World Bank vision tested by Dhaka factory disaster


The worst industrial accident in the history of Bangladesh has highlighted the scale of internal culture change necessary to legitimise the World Bank’s new goal to eliminate global poverty by 2030.

Ten days before the disaster, the Bank published its Bangladesh Development Update, recommending that 40,000 acres of land should be requisitioned to enable an exponential increase in the country’s Special Economic Zones. It endorses the transfer of these Zones from state to private ownership in order to reduce both the red tape of bureaucracy and the labour rigidity which creates “difficulties in hiring, firing, and training.”

The Rana Plaza building that collapsed on Wednesday with the loss of hundreds of lives is located in the Savar Export Processing Zone, one of the state-owned predecessors of Special Economic Zones. (CORRECTION 2nd May: the Rana Plaza is located in the same district – Savar – as the Dhaka EPZ)

Produced by the World Bank’s Poverty Reduction and Economic Management team for South Asia, the message of the Development Update is straightforward. “Bangladesh could become ‘the next China’…. with their wages being five times lower than their Chinese counterparts.”

Fertility rate: a real poverty reduction indicator

Fertility rate: a real poverty reduction indicator
Source: Population Reference Bureau

Notes about poverty reduction in the report are overwhelmed by its conventional macro-economic analysis, reminiscent of the findings of an annual IMF visit.

The Update fully acknowledges that the reputational risk of poor factory conditions in the garment sector in Bangladesh may deter foreign investors. But it offers no recommendations for action. Nor does it demonstrate any understanding of the knock-on effects of land acquisition for industrial development in a country striving to protect its food security on an ever-decreasing inventory of arable land.

All of this would be perfectly legitimate were it not for the fact that, over the last three weeks, the Bank’s publicity machine has pulled out all the stops in a rebranding exercise. The rather vague World Bank mission to reduce global poverty is to be ratcheted up to eliminate poverty, complete with a quantitative target.

The starting gun was fired in the April 2nd Georgetown University speech by World Bank president, Dr Jim Yong Kim. Under the heading “Within Our Grasp: A World Free of Poverty,” Dr Kim proposed “a common vision for the World Bank group” in which global poverty will be reduced to 3% by 2030.

This common vision goes further in identifying climate change unequivocally as the biggest risk to achieving the goal. “Climate change is not just an environmental challenge. It’s a fundamental threat to economic development and the fight against poverty,” said Dr Kim in an interview after his speech.

These radical ambitions were approved by the Joint Development Committee of the Bank and the IMF at the Washington spring meeting last Saturday. A strategy to deliver the new goals will be put to the World Bank board at its October annual meeting.

A good start for strategy planning might be to rewrite the Bangladesh Development Update with the new “common vision” governing the content.

Two fundamental changes will be needed. First, that the Herculean task of reducing poverty from over 30% to 3% by 2030 in Bangladesh can be achieved only by putting poverty policies at the top of the agenda; economic growth is necessary but insufficient to deliver a goal to eliminate poverty.

Second, that the impact of climate change is not just the biggest threat to poverty reduction in Bangladesh; for a significant percentage of the land mass, it’s an existential threat. The capital city of Dhaka is ranked as the world’s most vulnerable city in the 2013 Climate Change Risk Atlas published by Maplecroft.

A rewritten report might therefore question why the Bangladesh Bureau of Statistics suppressed the key indicator for hunger in publishing the results of its 2010 Household Survey. It would challenge whether government spending on social safety net programmes – a subject ignored in the original – should be more ambitious that the current target of 3% of GDP by 2014.

It would quantify the reduction in conventional growth brought about by the impact of climate change, estimate the cost of adaptation and speculate on who might foot the bill. It would contemplate the astronomic cost of extreme weather events, challenging international climate negotiators meeting in Bonn next week to get cracking with the idea of an international mechanism on loss and damage.

And, yes, the expansion of Special Economic Zones might feature as a means for providing decent work and a dignified path for displacement from the rural economy – subject of course to identifying the social and environmental impacts of land conversion. And the memory of those who died in the Rana Plaza will be honoured only through employment regulations which put people first, and profits second.

