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World Bank Needs to do Better on Energy Sector Investments Post South African Coal Project

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Today the World Bank approved a loan to build the fourth largest power plant in the world.  The project is to be financed with a $3 billion loan to Eskom – the South African electricity company – and is the largest coal-plant loan in the Bank history.  The 4,800-megawatt Medupi power plant would emit 25 million tons of carbon dioxide into the atmosphere – an amount equivalent to about half the annual emissions of Norway. 

This was a challenging and complicated project and was less about South Africa than about the World Bank’s role in helping (or hindering) the world’s efforts to address global warming.

We support the efforts of developing countries to alleviate their energy poverty, but dirty coal power is not the pathway to a sustainable economy.  The World Bank must do much more to help countries meet their energy needs in a manner that protects them from disastrous climate change.  Today’s decision is a failure by the World Bank to meet those needs.  They must do better!

I’m now hearing that 4 voting members of the World Bank Board of Directors abstained from this project (US, UK, the Netherlands, Italy, with Norway saying it would have voted no but it is a part of a Nordic voting block in the World Bank).  Abstaining from a World Bank vote essentially means that they are opposed to the project, but they are not voting to block the project.  The US statement outlining its rationale for abstaining discussed these concerns:

“…the United States is concerned about the project since it would produce significant greenhouse gas emissions, and uncertainty remains about future mitigation efforts.  Without actions to offset the carbon emissions of the Medupi plant, the project is incompatible with the World Bank's strategy to help countries pursue economic growth and poverty reduction in ways that are environmentally sustainable.  We also remain concerned about other facets of the project, including the inconsistency of Eskom's procurement process with the World Bank's Procurement Guidelines, deficiencies in the environmental impact assessment, and potentially inadequate efforts to mitigate local pollution.  The project is also inconsistent with new guidelines on coal lending adopted by the United States in December 2009.”

South Africa responded to the criticisms of this project with some commitments, including a proposal to come back to the World Bank with a $1.25 billion loan for emissions reduction actions and changing their energy sector policies to better enable renewable energy to compete (the later a major limitation restricting the viability of wind in South Africa as the wind energy folks have told me).  So hopefully some good will come out of this whole effort so that this will be the transition moment to help South Africa transform its energy sector so that renewables and energy efficiency will out compete uncontrolled coal (with some help from the World Bank to get there).

This project received significant criticism and generated strong opposition from groups in South Africa and serious questions from key Members of Congress – Sen. Leahy, Sen. Kerry, and Rep. Frank (as this ClimateWire article pointed out).  So how do you think the World Bank would respond to these concerns/questions?  This quote from a World Bank spokesperson before the vote was either way too optimistic or completely downplayed the grave concern that have been obvious for a while from key members of the Bank Board:

"We believe this project is important for South Africa and South Africans and we expect it will be well received by the board," World Bank spokesman Peter Stephens told Reuters.

I don’t know if I would consider five abstentions from key countries as “well received”.  And one of those statements (from the US) basically said “don’t do that again”:

“We expect that the World Bank will not bring forward similar coal projects from middle-income countries in the future without a plan to ensure there is no net increase in carbon emissions.”

I sure hope before the World Bank comes to the US and other donors with hat in hand asking for more money for a General Capital Increase that they come with a real energy strategy and a clear plan to stop funding projects which are causing global warming.  Otherwise, I’m afraid they are going to have a major challenge convincing countries around the world that this is a worthy investment.  After all, how can we use scarce resources to cause a problem – global warming – that we are simultaneously trying to eliminate?

Please World Bank help to fund the transition to a clean energy future – you must do better after this project.

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