Climate business for poverty reduction? The role of the World Bank

Abstract

The World Bank is increasingly active in the area of climate change mitigation. While it justifies this engagement with its poverty reduction objective and its capacity to pave the way for new business activities in developing countries, critics blame the World Bank as a “climate profiteer” and as an unfair competitor in private markets. Our econometric analysis of over 2,000 projects registered until May 2010 under the Clean Development Mechanism (CDM) of the Kyoto Protocol allows us to compare the activities of the Bank with those of other, primarily private actors. The results indicate that hardly any of the CDM projects can be considered as strongly pro-poor. Nevertheless, in comparison to the rest of the CDM projects, the Bank’s portfolio shows a relatively clearer orientation towards poor countries. Within these countries, however, the Bank does not show any particular pro-poor focus, and tends to implement those projects that are commercially most attractive. Moreover, there is no evidence of the Bank phasing out its activities once the market becomes fully operational, which goes against its professed pioneering and catalytic role in carbon markets.