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Bangladesh Development Update, April 2013 from World Bank Poverty Reduction and Economic Management team for South Asia

World Bank Group President Calls for a World Free of Poverty

Bangladesh briefings

Global Poverty briefings

Carbon bubble blown away by stock markets


After weeks of feinting with the pundits, the S&P 500 stock market index finally surged to its all-time record last Wednesday. The moment was symbolic, as the previous high, recorded in October 2007, marked the end of innocence of toxic banking. Many in the financial services industry will sense a return to the halcyon days when investment charts headed relentlessly towards the top right hand corner.

So much for the carbon bubble, the fetching idea that declared reserves of fossil fuel companies, so important to their share price, are destined to become stranded or sub-prime assets. This inference of overvalued markets draws on expert opinion, led by the International Energy Agency, that most of these reserves need to stay in the ground if dangerous global warming is to be avoided.

Since the touchstone report Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble? was published just over a year ago by the Carbon Tracker Initiative, many influential voices have supported its hypothesis.

The leading climate change economist, Lord Stern, referred to the “fundamental contradiction between current valuation methods and declared world climate policy” in his recent speech at the IMF. And the green philanthropist, Jeremy Grantham, admired on Wall Street for his track record of anticipating stock market upsets, was reported by the Guardian last week as stating that “the carbon bubble is the biggest he’s seen.”

Ironically, Grantham himself perfectly represents the gap between talking and walking the carbon bubble. The massive GMO investment funds under his direction continue to hold conventional assets in the oil and gas sector.

We have to recognise the reality here. The idea that political action on cutting greenhouse gas emissions might be sufficiently tough to strand oil and gas assets in the ground is treated as a joke by thriving world stock markets.

Evidence against the carbon bubble theory is in plentiful supply. ExxonMobil enjoys a Triple-A credit rating, superior to that of the United States government.

Thirty year corporate bonds issued by the oil and gas sector continue to be favoured by investors who see nothing incongruous at the prospect of drilling-as-usual in the 2040’s. The UK Oil and Gas strategy, published by the government last month, makes no bones about its goal “to ensure that the productive life of (North Sea Oil) stretches out beyond 2050.” New government subsidies support this ambition.

Why is mainstream investment analysis failing so utterly to understand the implications of global warming?  I posted here in February suggesting that the Carbon Tracker Initiative’s estimate of the safe carbon budget for the private sector was over-generous. This may in part have contributed to the timid conclusion of the otherwise welcome response by Standard and Poor’s Rating Services, What A Carbon-Constrained Future Could Mean For Oil Companies’ Creditworthiness.

Whilst acknowledging grounds for change in their metrics, the analysis decreed that the method of rating major oil companies can be regarded as sound at least until 2016-2017.

There’s a more fundamental weakness of these studies which may allow wriggle-room for the investment analysts. They both treat climate change as the only blindspot of modern economics.

Yet scientists increasingly refer to broader global environmental change, the damage to critical ecosystems brought about by the loss of biodiversity, pollution of the oceans and disruption of natural cycles of water, nitrogen and phosphorus. It’s not just the fossil fuel companies that are overvalued through ignorance of so-called externalities.

Remember those excuses offered by economists and investment analysts for their failure to spot the stock market bubble back in 2007? As experts in their narrowly allotted fields, they protested their inability to assess the bigger picture. Do we likewise have too many climate specialists, unable to hook up their models with other planetary stresses?

The UK now has a Financial Policy Committee dedicated to identifying systemic issues that threaten the whole financial system. Not unreasonably, the folks at the Carbon Tracker Initiative have argued that this Committee “must urgently address the carbon bubble.” Perhaps such demands would carry greater weight if framed by an equivalent systemic environmental watchdog.

Markets are going to be talked up over coming weeks in the euphoria of the S&P500 record. I recall a favourite tip from the easy-going days of the old London Stock Exchange. “Sell in May and go away” provided cover for gentlemanly stockbrokers to spend their summers enjoying corporate hospitality at Wimbledon and Ascot.

These days I wonder whether the old adage should be amended a little: “sell in May and stay away.”

