Latest Articles by Carl Pope

China needs venture capital, not the World Bank

Carl Pope — Thu, 15 Nov 2007 10:05:00 +0000

The World Bank subsidises fossil-fuel projects in the developing world, even while its lenders want poor countries to go green. Carl Pope says it’s time the rich world provided a different model of financial support.

“You cannot seize an opportunity if you don't know about it.” That was the point former US president Bill Clinton made repeatedly in his interactions with World Bank president Robert Zoellick at the Clinton Global Initiative (CGI) in September.

Clinton asked Zoellick what the bank's role was in enabling poor countries to develop and expand access to electricity and energy services by providing them with options other than fossil fuels, and Zoellick simply wouldn't answer the question. Clinton clearly understood that without a new development paradigm, China and India, Africa and Latin America will simply not be able to commit to avoiding worldwide climate catastrophe. But Zoellick appeared unprepared to engage on this issue. Over and over, the point was raised that we cannot solve global warming without addressing underlying problems: how to make forest preservation economically beneficial; how to deal with illegal logging and the global trade rules that encourage it; and how to give developing countries access to technology and clean energy options.

The Clinton Global Initiative this year was infused with the need for ecological, systematic thinking and acting. Earlier that same morning, Al Gore made an urgent appeal calling on the world to negotiate a new global warming treaty in 2009, not 2012, and to put it into effect immediately. He argued that, done right, such a global response could also give us the tools and resources to tackle poverty and conflict. And Jane Goodall, in closing out the sessions on global warming, quoted an Inuit leader from Greenland as saying to her: "In the North, we know what you are doing in the South, because we feel the consequences before you do. In the North, the ice is melting. What will it take to melt the ice in the human heart?”

But what is the role of the World Bank in such a situation? Zoellick is under heavy pressure, from both the right and the left, to shift the bank's focus away from rapidly developing but still poor countries like China and India, on the grounds that they have access to capital in the private markets and are actually themselves becoming aid donors to poorer countries. Zoellick is reported to be resisting these pressures, because he fears that if the bank is no longer lending in the world's most dynamic economies, it will become less central and relevant – and he will have an even harder time raising new tranches of capital.

By this logic, he should have welcomed Clinton's query. And shortly after the CGI he defended continued World Bank lending in India and China by saying that the bank could make different kinds of loans than commercial lending institutions, and by doing so, encourage development patterns that are more sustainable or inclusive of the poor. However, there is a deeper dilemma which may explain not only why Zoellick didn't take Clinton up, but also why there is no real evidence that the World Bank will become a major financial driver of a sustainable energy future for either desperately poor nations in Africa, or rapidly growing economies like China. A bank, as an institution, has a business model which depends on spending as little as possible in seeking out, making, and getting repaid on loans. As long as a loan is repaid, a bank's incentive is entirely to make the loan as cheaply as possible. The World Bank, of course, doesn't have shareholders, so its bottom line is slightly different. But like a commercial bank it does measure its success by size – and World Bank staff have always been under heavy pressure to make large volumes of loans, as long as they would be repaid. The easy way to make big, repayable loans in developing world is to fund projects like coal mines and power plants; things that have been done hundreds of times before, which generate highly liquid revenue streams and can easily absorb billions of dollars.

As a result, the World Bank provides heavy subsidies for fossil-fuel projects, even while the bank's lenders – the US, Europe and Japan – lament the unwillingess of poor countries to commit to a low-carbon growth strategy after Kyoto. China responds: “yes, we know we need to do something, but we have to be able to afford it – and we can't.” By making fossil fuel projects cheaper and easier, the World Bank is actually reinforces China's and India's dependence on twentieth-century energy sources, the very sources the world needs to get off this century. It is perverse, but it makes sense given the World Bank's basic model. A similar dilemma drove the bank’s approach to lending to African agriculture. When big, easy to make, infrastructure loans didn't do the job, the bank simply walked away from African farmers – a decision for which it has recently lambasted itself.

What is really needed to enable China (and countries like India, Brazil and Mexico) to leap-frog the carbon-based first-world energy model directly into an economy powered by sustainable energy technologies, is not merchant banking – the World Bank's basic model – but venture capital. Venture capital's business model is very different. With venture capital, the assumption is that the value-added is not cheap access to credit, but combined access to credit and a sophisticated support structure. It is assumed that many projects will fail: the "repayment" rate is low. Venture capital looks for risky, but high-return, investments. They then invest a lot of time and energy in helping those investments not only succeed, but also take off. And take off is what the renewable energy sectors in India and China need to do.

Maybe Zoellick should move the World Bank to venture capital’s home in Palo Alto. It's time for a different model.

Carl Pope is the executive director of the Sierra Club

Homepage photo by Tracy O

Security alert for the planet

Carl Pope — Fri, 29 Feb 2008 05:26:00 +0000

Climate change has been a source of violence and instability throughout most of human history. Now, says Carl Pope, the Tibetan Plateau is on the global warming frontline.

