AT A GLANCE : The extractive industries sector (EI—oil, gas, and mining) accounts for a large share of exports and government revenues in many developing countries, particularly in Africa. The World Bank Group invests in EI projects because natural resources can be an important driver of sustainable growth and poverty reduction.
The focus of the World Bank Group is to assist countries and investors in ensuring that benefits of resource development are sustainable. To this end, we work with countries and partners to help governments put in place appropriate regulatory frameworks and develop their capacity to manage their resource sectors across the EI value chain, i.e. from resource extraction to revenue management and spending.
We support private sector investment in EI by working with investors and communities in ensuring that investments are economically and socially sustainable and that communities enjoy concrete benefits such as jobs, improved infrastructure, and economic opportunities. We help to develop capacity among small and local investors; involve communities in improving projects’ long-term development benefits; and foster transparency and governance to combat corruption and support poverty reduction.
Addressing the challenge of climate change is a priority for the World Bank Group. At the same time, access to affordable and available energy is essential for poverty reduction. Fossil fuels (such as natural gas) for some time must play a role as a transition fuel to a less carbon intensive economy.
We help countries access new energy sources while working with them to increase low carbon ways of doing so. The World Bank Group’s International Finance Corporation (IFC), in its support for natural resources, is shifting its focus towards cleaner sources of energy.
In fiscal year 2007 (ending June 30, 2007), the World Bank Group’s oil, gas, and mining investments amounted to US$777 million. Financial support for renewable energy and energy efficiency rose almost 70 percent to US$1.43 billion, outperforming the Bank Group’s pledge to increase funding of new renewable and energy efficiency projects by 20 percent annually.
Industry and Investment Trends In response to increasing concerns about climate change, extractive industries will have to improve efficient energy use in production and processing, including reducing the harmful practice of gas flaring. Eventually, climate change concerns are likely to reduce demand for fossil fuels, but for now fast economic growth in many developing countries is outweighing any pressure on prices. As the demand for greenhouse gas-intensive coal in power generation is increasing, efficiency improvements and carbon capture and storage are key contributors to mitigating the climate change impacts of coal use. In many uses and locations, fossil fuels (such as natural gas) will be the most economical fuel and will for some time play a vital role as a transition fuel to a less carbon intensive economy. This is particularly the case for many developing countries whose use of such fuels is low (as recognized in the Kyoto Protocol agreement). The World Bank Group helps countries access additional energy sources, while working with them to increase low carbon ways of doing so: In fiscal year 2007, of all World Bank Group energy investments (US$3.6 billion), less than one-third (27 percent) were to support fossil fuel production or use; more than 70 percent of these were for the cleaner natural gas.
We support cleaner and alternative sources of energy (such as extracting gas out of coal – coalbed methane) and greater efficiency in energy use (particularly in the chemical industry).
IFC launched in March 2008 its Carbon Delivery Guarantees, supporting companies in developing countries to access the Kyoto Protocol’s carbon credit trading market at attractive prices while addressing the challenge of climate change.
In the fiscal year to June 2007, the World Bank Group invested US$777 million in oil, gas, and mining projects, down 27 percent from fiscal year 06. Financial support for renewable energy and energy efficiency rose almost 70 percent to US$1.43 billion. The Bank Group outperformed its 2004 pledge to increase funding for “new” renewable energy and energy efficiency projects by 20 percent annually. From July 2004 through June 2007, the Bank Group committed US$1.8 billion for such projects, almost doubling its goal for US$913 million in the same period. Background: Extractive Industries Review (EIR) – Implementing Reforms, Achieving Sustainability In 2004, the World Bank Group concluded a multi-stakeholder review of its investments in EI industries (www.worldbank.org/ogmc, www.ifc.org/oeg, www.cao-ombudsman.org). The World Bank Group’s management responded to the three reports’ recommendations with reforms to better ensure that projects contribute to development. Extractive industry investment projects now require disclosure of revenues. Projects’ development impacts are tracked more thoroughly. An advisory group has been established and reports of its meetings are made public, as are annual implementation progress reports. A revision of the World Bank’s Indigenous Peoples policy was approved in 2006, reflecting Bank efforts to strengthen local community participation in EI projects. IFC has updated its environmental and social performance standards also in 2006.
We play a strong role in helping develop capacity among small and local companies and at all levels of government. Empowering and building expertise among local communities is particularly critical for EI projects’ success. Therefore, IFC has set-up a Community Development Facility (www.commdev.org) to educate community foundations and those involved in local and regional governance; to help develop local suppliers and small businesses; and to support programs on the environment, gender, and HIV/AIDS. Extractive Industries Transparency Initiative (EITI)/Gas Flaring Reduction Partnership Knowing what governments receive, and what companies pay, is crucial to holding decision-makers accountable for revenues from extractive industries. Therefore, the World Bank Group, in partnership with the secretariat of EITI, is working with more than 20 countries to implement the Extractive Industries Transparency Initiative, which works to improve transparency and accountability in response to concerns about corruption in resource-rich countries (www.eitransparency.org). To deepen the sustainability of oil development, the World Bank also manages and facilitates the Global Gas Flaring Reduction Partnership, which supports national governments and the petroleum industry in their efforts to reduce the wasteful flaring and venting of gas that is associated with the extraction of crude oil. (www.worldbank.org/ggfr). GGFR-facilitated carbon projects will reduce CO2 emissions by around 32 million tons by 2012. ### Updated March, 2008 Media Contact:
Hannfried von Hindenburg, (202) 458-5613, Email: hvhindenburg@ifc.org |
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