The World Bank has approved a controversial loan for a 4,800-MW coal-fired power plant in South Africa that will emit more CO2 than 135 of 212 countries.
The World Bank had a big decision to make this week -- send South Africa a $3.75 billion loan and support for the fourth largest coal power plant in the world or listen to an international coalition of grassroots, environmental and church activists and deny the request.
In the end, after plenty of discussion and clear but not firm opposition from numerous world leaders, the World Bank decided on April 9 to approve the loan. 20 of the 24 Board directors representing 186 countries voted to approve the loan and the other 4 Board directors abstained from voting in an act of dissent.
The bulk of the loan ($3.05 billion) is going to the Medupi station, a power plant operated by South Africa's state-owned electric company, Eskom, and will produce roughly 25 million tons of carbon dioxide a year.
Earlier in the week, there were some indications that Britain would heed the advice of environmental groups opposing the World Bank loan and work to block the loan. But rather than block the loan, the U.S., Britain, the Netherlands and Italy showed their "opposition" to the loan, by abstaining from voting on the issue.
As is the case in UN proceedings, abstaining from a vote is common method of dissent on the World Bank board (which works on consensus). However, environmental activists say it was not a courageous or effective decision and the action fell short of their hopes.
"I am not going to give them points for abstaining. This was totally the easy way out," said Karen Ornstein of Friends of the Earth. "If the US were to follow its own clean coal guidance for multilateral development banks it would have had to vote no on this loan."
Activists may not have gotten the decision they thought was needed, but perhaps the controversy will help shape future World Bank activity. "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," said the US Treasury Department.
'Not an easy decision'
Countries expressing opposition to the loan emphasized growing international need to address climate change, but others from the World Bank said these remarks didn't represent the complexity of the issue or the true atmosphere of the internal decision-making process.
"It was not an easy decision," a World Bank official said. "Everybody recognised the concerns about climate change, but this was a balancing act."
The World Bank claims that it is not in the habit of funding fossil fuel projects these days. In its last fiscal year, it reports that it financed over $8.2 billion in energy projects and less than three percent of that was for coal-related investments. On the other hand, 40% went towards energy efficiency and renewable energy projects and programs. Nonetheless, if its energy budget for this year is of the same size, nearly 40% of it is going towards this single coal-fired power plant.
Additionally, independent analysis of World Bank funding for energy projects showed 2008 was a dreadful year in that respect, with a 102% increase in fossil fuel spending and an 11% increase in renewable energy funding. So, the World Bank's commitment to addressing climate change seems to still be up in the air.
In their defense, roughly $700 million of the loan will fund what the World Bank says are "some of the biggest solar and wind power plants in the developing world," including a 100-MW wind power project in Sere and a 100-MW concentrated solar power project with storage in Upington. Another $485 million is earmarked for low-carbon energy efficiency components, including a railway to transport coal with fewer greenhouse gas emissions.
Will South Africans see the economic benefits?
Although the argument is that South Africa needs this coal power plant to grow and prosper, the question is: Will short-term economic benefit doom long-term environmental and economic sustainability? In the long-term, South Africa is expected to be especially sensitive to the negative effects of climate change.
Amazingly, if it were a country, the 4,800-MW Medupi Station would rank 77th out of 212 countries in CO2 emissions, making South Africa's pledge to help address climate change practically meaningless.
Climate change is not the only concern here, but whether or not the power plant will really help poor South Africans is also an issue. Opponents in South Africa and Britain have argued that only a fraction of the 4,800MW of electricity generated at Medupi will go to ordinary South Africans, but rather, to large multi-national mining and metals corporations that dominate the region's industrial sector.
"This loan will put South Africa deep into debt, damage the environment and drive the climate impacts already affecting poor South Africans," said Bobby Peek, director of Groundwork Friends of the Earth, arguing that the power station will amplify South Africa's climate and poverty crises.
"It is not electricity for the millions of people who live in deep rural areas who still have no electricity. It's for big industry which uses more than 80% of South African electricity," said Peek.
Michael Stulman of the group, Africa Action, considers the project a misguided attempt to help South Africa and would result in little benefit for poor South Africans.
"This is one of those stereotypical development disaster stories," he said.