Surge in renewable energy tests Bank auditors
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Surge in renewable energy tests Bank auditors

Environmental sustainability questions have surfaced for IDB renewable energy projects

The sustainable energy and climate change initiative that the Inter-American Development Bank (IDB) launched six years ago took a major leap forward this weekend.

The Bank signed a deal to co-invest at least $600 million in renewable energy and is committed to spending 25% of its total loans, set to reach some $12 billion a year, on the area.

But the pace of expansion in this sector has raised questions about how these projects can be audited for environmental sustainability, the bank has conceded.

The IDB has been spending around $6-7 billion per year since 2006 on the area but last year saw a leap to $10.9 billion in approved projects although disbursements came in at a lower $8.4 billion.

The bank is working to enhance its funds and announced a deal with the Japan International Cooperation Agency for Central America and the Caribbean over five years in which it will at least match the Japanese agency’s $300 million contribution.

While the speed of the IDB’s move into the area has been breathtaking, Alexandre Meira da Rosa, manager of the infrastructure and environment sector, admitted it was raising tough questions for the bank.

Assigning a value to the environmental impact projects in areas such as urban transport, which is used to calculate how the Bank is fulfilling its mandate, could prove cumbersome, he admitted

Moreover, the Bank is auditing the success of its projects internally, which could raise doubts over methodology. He said the Bank was using best practices in its internal methods.

The Bank will work across four areas, with roughly equal weightings: Energy; water and sanitation; transportation, including urban transport, cargo and logistics; and natural resources, which encompass forestry and agriculture and disaster risk management. It will also dedicate some resources to carbon sequestration.

Poor countries will particularly benefit as they depend most heavily on oil in their energy matrix and have typically responded to increasing demand by increasing fossil fuel use.

Moreover, sustainable and renewable upfront costs are very high and have deterred some countries. That said, ambitious plans exist in some countries: Costa Rica, for example, is already sourcing 90% of its energy needs from renewable sources and aims to achieve 100%.

In transportation, the Bank is changing policies radically. Up to the early 2000s, it emphasized road building and has now refocused on moving vehicles to less polluting fuels and reducing congestion in cities as well as logistics to reduce oil consumption and emissions.

The IDB is working closely with the World Bank in channeling funds to the region.

To complement its investments, the Bank is working on policy changes and regional cooperation. This includes a grant for Haiti to reform the legal framework for the electric sector and the operations of state company Electricité de Haiti.

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