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What A Carbon-Constrained Future Could Mean For Oil Companies’ Creditworthiness from Standard and Poor’s Ratings Services

Unburnable Carbon – from Carbon Tracker Initiative

Jeremy Grantham, environmental philanthropist – Guardian interview

Climate Justice briefings

Lord Stern makes mischief for climate finance ministerial


For the conspiracy theorist, there’s just a hint of mischief lurking in the depths of Lord Stern’s wide-ranging climate speech at the IMF last week. It concerns his namesake, Todd Stern, US special envoy for climate change.

The Washington-based Stern has a real problem on his hands as host of a two-day “ministerial meeting on mobilizing climate finance” which starts on Wednesday. In a January speech he acknowledged that “there will be enormous pressure on donor countries to show that they are taking their 2009 pledge to a goal of mobilizing $100 billion per year by 2020 seriously.”

His problem is that the numbers don’t add up. There aren’t even any numbers to perform an addition.

Lord Stern confided in his speech that he’d had a “long discussion” with Secretary of State, John Kerry, Todd Stern’s boss, on the evening before. So we have a possible connection.

Coverage of the IMF speech has focused on Lord Stern’s technical criticism of economic and scientific modelling of climate change, balanced by his positive suggestion that 2013 presents a rare window of political opportunity for action.

There was one curious digression in his section on policy. “We must be very careful to think of development, mitigation and adaptation as bound up together. Sometimes they get separated out….. that’s a logical and a policy mistake of great magnitude,” he said.

Stern is surely aware of the scale of administrative effort within developing country ministries and international aid agencies that strains every sinew to separate out development, mitigation and adaptation. They do so in order to monitor promises of climate finance. These promises concern the additionality of climate finance and its adaptation component.

How the donor ministers meeting in Washington would love to brand this endeavour as “a policy mistake of great magnitude.” Hey, let’s just declare all foreign aid for poverty reduction to be climate finance. Let’s not worry too much that the private sector won’t touch adaptation programmes.

That does sound far-fetched but time is running out for the donors to persuade developing countries to cooperate in negotiating a new climate agreement for 2015.

There is no roadmap for the $100 billion pledge. Aid budgets are stagnant. The suggestion of taxes on aviation, shipping or financial transactions has been hijacked by exchequers who have no intention of earmarking proceeds for foreign fields. Ministers have resorted to bleating promises of public-private partnerships which have at best a limited role where it really matters.

They need only note the hole in US public finances created by the weird weather of 2012.

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US climate finance meeting ‘needs to deliver plan’ from RTCC

Fostering Growth and Poverty Reduction in a World of Immense Risk – Lord Stern’s presentation, hosted by WRI and IMF (see slide 25)

⇒ more posts about climate finance

Lord Stern calls for new generation of climate models


The opening scene of the film, Apollo 13, plunges the viewer into a switchback thrill as a pilot and his crew wrestle with the controls of an increasingly erratic space vehicle. After a particularly abrupt lurch, the motion ceases and Tom Hanks, playing the astronaut, Jim Lovell, turns in irritation to his colleagues to pronounce: “we’re all dead.”

The Apollo 13 crew, whether in fiction or real life, was fortunate that the Houston geeks who programmed the NASA flight simulators included everything that mattered. After more practice, the astronauts improved their skills, ultimately saving their lives.

Too much that matters is left out of contemporary scientific and economic modelling of the impact of climate change. That was the headline message of last week’s major speech by Lord Stern at a Washington event hosted by the IMF and the World Resources Institute. In consequence, political leaders don’t understand environmental risks well enough to pilot global economic policy safely through our turbulent times.

Lord Stern © World Resources Institute

Lord Stern © World Resources Institute

The British economist commands attention amongst his peers in Washington, as elsewhere, for the 2007 Stern Report that showed policymakers how to embed a response to climate change into national economic equations.

“A lot of the things that scientists worry about, but which they cannot yet model precisely, get left out of these (climate) models,” Stern said. “But the best estimate of that danger cannot be zero.” He mentioned in particular the interaction between climate and other ecosystems – and the potential for tipping points in these interactions.

