Multilateral development banks continue to fund fossils over zero emissions vehicles

Forthcoming BIC research will show that the World Bank and the Inter-American Development Bank (IDB) continue to overwhelmingly support fossil fuel-dependent vehicles and infrastructure. Of the public sector World Bank investment project financing in the transport category, 68% is for projects that support fossil fuel-dependent vehicles and infrastructure, such as refineries and petrol stations; and only 2% of financing is for projects that support zero emissions vehicles (ZEVs) and infrastructure, such as electric buses and charging stations. For public sector IDB projects related to the transport sector, most of the funds are used for projects supporting internal combustion engine (ICE) vehicles. From a total of $7.6 billion of what the IDB categorizes as Transport sector financing, $7.4 billion (97%) were directed to ICE intensive projects, another $99 million for ICE infrastructure, and only $880,000 (0.01%) for ZEVs. 

Knowing how lopsided these investment ratios are, BIC and its allies are calling on the leaders of multilateral development banks (MDBs) to commit to shifting transport financing priorities away from ICE vehicles and toward zero emissions vehicles and charging stations. We believe that MDBs can help create a world in which everyone relies on transport infrastructure that is both climate-resilient and sustainable. Along with the Center for International Environmental Law, Ecoa, E3G, FEMAPO, Greenpeace, Oil Change International, Urgewald, and many other civil society organizations around the world, BIC sent a letter to the presidents of the MDBs demanding that they: 

1. Commit to end support for fossil fuel-dependent vehicles by 2025.
2. Commit immediately to stop financing for any ICE vehicles where there are already alternatives available, and instead support clients in the transition to all-electric fleets.
3. Focus support for transport and related infrastructure to directly address poverty and development inequities by increasing access to transit and transport services for disadvantaged, marginalized, and mobility impaired peoples. 
4. Create a transparent timeline for how the institution will phase out financial support for carbon-based transport and fundamentally change the ratio of funding in favor of zero emissions vehicles and systems. 

At the ongoing UNFCCC COP 26 Summit, several countries and private sector actors have made significant financial commitments to mitigate the worst effects of climate change and invest in zero emissions technologies. Notably absent from the COP26 finance conversation have been MDBs and a significant commitment from the World Bank, the IDB, and others to end their support for fossil fuels and the vehicles and transportation infrastructure that support them. 

While 10 MDBs did make a joint statement at COP26, it was one of “ambition” and not a meaningful commitment. Since 2015, these MDBs have collectively financed at least $45 billion in fossil fuel projects despite their sustainable development mandates. BIC along with coalition members of The Big Shift Global reiterated that MDBs have a responsibility to adapt their energy finance policies to support the development of clean energy and increase energy access for developing countries. MDBs can not continue to pick and choose where to apply their climate commitments and instead must adopt policies that prevent MDB budget support from promoting fossil fuels in extraction, refinement, or transportation projects. 

Events during the second week of the COP26 include a discussion on decarbonizing transport that will examine what is needed to transform fleets of vehicles in both passenger and cargo ground transport, and how those needs differ across countries. While leading NGOs and countries, including Norway and Costa Rica, which have made real, tangible progress toward phasing out ICE vehicles, are expected to participate, MDBs should also be a part of this conversation considering their role in funding decarbonized transport in developing countries.

In the United States, legislative efforts are underway to prevent U.S. contributions to international financial institutions from funding fossil fuel projects. Introduced late last week by Sen. Jeff Merkley and Congressman Jared Huffman, the Sustainable International Financial Institutions Act of 2021 prioritizes clean and renewable energy sources by requiring the U.S. to use its contributions and voting power in international financial institutions to divest from fossil fuel investments.

Since the Paris Agreement, MDBs have instituted Climate Change Action Plans, launched initiatives, and made statements on the importance of decarbonizing transport. Despite these plans and statements, the vast majority of World Bank and IDB-financed projects in the transport sector support fossil fuel-dependent vehicles and infrastructure. Even World Bank staff have observed that for all its talk, the Bank’s investments, especially in transport, overwhelmingly favor the internal combustion engine and building more refineries and petrol stations. 

We welcome more allies in calling on these banks to #CutTheEngine and reverse their investment ratios in favor of the clean technologies that will make the energy transition for every country. 

For more information, read the executive summary of our report here and the CSO letter to MDB Presidents here.