New BWP briefing finds the World Bank counted 70 per cent of energy-sector reforms in Development Policy Financing as having ‘climate co-benefits’ between 2018-2023 – but most of these promoted a private-led energy transition.

A new policy brief from the Bretton Woods Project (BWP) – A just energy transition deferred: How the World Bank counts pro-privatisation energy sector reforms as ‘climate finance’ – reveals how the World Bank is using its policy-based budget support to promote energy sector reforms that benefit the private sector, while counting these measures as climate finance.

The World Bank’s Development Policy Finance (DPF) is the institution’s policy-based lending instrument. It provides governments with non-earmarked loans or grants that are conditional on the implementation of specific reforms, known as ‘prior actions’ (see Inside the Institutions, What is World Bank Development Policy Financing?). In recent years, the World Bank has begun counting a proportion of DPF as climate finance, even though by their nature these loans or grants provided aren’t earmarked for climate projects. The Bank’s rationale for this accounting is that DPF policy changes have a positive impact on climate action.

Using new data obtained through a 2024 Access to Information request, the briefing examines which energy-related policy reforms linked to DPF loans were counted as climate finance between fiscal years 2018 and 2023. The analysis shows the Bank counted as much as $7.6 billion in energy-related DPF loans and grants as climate finance during this period, with 70 per cent of the reforms (165 of the 236 prior actions) classified as having climate co-benefits. However, the majority of these “prior actions” were market-based reforms aimed at opening energy sectors to foreign investors.

This approach raises serious concerns. This model – dubbed by Prof Daniela Gabor as the ‘Wall Street Climate Consensus’ – implies potential costs for Global South states, who must undertake a number of steps in order to ‘derisk’ investments (i.e. guarantee profits) for foreign investors, while typically increasing energy tariffs for consumers (see Briefing, Gambling with the planet’s future? World Bank Development Policy Finance, ‘green’ conditionality, and the push for a private-led energy transition). The briefing calls for a wholesale re-evaluation of the Bank’s approach to the energy transition, which puts climate justice and a just transition for workers and communities at its centre.

This briefing is part of BWP’s environmental advocacy work. For questions related to this work or the briefing itself, please contact Jon Sward, BWP’s Environment Project manager, jsward[at]brettonwoodsproject.org.