World Bank Vote for Coal Power Plant a Setback for Low-Carbon Development

The World Bank voted today to approve a $3.75 billion loan to South Africa’s public utility Eskom, the bulk of which would finance construction of what will be the world’s seventh-largest coal plant.  The United States abstained from the vote.

EDF’s Climate and Air Program Director Peter Goldmark said in EDF’s news release:

Giving the go-ahead to the Medupi coal plant, which will release massive amounts of greenhouse gases for decades, without a clear South African plan to level off and then decrease emissions amounts to a step backward when the world is moving forward to a clean energy future.

This was a missed opportunity for the U.S. and the World Bank to move away from a traditional focus on fossil-fueled growth and toward a new model of low-carbon economic development.

An abstention is a weak position for the U.S. to take in defense of its own proposal. Next time, the U.S. and others must vote no if we’re really going to reverse the headlong stampede to build coal plants in the developing world.  The coal lending guidelines are a good start — but now the Bank should adopt them and Treasury must show, at a minimum, that it is willing to act on them.

The problem here is not giving South African citizens access to cheap energy – we all want that.  The challenge is to do that within a framework that clearly puts South Africa, and the world, on a course where greenhouse gas emissions will peak and then decline. South Africa has not explained how the Medupi plant, or the successor coal plant right behind it, fits into a realistic program to level off and then decline the level of greenhouse gas emissions.


The U.S. Treasury Department issued a statement today, saying:


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.


In a larger sense, this decision highlights the challenge the World Bank is facing in adhering to its own Development and Climate Change Strategic Framework, which looks to “support sustainable development and poverty reduction at the national, regional, and local levels, as additional climate risks and climate-related economic opportunities arise.”  The vote also apparently conflicts with the leaders’ statement from the September 2009 Pittsburgh meeting of the G-20, of which South Africa is a member.  That statement commits all members to “phase out and rationalize over the medium term inefficient fossil fuel subsidies” that “encourage wasteful consumption.”

EDF’s 2009 report “Foreclosing the Future: Coal, Climate and International Public Finance” urged multilateral development banks, including the World Bank, to hasten the shift to renewable energy by adopting recommendations like deploying public international finance in support of renewable energy, energy efficiency and other alternatives to coal.

As the World Bank, International Monetary Fund, and other multilateral financial institutions seek a capital increase from the U.S. Congress, they will be faced with a decision as to when cheap, dirty development will finally take a backseat to clean, sustainable alternatives.

EDF strongly encourages the U.S. Congress and Treasury to help shift World Bank resources and strategy towards a fundamental rethinking of development priorities – both by providing sufficient funding for the Bank’s dedicated Clean Investment Funds and by reorienting the Bank’s overall lending portfolio toward low-carbon development.


Read more in EDF’s news release.

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