Is there dirt beneath the World Bank's green veneer?

The developing world needs energy to alleviate poverty, but environmentalists say the type of projects supported by big investors like the World Bank perpetuate climate change, exacerbating the problem.

The international financial institution, which provides capital for development initiatives, has come under fire lately for investing in fossil fuel-based projects.

In fiscal year 2008 the bank lent $2 billion for coal, oil and gas ventures, according to bank officials. A left-leaning think tank, the Institute for Policy Studies, places the number much higher at $3 billion, 94 percent more than in 2007, with coal lending alone skyrocketing 256 percent. Investments in renewable energy rang in at $476 million, only 13 percent more than last year.

Since the bank's money comes, in part, from member countries and their citizens, that capital should be used to build climate-friendly projects, not ones that spew carbon, said Stephen Kretzmann, executive director of Oil Change International, an organization that promotes sustainable energy. Kretzmann and others argue that where the money goes has more to do with making a profit than helping the poor.

"Oil and coal projects make the bank a lot of money; the returns are astronomical," Kretzmann told United Press International. "The returns on renewable energy are not as high."

Recent initiatives at the bank, though, point toward increased efforts to go green, including the creation in July of the Climate Investment Funds. The CIF will collect money from donor countries and use it to bolster projects using clean energy or encouraging climate-change mitigation in the developing world. So far, industrial nations have pledged $6 billion to the funds.

But the bank's track record in fossil fuel investments has led to concerns among organizations about how the funds will be used, including Friends of the Earth, an environmental organization.

"It's not a democratic institution," said Nick Berning, press secretary for Friends of the Earth. "The nations that will be receiving some of these funds are not part of the World Bank's board. They need a voice."

And they'll have one, said Roger Morier, spokesman for the bank. Funding decisions will be made by committees with equal representation of developing and developed nations -- eight from each. A meeting this week in Washington open to all interested stakeholders and broadcast on the Internet initiated the decision-making process.

"It's a fair and equitable and transparent and balanced process," Morier told UPI.

Addressing non-CIF investments, Morier said limiting the bank to purely renewable-energy projects would not serve the institution's overarching goal of alleviating poverty, even if it decreased greenhouse gas emissions.

"You cannot have economic development, and therefore poverty reduction, unless you have access to energy," Morier said. "In order to provide that, our job is to help developing countries put in place the broadest mix of energy possible."

Currently, 1.6 billion people worldwide have no access to electricity, and in some regions fossil fuels present the only economically viable way to provide people with that amenity, Morier said. In instances where producing electricity from renewable sources would be too costly for the poverty-stricken to buy it, coal and oil present the best alternative, he said.

In addition, while it's true the bank lent only $476 million for renewable-energy projects in the 2008 fiscal year, it invested a total of $2.4 billion in energy efficiency, projects to clean up inefficient power plants and hydropower projects not classified as renewable. Another $2.5 billion was spent on energy-distribution projects, which don't finance any particular type of energy but simply distribute it.

Recent World Bank investments raise larger questions about what exactly should be considered green by the international community. In April the bank's decision to invest $450 million in an enormous coal-fired power plant sparked outcries from a number of corners, particularly because the project falls under the Clean Development Mechanism. The CDM, established by the Kyoto Protocol, allows developed countries that have ratified the treaty to meet their emissions-reductions targets in part by helping to finance projects in the developing world that will decrease overall emissions.

The Indian Tata Ultra Mega coal plant, a 4,000 megawatt power station, represents one of these projects, even though it's projected to be one of the world's Top 50 greenhouse gas-emitting operations when it comes online in 2012.

This illustrates the contradictory nature of the CDM, said Karen Orenstein, international finance campaign coordinator with Friends of the Earth.

"It's not a good program," Orenstein told UPI. "It's supposed to be for sustainable development, but very, very few projects have actually resulted in greenhouse gas reductions."

But others argue that while the plant does use fossil fuels, it will decrease overall emissions from Indian power plants because the technology it employs produces far less carbon per kilowatt than other, less efficient operations.

By providing a way for developing countries to supply electricity while decreasing the carbon footprint they would produce if they had to do it on their own, the CDM leads to lower overall emissions, proponents say.

So while there are still wrinkles to iron out, the program has been a success, said Yvo de Boer, executive secretary for the U.N. Framework Convention on Climate Change.

"The CDM has tremendous potential," he said. "One hundred and ninety-five million (emissions) reductions certificates have been issued to 400 projects, and that is the equivalent of 195 million tons of CO2 emissions avoided."