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Should the World Bank fund coal plants?

By Steven Mufson

Should the World Bank lend money for coal plants?

The climate folks at the Center for American Progress don't think so. In a report due out this week, they argue that the international lending agency should stick to renewable energy projects that don't produce greenhouse gases. And they want to use the World Bank's first request in 20 years for an increase in its general capital as an opportunity to get donors to curtail the bank's fossil fuel lending, starting with a $3 billion loan planned for a new coal-powered plant in South Africa. While the the CAP report doesn't call for an outright ban on coal projects, it says the bank should be more transparent and give more consideration to greenhouse gas emissions. The capital increase discussions offer "a perfect moment to institute long-term reforms on energy financing," the report says.

But the World Bank says it needs to fund the South African coal plant, which it says is key not only for South Africa, but also for surrounding countries that rely on South Africa's electricity company, Eskom, for power. Nor do bank officials want to rule out coal projects in the future, particularly in sub-Saharan Africa where in some countries, such as the Democratic Republic of the Congo, as many as 94 percent of people are without electricity. It is, they say, hard to fight poverty for people without any electricity.

While not renouncing coal projects, bank officials also say that over the past two years the World Bank and its affiliated institutions, such as the International Finance Corp., have sharply boosted lending for energy efficiency and renewable energy projects, which now account for the biggest chunk of the bank's lending this year.

This shift appears in the World Bank's numbers. The four authors of the Center for American Progress report say that the World Bank is lending more than twice as much money to fossil fuel-based projects as it does to renewable energy projects. That was true in 2007, the year CAP cites. But the World Bank's spending on energy efficiency has increased more than six-fold and on renewables more than three-fold since then. By 2009, renewable energy and energy efficiency projects accounted for 40 percent of World Bank's $8.2 billion in energy lending while fossil fuel projects accounted for 24 percent.

The CAP report is the latest salvo in a debate over the World Bank's energy strategy, which the bank has been reevaluating. It has published a document in October and invited comments. (The new report is titled "Development Funding Done Right ; How to Ensure Multilateral Development Banks Finance Clean and Renewable Energy Projects to Combat Global Warming.")

The World Bank says it has six criteria new coal lending must meet. In those cases, it's a question of priorities. And for the World Bank, the priority is development.

Inger Andersen, the World Bank's director for sustainable development in Africa, notes that in a country like Rwanda only 9 percent of the people have access to electricity. "That means 91 percent of the people don't have access," she said in an interview. "Imagine what that does for investment, schools and hospitals and all that stuff. How do you do agriculture processing? How do you add value for the products you grow?

"For Africa there is a role for access, energy access," she continues. "So you have to scale up access. That has to be part of Africa's development solution. Without energy, we cannot power our industry, human capital, agricultural processing. And investment will not come."

"If you look at the financial crisis last year, around 2 to 4 percent of GDP was gone because of shortages of energy in sub-Saharan Africa. You have to imagine the cost of electricity shortages," says Jamal Saghir, director of energy, transport and water at the World Bank.

The Center for American Progress report says that climate concerns have to take priority. "What is being overlooked here, though, is that in the medium to long-term outlook the costs of global warming will overrun the benefits of short-term economic growth levered through new coal facilities," CAP says. Elsewhere it says, "[it] is important for the Bank to provide energy services to as many of the energy poor as possible. Yet climate change threatens the progress made on economic development and will impact the least developed communities first and worst."

The CAP report also argues that while coal plants might help alleviate poverty in the short-run, the 40-year or so lifespan of the coal plants means long-term damage to the climate.

Given the huge expense of building power plants, most of CAP's argument is about two projects: the one in South Africa and another earlier one in India. The South African project comes before the World Bank board this month, and it could tilt the bank's balance back toward coal. In addition, last October the bank approved a coal power project for Botswana, which has traditionally relied on South Africa for electricity.

Andersen notes that although South African utility Eskom is one of the ten largest utilities in the world, it supplies poor neighboring countries as well as South Africa. Planning for the new coal plant grew out of a crisis of 2008, when there wasn't enough power generation. (Eskom, a state-owned utility with 13 other coal plants, had done little investment in generation in 20 years.)

"The thing came to a standstill," said Andersen. "Hospitals were in blackout, schools couldn't function. This had a severe impact on confidence in the country, on the investment climate and on human development."

The World Bank also notes that South Africa has been supportive of international climate accords and has committed itself to reducing emissions, and that this provides some reassurance. To CAP, however, this is seen as a contradiction. The Bank also notes that the new giant coal plant in South Africa will be super-critical, among the most efficient in the world. Moreover, along with the $3 billion the bank wants to lend to the Eskom coal plant, the World Bank plans to lend $750 million on a variety of related projects including new wind and concentrated solar energy, converting coal transportation to rail from road, and rehabilitating and improving the efficiency of old coal plants in South Africa.

