ENERGY: Bank-Funded Coal Plant Tests Green Agenda

Decision-makers around the world are in a period of transition when it comes to the future of supplying energy. Even if everyone agrees that a low carbon future is the inevitable solution, there is nothing close to consensus regarding which path to take.

Increasingly, industrial and developing countries find themselves favoring different paths – not only for their own countries but for each other.

These differences were on full display at the Copenhagen climate talks in December. Now, the battleground has moved to World Bank energy projects and investments.

On Apr. 8, the World Bank’s board is expected to approve a 3.75-billion-dollar loan for a coal-fired power plant in South Africa.

Earlier this month, it was reported that the United States was opposed to the loan due to the high greenhouse gas emissions of coal-fired plants and that its representatives on the bank’s board would abstain from voting on the proposal. U.S. officials have since denied that a decision has been made.

An abstention would allow the loan to go forward, while also allowing the U.S. to go on record in opposition to it.

There are plenty of indications of how the U.S. feels, however.

It abstained from voting on a 2.81-billion-dollar loan from the African Development Bank for the same power plant last November.

And a month later, as blocs of countries were clashing in Denmark over climate adaptation finance and technology transfer, the U.S. Treasury Department issued a guidance memo directing U.S. representatives on the boards of multilateral development banks – such as the World Bank and AfDB – to encourage building demand in developing countries for no- or low-carbon energy sources.

Opposing coal-fired power is a somewhat strange position for the U.S. to take. The U.S. has 600 coal-fired plants, which provide more than half of its energy supply. There are around 60 new coal-fired plants in various stages of planning or permitting – even after a record 26 planned plants were cancelled last year.

The U.S. has notoriously failed to agree on limits to its own domestic greenhouse gas emissions, though it did agree to modest cuts in Copenhagen which now need to be approved by the Senate.

And lumped in with clean energy proposals and such controversial ideas as building more nuclear plants, the Barack Obama administration has proposed increased investment in so-called “clean coal” technologies. These are the same technologies that the South African utility giant Eskom says it will employ on the proposed World Bank-funded plant, Medupi.

While the U.S. is favoring one path at home – a slow, industry-friendly one that will ease its economy into a low-carbon future – it seems to be hoping to persuade other countries to favor another, say some developing countries.

Representatives from Africa, China and India responded to the U.S. Treasury’s December guidance with a letter to World Bank president Robert Zoellick.

Their points were several-fold: the U.S. should not be allowed to flex its muscle unilaterally as the bank’s largest donor; the bank’s core mandate is poverty alleviation and economic growth and climate change should only be addressed when it impinges on those efforts; and coal is still crucial to increasing access to electricity and thus those poverty and development efforts.

In agreement with this last point, World Bank Vice President for Africa, Obiageli Ezekwesili, has called Medupi a “transitional investment”.

“There is no viable alternative to safeguard Africa’s energy security at this particular time,” she told Reuters earlier this month.

Certainly, not every country should be expected to take the same path toward a clean energy transition. But does investing in plants fired by coal – which releases more carbon dioxide emissions per unit of energy produced than any other fossil fuel – really best serve people in South Africa and other countries receiving bank funding?

Pravin Gordhan, South Africa’s finance minister, says it does. Citing his country’s widespread poverty and 24 percent unemployment, he argued in a Washington Post op-ed last week that “to sustain the growth rates we need to create jobs, we have no choice but to build new generating capacity – relying on what, for now, remains our most abundant and affordable energy source: coal.”

If new plants are being built, though, and especially if they are being built with money from the World Bank, those plants should be made as low-carbon and sustainable as possible, argue critics of the project.

“The World Bank should be assisting projects that help countries transition to long-term sustainable development, not coal plants that will make the future tougher for the recipient and all the rest of us,” wrote the Environmental Defence Fund’s climate and air programme director Peter Goldmark in response to Gordhan’s op-ed.

For its part, the World Bank website notes that, “Addressing this challenge [of climate change] is part of WBG’s [World Bank Group’s] core mandate of helping countries deal with poverty and move towards economic prosperity.”

It is funding numerous efforts to address the effects of climate change and provide support for low carbon projects, largely through the Climate Investment Funds which the bank approved in 2008.

CIF meetings concluded Mar. 19 in Manila with plans to mobilise 40 billion dollars for projects ranging from solar power development to public transportation.

With projects like funding the Medupi plant primed for approval, though, the extent to which the bank has addressed the climate change challenge remains patchy.By Matthew Berger

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