The impact on human lives is therefore underestimated. Citing the example of the projected impact of climate change on crop yields in northern India, Lord Stern expressed concern: “you end up with actually rather trivial statements of small losses for a radical transformation in what’s going on.”

Questioned after the presentation, Stern conceded that he could not see how his demand for a “new generation of scientific models” could be fulfilled in the next 10-20 years; too late, as he admitted.

Whilst not belittling the sheer difficulty of the earth science involved, I can’t help wondering whether our tendency to pigeon-hole different environmental topics has blinkered attention to the bigger picture. For example, at the landmark Rio Earth summit in 1992, governments signed up to separate UN Conventions for climate change, biodiversity and desertification.

That seemed good sense at the time but the Intergovernmental Panel on Climate Change has naturally served its master, the UN Convention, by focusing on the science of its title. Since 2012, we have the quite separate Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES).

There’s a strong argument that the proposed 2015 Sustainable Development Goals should knock all these silos together into a single goal for planetary stewardship, to accompany human development goals. Then those fiendishly difficult all-embracing climate models might begin to see the light of day.

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Fostering Growth and Poverty Reduction in a World of Immense Risk – Lord Stern’s presentation, hosted by WRI and IMF

⇒ more posts about climate science

Arms Trade Treaty circles climate change agenda


Last Thursday a conference summoned by the UN General Assembly failed to approve a draft Treaty on the threat to global security posed by the arms trade. A week earlier the UN Security Council refused to hold a formal debate on the threat to global security posed by climate change.

Adopting similar language to record these two sorry outcomes is my lazy device to suggest that climate change and the arms trade have more relevance to each other than meets the eye. If only the disparate participants in New York had made the connection, we might have had more to cheer over the weekend.

I fear that climate change is now so far advanced that we must begin to think of the Arms Trade Treaty as a tool of climate adaptation, alongside drought-resistant seeds and sea walls. Or maybe it belongs in the category of “beyond adaptation”, alongside disaster risk insurance and litigation for loss and damage.

If this sounds far-fetched, remember that recent months have seen a steady flow of published research concluding that climate change is a serious threat to global peace and security. Preventing arms falling into unsuitable hands makes complete sense in that context, quite apart from the more familiar concerns identified in the draft Treaty.

Whether by chance or design, the latest example of this research genre was published to coincide with the arms trade negotiations. Preliminary findings of a major survey by the American Security Project – an influential New York think tank – concluded that: “the governments and militaries of an overwhelming majority of countries – at least 110 – have identified climate change as a threat to their secu­rity.”

Last week also saw a conference at Oxford University’s Centre for the Study of African Economies at which the keynote speaker tackled the subject of Conflict, Climate and African Development. Edward Miguel of University of California, Berkeley, presented wide-ranging evidence of a close correlation between rising temperature and conflict.

This angle of research, often described as the securitisation of climate change,  comes in the wake of The Arab Spring and Climate Change, a searching series of essays published in February by the Center for American Progress.

They conclude that, whilst there is no direct link between the topics of their title, it is not difficult to trace paths between the political drama and tensions provoked by global warming. For example, drought in China in 2010/11 had a severe impact on global wheat supplies on which Egypt depends for its food security.

As Anne-Marie Slaughter explains in a Preface: “this concept of a “threat multiplier” is a helpful way to think about climate change and security more broadly.” The arms trade is also a threat multiplier in the context of international security.

There are mixed feelings about the prospect of the securitisation of climate change. Some welcome the injection of a greater sense of urgency. Others fear that security issues are traditionally resolved with little reference to the interests of poorer countries, the antithesis of principles underpinning the UN Framework Convention on Climate Change.

The Arms Trade Treaty will have a second chance this week, as moves to put it to a General Assembly vote have been approved. Will its effectiveness become a measure tracked by researchers on climate and conflict?

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The Global Security Defense Index on Climate Change from American Security Project

The Arab Spring and Climate Change from the Center for American Progress

Will Rising Temperatures Derail Africa’s Rise? from World Bank blogs

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