Some of the World Bank insiders believe that it's tougher to make the case for an Indian coal plant the Bank is supporting. The Bank's International Finance Corp is providing loans to cover 11 percent of the $4.2 billion cost for a plant built by Tata, a big Indian conglomerate. India too has huge electricity problems, but arguably more ways to finance new plants on its own.

The IFC has posted a Q&A about the issues surrounding the project. It says the new plant will be supercritical, and therefore much more efficient than the average Indian coal plant. That Indian plant is so big, that even though it's efficient it will be one of the world's top 50 greenhouse gas emitters, the CAP report says.

CAP wants the World Bank to lend to more solar and wind projects. It quotes a study saying that a solar power plant's return on investment can equal a coal plant -- if you include the sale of credits from the Clean Development Mechanism associated with Europe's cap-and-trade system. But the Bank laments that solar and wind technologies are still very expensive. African governments don't have enough money to subsidize renewables the way the United States or Europe does. And from a development point of view there are more effective ways to use donors' money.

The IFC in its defense of the India plant says: "For comparison, the world's largest concentrated solar power project is a $2 billion, 553-megawatt thermal electric project for Pacific Gas and Electric that is under construction in the Mojave desert and designed to operate when solar energy is available. The Tata Mundra project will generate more than eight times as much power as the Mojave solar project from an investment of just over twice as much ($4.24 billion)."

The U.S. Treasury in December proposed its own guidance for international development bank loans for coal projects, suggesting that they raise the bar for new projects. (The deputy assistant Secretary of Treasury for environment and energy is William A. Pizer, who spent 12 years at Resources for the Future, a Washington think tank.)

"The World Bank now faces a choice," says the CAP report. "As the governors and shareholders of the bank begin to defend their financing choices for power projects and solicit more resources to do their work they must decide whether this remarkable institution will be put at the service of the larger project of reducing carbon pollution or whether it will become an obstacle to it."

"We have to be open minded," Saghir replies. "There are some countries where there are no choices."

CAP isn't the only place that's been giving the World Bank advice on energy policy. In November, Oliver Johnson of the Bretton Woods Project has written an overview of the World Bank's past debates over energy projects.

Last June, the World Resources Institute weighed in on the bank's energy strategy, suggesting the U.S. Treasury support a "new paradigm."

The Bank Information Center also wants the World Bank to change its energy strategy. "It's hard to understand why 'coal' isn't a dirty word in the halls of the World Bank -- an institution whose mandate is built on the idea of sustainable development," said Greenpeace's Phil Radford on the Web site of the Bank Information Center, a non-profit that is not affiliated to the World Bank.

The World Bank has its own page about energy: It includes a link to the bank's own panel of experts report on the South African coal plant:

By

Steven Mufson

 |  March 3, 2010; 5:15 PM ET Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Just wondering - since everyone opposes these loans and investments in SA (and the developing world in general), why don't we start at home? Let's immediately cease constructing new coal powered plants here in the US (several are under construction currently) and in order to alleviate the world-wide green house gas problems, let's stop all coal energy production here. Let's take the lead! Let's begin rolling black-outs tomorrow (we'd need them if we take out coal) despite the impact on business and our economy. Because if we feel that's an okay way to go for Africa, it must surely be a good way to go for us....

Posted by: KDMD1 | March 8, 2010 11:45 PM
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The Globalist Criminal World Bank should be Closed Down!! - And, like the U.S. so-called "EPA", - Both need investigated, prosecuted, and Closed-Down. Also, the EPA & World Bank have Nothing to do with Coal or the Coal / Energy Industry,- period!! Like I said, they both need Closed-Down! - Right now during thsi Economic CRISIS,- the goof-ball EPA un-Protection Agency, wants to limit, add fees, and hinder the Energy / Coal Industry. - What in the world is wrong with these Criminal "Special-Interest" CROOKS?! - Put them All in Prison NOW!! -- All of the Globalist Thieves are tied together,- including the World Bank, the criminal U.S. Federal Reserve Bank, and all Global Central Banking Cartels. - And the U.S. 'EPA' works for these crooks,- Not for the American People, - nor to Protect the U.S. Environment. - The EPA is anti-American Prosperity,- and is a crony of Globalist $BANKsters, WALLsters, and 'Big-OIL'!!!

Posted by: jward52 | March 7, 2010 3:06 PM
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Should the World Bank fund coal plants? NO!

Posted by: clairevb | March 7, 2010 11:27 AM
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Posted by: randomsample | March 6, 2010 9:36 PM
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The World Bank shouldn't fund anything. Much of its expenditures are misappropriated by kleptocrats. It is out of control and a leaky bucket for American taxpayers' hard-earned funds. It should just go away.

But if the World Bank is to continue financing overseas projects they should fund coal plants. Coal plants, along with clean water and other infrastructure projects, benefit the greatest number of people in the developing world at the least cost.

Posted by: fkeady | March 6, 2010 1:18 PM
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AsteroidMiner before what you say happens, man will be extinct way before that...
your fear mongering ways is what will destroy this world...