In our hearts, many Americans know that addiction to oil is responsible for the war in Iraq. But while oil addiction is the nexus between the causes of global warming and the threats to US national security, global warming itself is a much bigger threat to security than oil addiction alone would be.

One irony of the debate on climate change is that “uncertainty” is used as an argument by those who would delay effective action on global warming. Uncertainty about future climate patterns, however, should not be a reassuring excuse for inaction; it should sound the alarm for an urgent response. Climatic uncertainty and instability have historically been at the root of many long-range threats to human security, and are again today.

Climate change has been one of the major sources of violence and instability during most of human history. From the fourth century BC until the battle of Ayn Jalut in 1260, which ended the Mongol Invasion of the middle east, world history was dominated by climate-change wars. For 1,700 years, the drying out of central Asia sent wave after wave of nomads to topple the Roman Empire, unseat Chinese dynasty after dynasty, expel the Byzantine Empire from Asia Minor and finally topple the Arab Caliphate by sacking Baghdad. Attila the Hun and Genghis Khan were propelled on to the world scene by climate change.

Glacier melt

The map of global security in the 21st century, however, begins with the Tibetan Plateau. From its glaciers originate the great rivers of the Asian heartland: Yangtze, Salween, Syr Darya, Amu Darya, Mekong, Irawaddy, Brahmaputra, Ganges and Indus. Roughly one-third of humanity depends on food grown in these watersheds. Global warming puts this entire circuit of fertility at risk.

Climate change and disruption will put pressure on populations with scarce resources, creating competition for those resources and sparking conflict. At the same time, decreasing crop yields, drought, rising sea levels and other climate impacts will create new refugee populations, further destabilising already vulnerable regions. Over 200 million people live in coastal cities and low-lying countries which would be affected by rising sea levels.

This was recently summarised in a report [pdf] for the military prepared by Peter Schwartz of the Global Business Network, who warned that greater climatic variability – regardless of its details – could create enormous instability in societies already under stress. “Just look at Somalia in the early 1990s,” Schwartz said. “You had disruption driven by drought, leading to the collapse of a society, humanitarian relief efforts, and then disastrous US military intervention. That event is prototypical of the future.”

A recent trip to Cambodia reminded me again of the impact that climate change could have on a civilisation. Religious fervour and slavery were only one part of how the ancient Khmers were able to devote so much manpower to building the Angkor temples. The elegance and craftsmanship of the relief panels required dedicated, skilled and focused artisans. The Khmer kings had to be able to feed their people with the labour of relatively small portion of the population. The ecosystem of the Tonle Sap Lake made this possible, providing protein in the form of fish, and calories in the form of paddy rice. Every ancient Khmer artisan carving the sandstone devatas of the temple carvings was supported by the gifts made possible by a big slice of rich natural ecosystem. It was those natural services – above all – that made the Khmer empire powerful, and Angkor possible.

Now, Cambodia still has only 13 million people; every citizen still enjoys a fair chunk of the Tonle Sap's bounty. But to the north lies China, with more than 1 billion people, whose government announced last year that by 2030 it will have exploited all of its water supplies. One response is already in the works: damming the Mekong River. But this carries the risk of dismembering the web of ecosystem services provided by both the river and the Tonle Sap.

In the end, China may risk long-term ecological disaster in order to avert short-term economic upheaval. It will require a new kind of economic and ecological cooperation to avoid more and more of these scenarios.

National security

I do not typically testify on congressional panels alongside a former CIA director, the head of the Council on Foreign Relations, admirals and four-star generals. My appearance before the House Select Committee on Global Warming and Energy Independence last April, therefore, was a first for me. What I found stunning was that, despite our very different backgrounds, the testimony the five of us delivered was, in all but the smallest details, identical.

The hearing was the day after a meeting of the UN Security Council on the same topic, and two days after the release of a blue ribbon military report on how global warming threatens national security.

At the beginning, Representative James Sensenbrenner, a member of the Republicans – the minority party in Congress – known as the ranking minority member, took on the committee chair, Representative Ed Markey. He lamented that some of the solutions to climate change advocated by “extremists” would be devastating. But after the panel finished, and Sensenbrenner had tried to force us into yes or no answers on nuclear energy and coal, he retreated with the comment: “Well, at least you all admit that this is complicated.”

Overall there were few fireworks, and the proceedings reflected a consensus on climate change that is finally seeping into Washington.

The US Congress has an important role to play in developing policies that will ensure national security by cutting American oil dependence and curbing global warming. The Sierra Club believes Congress should act now to raise fuel economy standards, invest in renewable energy and energy efficiency, move forward on clean, renewable fuels and adopt economy-wide caps on global warming emissions.

Growing up, I used to ask my father repeatedly: “Daddy, what did you do in the war?” Children born today may turn to us and ask: “What did you do in the warming?” US elected officials should lead Americans towards an answer we can give with pride: that we led the world back from the precipice of climate collapse and climate conflict.

Carl Pope is the executive director of the Sierra Club