by Graham Saul and Debayani Kar

22-11-06

As the United Nations discussions on climate change drew to a close in Nairobi, Kenya, Secretary General Kofi Annan faulted policymakers worldwide for a “frightening lack of leadership” in confronting this crucial global issue.
According to the just-released Stern Report, climate change is “the greatest and widest-ranging market failure ever seen,” and it will have massive costs for the global economy. Some of the underlying reasons for this market failure are the perverse incentives and signals created by subsidies to the oil industry.

As world leaders continue to search for solutions to the global problem of climate change, our public funds continue to flow into the pockets of the oil industry. Yet, oil is playing a major role in many of the most urgent problems facing humanity today. Volatile oil prices are putting serious stress on many of the world's most impoverished countries and threatening to deepen the debt crisis. Oil is triggering and exacerbating conflict around the world and is all too often associated with human rights abuses and state-sponsored repression.
Pollution associated with the production, transportation, processing and burning of oil is also taking a tremendous toll on human health and is responsible for undermining the livelihoods of many local communities and the well-being of sensitive ecosystems. These problems are now joined by the growing crisis of climate change.

Oil and climate change complicate debt and poverty in already impoverished countries. Soaring oil prices are undermining the benefits of limited debt cancellation in many of the world’s most impoverished countries, particularly those that are oil importers. For example, the estimated cost of Tanzania’s oil imports rose from $ 190 mm in 2002 to $ 480 mm this year -- for the same amount of oil. In comparison, debt cancellation is expected to only free up about $ 140 mm for Tanzania in 2006.
Furthermore, this cancellation doesn’t even touch on the debt held by large private banks in London, Paris and New York. At the same time, oil companies are raking in record profits, with ExxonMobil reporting profits of $ 4.7 mm an hour in July 2006.

Climate change will hurt the poor, too. Christian Aid in the United Kingdom has estimated an astonishing 182 mm people in sub-Saharan Africa alone could die of diseases attributable to climate change by the end of the century. Floods, famine, drought and conflict all resulting from climate change could threaten the existence of millions more worldwide.
Despite these warnings, the US government, along with publicly-supported international institutions, continue to protect the interests of private investors, whether they are oil companies or Wall Street banks that profit from the oil industry’s activities.

Since 1992, the publicly-backed World Bank has provided more than $ 5 bn in subsidies to the oil industry, while devoting only 5 % of its energy budget to clean, renewable energy sources. The US government has spent even more money subsidizing Big Oil. America’s misguided policies have fuelled global warming, encouraged oil dependence, led to increased conflict, and increased poverty and debt. On November 7, Americans voted for an agenda that called for an end to the support of Big Oil and there is hope that Congress will act on this promise in the coming months.
In Chad, the World Bank provided critical assistance to a project led by ExxonMobil that has only exacerbated conflict and poverty. As oil started flowing, Chad’s authoritarian president increased military spending and ripped up an agreement with the World Bank that was supposed to ensure that oil revenues were used to fight poverty. At first the Bank objected, but it backed down as soon as the president threatened to cut off the oil if his terms were not accepted.

In Ecuador, when the government wanted to use oil revenues to alleviate poverty, the International Monetary Fund (IMF) and World Bank withheld promised new lending in protest, pushing thecountry to instead pay its debt to the IMF, World Bank and other creditors. The country’s debt trap thus helps to fuel the government’s drive towards expanding oil production without consideration of alternatives.
Around the world, our tax dollars have been improperly used to subsidize Big Oil instead of providing clean energy for the poor, combating climate change and ending our destructive oil addiction. It is time for G8 governments and institutions like the World Bank to stop using development assistance to support Big Oil.

This is why Rainforest Action Network, Jubilee USA Network, Oil Change International, Bank Information Centre, Friends of the Earth, and Amazon Watch have come together in a growing coalition working towards making these crucial links between poverty and the environment. Go to http://www.EndOilAid.org for ways to make a difference.
Broader debt cancellation and additional aid money should go where it’s needed -- to initiatives that fight global warming, improve access to energy, and help countries overcome their dependence on oil. The time has come to end oil aid and focus instead on promoting renewables and energy efficiency.

Graham Saul is the international programs director of Oil Change International. Debayani Kar is communications and advocacy coordinator at the Jubilee USA Network.