Posted by: DwightCollins | March 6, 2010 9:08 AM
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Those countries that have no electricity DO NOT need coal fired power plants. We are within half a century of humans going EXTINCT because of Global Warming. The #1 kill mechanism is famine. See "The Long Summer" by Brian Fagan and "Collapse" by Jared Diamond.
7 degrees C is one more than the for-sure extinction point for Homo Sapiens as reported in a bunch of reports and books.
The book "Six Degrees" by Mark Lynas says: "If the global warming is 6 degrees centigrade, we humans go extinct." See:
http://www.marklynas.org/2007/4/23/six-steps-to-hell-summary-of-six-degrees-as-published-in-the-guardian
Lynas lists several kill mechanisms, the most important being famine and methane fuel-air explosions. Other mechanisms include fire storms.

The following sources say H2S bubbling out of hot oceans is the final blow at 6 degrees C warming:
"Under a Green Sky" by Peter D. Ward, Ph.D., 2007.

http://www.sciam.com/article.cfm?articleID=00037A5D-A938-150E-A93883414B7F0000&sc=I100322

http://www.geosociety.org/meetings/2003/prPennStateKump.htm
www.astrobio.net is a NASA web zine. See:

http://www.astrobio.net/news/modules.php?op=modload&name=News&file=article&sid=672

http://www.astrobio.net/news/modules.php?op=modload&name=News&file=article&sid=1535

http://www.astrobio.net/news/article2509.html

http://astrobio.net/news/modules.php?op=modload&name=News&file=article&sid=2429&mode=thread&order=0&thold=0

"Climate Code Red" by David Spratt and Philip Sutton says the following:
Long term warming, counting feedbacks, is a least twice the short term warming. 560 ppm CO2 gets us 6 degrees C or 10.8 degrees F. We will hit 560 ppm before mid century.

Per "Climate Code Red", we need ZERO "Kyoto gas" emissions RIGHT NOW and we also need geo-engineering because we have already gone way beyond the safe CO2 level of 300 to 325 ppm. We are already at 455 ppm equivalent and we have tripped some very big tipping points. We aren't dead yet, but the planet needs critical intensive care if we humans are to have a chance of survival.

"The Vanishing Face of Gaia" by James Lovelock has identified a 9 degree lurch in the temperature that happens at 450 ppm equivalent.
Looks like we are not going to make it. We HUMANS could be EXTINCT by 2050 because politicians are not considering sufficiently strong action.

Posted by: AsteroidMiner | March 5, 2010 1:46 PM
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Other reasons to quit burning coal:

Posted by: AsteroidMiner | March 5, 2010 1:23 PM
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Other reasons to quit burning coal:

Posted by: AsteroidMiner | March 5, 2010 1:22 PM
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Blasmaic
Coal combustion does emit some pollutants, but it does not “spew tons of harmful gasses into the atmosphere”. Nearly all of the emissions from coal combustion are solids (ash). Those solids contain low concentrations of toxic metal compounds, but modern combustors incorporate fabric filter emissions control devices, which can capture more than 99% of those solid particles. The concentration of toxic compounds in the ash is so low that the ash is not deemed to be a hazardous solid waste. Normally, more than 99.9% of the carbon in the coal is combusted completely to carbon dioxide and water. The remaining 0.05% to 0.1% is mostly carbon monoxide; however its concentration is so low that it has no health impact on humans or animals.

Hydroelectric can solve more than energy problems. In areas where precipitation is highly seasonal and where terrain is suitable, hydro power can store water during the rainy season to cover water needs during the dry season. The impoundment can be available for previously unavailable commercial fishing and recreational uses. It also can provide irrigation for food crops. If we are to provide the standard of living that all humans deserve to those to whom it is now unavailable, we cannot dismiss, without thought, any source of the energy needed to effect the improved living standard.

Posted by: snorbertzangox | March 4, 2010 9:36 AM
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There is also the "net" effect to consider. While coal will spew tons of harmful gasses into the air, the electricity produced will reduce the amount of wood that will otherwise be burned. That helps mitigate the effect.

Unfortunately, if the choice were solar and wind or nothing, then progress on these green technologies would be intensified. The only way to reduce the per megawatt efficiency of a green technology is to have more resources devoted to its research and development. It is the non-viability of green technologies compared to dirty power that slow their progress.

And since it is a World Bank topic, let God strike down dead the first person to raise the topic of hydr


Posted by: blasmaic | March 4, 2010 1:37 AM
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The answer to the question posed by the first sentence in this article is "Yes".

Joe Romm cannot keep his fact straight; he hasn't been right about anything in 6 years.

Again, all of the sources of information you sought during your "research" were activist organizations with axes to grind.

There are other organizations which have alternative views expressed by professionally qualified staff members. You really should try to find some of them so you can hear what they think. Only then, can your reporting achieve rigor and balance.

Posted by: snorbertzangox | March 3, 2010 9:36 PM
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