BM Desk : Ajay Banga, president of the World Bank, announced on Wednesday that the board has decided to lift a long-standing prohibition on financing nuclear energy projects in developing nations as part of a larger effort to satisfy growing electricity demands.

In an email to employees, Banga described the bank’s updated energy plan following what he described as a productive meeting with the board on Tuesday. He stated that the board was still unsure about whether the bank should finance natural gas development and, if so, under what conditions. The global development bank, which provides low-interest loans to assist countries in constructing various infrastructures such as flood barriers and railroads, made the decision in 2013 to cease funding for nuclear power initiatives. In 2017, it announced that it would halt financing for upstream oil and gas projects starting in 2019, although it would still evaluate gas projects in the least developed nations.

The board members reached a consensus on the nuclear issue relatively quickly; however, several countries, including Germany, France, and Britain, were not entirely in favor of altering the bank’s strategy to include upstream natural gas projects, according to sources familiar with the discussions.

“Although the matters are intricate, we have made significant strides toward establishing a clear direction for providing electricity as a catalyst for development,” Banga stated, emphasizing that further discussions were necessary regarding upstream gas projects Since assuming office in June 2023, Banga has advocated for a transformation in the bank’s energy policy, contending that the bank should adopt an “all of the above” strategy to assist nations in addressing increasing electricity demands and achieving development objectives.

In his memorandum, he highlighted that electricity consumption in developing countries is projected to more than double by 2035, necessitating an increase in annual investments from the current $280 billion in generation, grids, and storage.

The Trump administration has been vigorously advocating for the termination of the ban on nuclear energy projects since taking office.

The United States is the largest shareholder of the bank, holding 15.83%, followed by Japan with 7% and China with nearly 6%. President Donald Trump is likely to support the bank’s decision to broaden its energy project strategy, especially since one of his first actions in January was to withdraw the U.S. from the Paris Climate Agreement and its commitments to reduce emissions.

Currently, 28 countries utilize commercial nuclear power, with an additional 10 countries prepared to begin operations and another 10 potentially ready by 2030, as reported by the Energy for Growth Hub and Third Way. Banga mentioned that the World Bank Group plans to collaborate closely with the International Atomic Energy Agency to enhance its capacity to provide guidance on nuclear non-proliferation safeguards, safety, security, and regulatory frameworks.

The bank intends to support initiatives aimed at prolonging the operational life of existing nuclear reactors, as well as upgrading the grid. Additionally, it will focus on accelerating the development of small modular reactors.

Officials from the Trump administration and various development experts argue that developing nations should not be hindered from utilizing affordable energy to grow their economies, especially while advanced economies like Germany continue to rely on fossil fuels.

However, climate activists express concern that increasing funding for nuclear and natural gas projects may divert resources from the urgent needs of developing countries to adapt to climate change and take advantage of plentiful alternative energy sources like solar power.

“Net zero does not equate to being fossil fuel-free. It indicates that 20% of energy will still come from fossil fuels,” stated Mia Mottley, the Prime Minister of Barbados. “We recognize that natural gas is a cleaner fuel.”

Banga indicated that the bank’s updated strategy would empower countries to choose their optimal energy mix, with some opting for solar, wind, geothermal, or hydroelectric power, while others may select natural gas or, in the long run, nuclear energy.According to him, the bank would keep offering advice and funding for midstream and downstream natural gas projects as long as they were the least expensive, in line with development objectives, reduced risk, and did not interfere with renewable energy sources.
Banga stated that in order to streamline evaluations and approvals, the bank would continue to research cutting-edge technologies including carbon capture and ocean energy.

In addition to supporting carbon capture for industry and power generation, Banga stated that the bank will continue to advise on and finance the retirement of coal plants. However, it would not promote enhanced oil recovery, which is normally eligible for commercial financing.