A wide range of national and international financial institutions have important roles to play in providing the necessary resources to help developing countries provide modern energy supplies to all their citizens using low-carbon fuels.1 Dangerous climate change cannot be avoided without accomplishing both energy access for all and moving away from fossil fuels. This chapter analyses the role of the multilateral development banks (MDBs)2 in financing the transition to a low-carbon future because they have the dual role of promoting economic development to address poverty, as well as providing a portion of the needed finance for energy. While the total amount of energy-related funding contributed by these institutions to emerging economies has been dwarfed in recent years by private commercial investors, the MDBs remain critical lenders to poor countries. They also influence private-sector finance because of the 'seal of approval' their participation brings to projects that they invest in, and their policy advice remains influential.

Our conclusion is that the MDBs are not yet playing the role they need to play in order to be part of the solution. Most are still lending to major greenhouse gas-emitting industries, such as fossil fuel and mineral extraction, coal-based power and livestock production. Most of them have new programmes or policies to encourage energy efficiency and renewable energy supplies, and most are slowly increasing their investments in these areas; but these sectors do not loom large in their lending portfolios. On the other hand, at the World

Bank there is much experimentation in carbon trading, and multiple new partnerships and 'funding mechanisms' have been created. This could be seen as a 'razzle dazzle approach', which diverts attention from the difficult chore of reducing the greenhouse gas intensity of the industries supported through World Bank Group's mainstream lending and policy operations. Because these banks are the creatures of their governing boards (principally the donor nations), one should conclude that this situation reflects the desires of the countries that govern the institutions.

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Guide to Alternative Fuels

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