Archived press release

UK Development Aid Fuels Climate Change and Poverty

17 March 2005

UK aid money is creating an "oil curse" for developing economies, according to a new report, launched today (Thursday) as G8 environment ministers meet in Derby to discuss the impact of climate change on Africa [1]. Pumping Poverty finds that government aid is being spent on supporting energy projects which benefit UK and US oil companies, but which do little to help the countries where they are based.

Published by Friends of the Earth, Plan B and Platform Research, the research shows that the Department for International Development's (DFID's) policies on oil development are incoherent; fail the very people they are designed to help and compromise the department's mandate for poverty alleviation, undermining the aims of the Millennium Development Goals, and further undermining UK efforts to fight climate change.

Specifically the report highlights the "oil curse" which often accompanies the discovery of oil in a developing country. At a local level, oil production can have an adverse effect on local communities, with pollution affecting water supplies, farm land and air quality. Nationally, the discovery of oil can harm the economy, with investment in oil undermining other sectors, disrupting growth and potentially weakening democracy [2].

The report points to DFID's continued support for fossil fuels through direct grants and the approval of loans through the World Bank and the European Bank of Reconstruction and Development (EBRD) to massive oil projects, such as the Chad-Cameroon pipeline. The World Bank has provided more than $5 billion in funding for oil projects since 1992 while EBRD has provided loans of over $1 billion.

The use of development aid to support such projects distorts the energy market in favour of oil and provides essential leverage for private finance. The report argues that in order to prevent catastrophic climate change such hidden subsidies need to end.

The report also questions the conflicting role of DFID's role as a partner in maintaining UK energy security, which leads to the use of development aid to support the goals of the UK's oil industry and is explicitly aimed at enhancing the UK economy rather than maximising poverty alleviation in developing countries. African oil is expected to increase over coming years.

Friends of the Earth Oil Campaigner Nick Rau said:

"The Department for International Development was set up to alleviate poverty, yet our research shows that it is providing crucial support for oil and gas projects which boost oil company profits, but do little for the communities they are supposed to help. Oil is a curse not a blessing for too many countries in the developing world."

Lorne Stockman, co-author of the report said:

"DFID needs to take a close look at the role of energy in achieving the Millennium Development Goals. Oil development has failed the poor and will further undermine development through climate change. Tinkering at the margins will not solve the problem. DFID must take the lead, in line with the UK Government's professed leadership in addressing climate change, and cease support for oil while aggressively supporting alternatives that suit the needs of the poor. Renewable energy technologies, that put the production of clean and locally sourced energy into the hands of the poor is the way forward and DFID should be wholeheartedly supporting them."

Notes

[1] Friends of the Earth, Plan B and Platform will present the findings of Pumping Poverty at the Civil Society Outreach G8 meeting of Environment and Development Ministers in Derby on Thursday 17^th March 2005. A full copy of the report is available at:
www.foe.co.uk/resource/media_briefing/pumpingpoverty.pdf (PDF)

The executive summary is available here:
www.foe.co.uk/resource/media_briefing/pumpingpovertysummary.pdf (PDF)

[2] A briefing detailing oil projects in Africa is available from the press office at Friends of the Earth.

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Published by Friends of the Earth Trust