, cannot allow the narrative of “carbon imperialism” to come in the way of realistic planning.

This would include adopting the best technology using cheap coal for power generation, increasing the use of cleaner fossil fuels such as natural gas, and recognising the hidden costs of subsidising newer technologies such as wind and solar power.

The Trump administration’s Treasury Guidance for the US position on multilateral banks regarding energy projects and policies includes the objectives to “help countries access and use fossil fuels cleanly and efficiently” and “support development of robust, efficient, competitive, and integrated global markets for energy”.

These are good first steps.

But the nomination of David Malpass could not have come sooner, and the sooner World Bank managers shake off their enslavement to defunct economists, the better. The hopes of the world’s one billion poor — yet to achieve access to reliable, affordable and clean energy taken for granted in the developed countries — depend upon it.

Published in Business Standard (India), 21 Februry 2019, paywalled


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