World Bank May Ignore Climate Fears : Predicted Warming Doesn’t Justify Loan Limits, Memo Says

A confidential document prepared by the World Bank has concluded that predictions of global warming are too uncertain to justify limiting loans for development in Third World countries on environmental grounds alone.

The internal memorandum, which is expected to be the basis of a policy statement to be announced by bank President Barber Conable Sept. 11 in Tokyo, comes at a time when the Washington-based international development bank is under growing pressure to use its financial leverage to help direct economic development projects in ways that do not harm the environment. The World Bank is a major source of loans to less-developed countries.

Under Internal Pressure

Meanwhile, many poorer nations are under internal pressure to raise the standard of living for their burgeoning populations and improve their economies. Many of these Third World countries argue that industrialized countries are primarily responsible for such environmental problems as the greenhouse effect and should bear the brunt of solving them.

But the confidential memorandum, which outlines options for addressing the greenhouse effect issue, said the bank’s Third World lending policies should aim for “immediate and obvious” economic benefits “without having to deal with the issues of uncertain global externalities.” The paper, obtained by The Times, called scientific predictions of a global climate change “conjectural.”

The document, which reportedly has been viewed favorably by senior bank officials, is expected to be incorporated into the bank’s first comprehensive policy on the greenhouse effect, which is likely to be announced by Conable in a major environmental speech at an international conference on global environmental issues in Tokyo.

Seeking Billions of Dollars

The policy statement comes at a time when the bank is seeking billions of dollars in additional financial support from the United States and other industrialized countries to fund low-cost loans to developing countries. In 1987, when industrialized nations were last asked to contribute to the loan fund, $12.4 billion was pledged. The U.S. share was $2.8 billion.

The Bank is currently the largest single lender for Third World energy development, dispensing an average of $3.2 billion a year for the past five years.

The policy is likely to be welcomed by developing countries that do not want to sacrifice development necessary to meet the needs of their populations in order to stave off longer term global environmental problems.

Environmentalists and others, however, warn that adoption of the policy would send a disturbing signal that the bank has no serious intention of altering lending practices that have been blamed in part for accelerating tropical deforestation, which contributes to the greenhouse effect.

Global warming results when certain gases such as carbon dioxide, which are produced when fossil fuels are burned for energy, trap the sun’s reflected heat in the atmosphere. Carbon dioxide also is released when forests are cleared and burned because of population pressures and the need for agricultural development.

The paper “sort of sets (the bank) up for inaction,” said David A. Wirth, senior attorney for the Natural Resources Defense Council, a Washington-based private environmental organization.

Wirth charged, for example, that the document makes little mention of the importance of reducing deforestation and even less to the need for energy conservation by consumers.

“They are now coming out with a very low-ball policy paper so nobody can accuse them of not dealing with the issue,” Wirth said. “On the other hand they are dealing with it in a way that suggests business as usual.

“While there’s an urgent need for the bank to come out with an aggressive greenhouse (effect) policy, the quality of that policy is crucial.”

Although the document says lending should be based on economic considerations, it does not rule out attaching environmental conditions to individual development projections. Recently, for example, the bank required Sri Lanka to take action to preserve its vanishing forests in approving a loan to assist the nation’s lumber industry.

Similar to U.S. Policy

The steps proposed in the bank’s paper are similar to those advanced by the Bush Administration, which has said that U.S. environmental actions should be justified on their own merits, apart from any impact on global warming. Such actions include energy conservation measures to reduce U.S. dependence on foreign oil and the nation’s trade deficit. While the bank said there is no doubt that average temperatures are rising worldwide and that emissions from the burning of fossil fuels and deforestations are contributing to the phenomenon, there is no agreement among scientists thus far that the temperature increases are actually the first signs of global climate change.

“Consequently, all present-day, long-term climate prediction scenarios should be seen more as conjectural than literal predictions,” the paper said.

Costly Measures

“Only if countries and people are convinced that a climate-related disaster is imminent or highly probable will it be possible to take the difficult and costly political and economic measures to insure cooperation,” it said.

Citing the uncertainty, the bank proposal stresses the importance of energy conservation that can be justified first on economic grounds and second on the basis that it helps to minimize the greenhouse effect. At the same time, however, the paper said the worldwide drive to limit the production of ozone-destroying chemicals used in air conditioning and refrigeration could include developing countries because the costs are relatively modest.

The paper also said the outcry against deforestation and proposals for planting billions of new trees are not as important as limiting greenhouse gas emissions from burning fossil fuel. “Given today’s fossil fuel use and its likely growth, an enormous amount of additional land would have to be devoted to trees in order to have any significant global impact on carbon dioxide levels in the atmosphere. The economics of vigorously pursuing this option are probably not favorable at this time,” the paper said.

But Wirth of the National Resource Defense Council said developing countries have a critical stake in preserving their forests, not only because their depletion will change weather patterns and result in soil erosion, but also because such nations would be poorly equipped to cope with the consequences of global warming, such as floods resulting from rising sea levels and possible changes in crop-growing regions.

‘Greatest Difficulty’

“Developing countries will have the greatest difficulty in dealing with global warming and current bank policies are inconsistent with preventing it,” Wirth said.

Robert J. Saunders, director of the bank’s energy strategy, management and assessment division and the principal author of the paper, said the criticism is not unexpected.

“There certainly will be people who are saying the World Bank is not doing enough,” Saunders said. “Usually they are those who think the bank can do more than we can.”

Saunders said development pressures will continue in the Third World and without some evidence of the environmental consequences of development, there is little incentive to change.

Moreover, he said, even if developing countries concede that there is a scientific basis for global warming scenarios, they are not in a financial position to afford more costly alternatives without subsidies.

Must Be Realistic

“It’s not reasonable to expect them to stop,” Saunders said by telephone from Washington. “You’ve got to work with the reality. Realistically (development) is going to happen so what we have to do is deal with it in a way that is environmentally acceptable . . . but we have to sell it on the basis of economics.”

The bank, however, has yet to produce a plan to help developing countries switch to more costly but environmentally desirable alternatives.

Such initiatives are being examined by the United Nations Environment Program as well as industrialized countries that have signed the Montreal Protocol, which limits the use and production of ozone-destroying chlorofluorocarbons (CFCs).

In addition to the position on lending policies, the bank paper also recommends:

Switching to cleaner-burning fuels “where justified on economic grounds.”

Phasing out CFCs “as soon as alternative substances . . . are available.”

Monitoring research into global warming and its economic and social impacts as well as the effect on natural resources.

Stepping up evaluation by the bank of what, “if any,” further changes may be required to take account of greenhouse effect emissions in financing development projects.