Global Climate Battle Plays Out In World Bank

Published by MAC on 2010-03-10
Source: PlanetArk

Global Climate Battle Plays Out In World Bank

Lesley Wroughton

PlanetArk

8 March 2010

The United States and Britain are threatening to withhold support for a $3.75 billion World Bank loan for a coal-fired plant in South Africa, expanding the battleground in the global debate over who should pay for clean energy.

The opposition by the bank's two largest members has raised eyebrows among those who note that the two advanced economies are allowing development of coal-powered plants in their own countries even as they raise concerns about those in poorer countries.

While the loan is still likely to be approved on April 6 by the World Bank board, it has revealed the deep fissures between the world's industrial powers and developing countries over tackling climate change.

Both camps failed to reach a new deal in Copenhagen in December on a global climate agreement because of differences over emissions targets and who should pay for poorer nations to green their economies.

Some $3 billion of the loan to South African power utility Eskom will fund the bulk of the 4,800-megawatt Medupi coal-fired plant in the northern Limpopo region and is critical to easing the country's chronic power shortages that brought the economy to its knees in 2008. The rest of the money will go toward renewables and energy efficiency projects.

The battle playing out in the World Bank was prompted by new guidance issued by the U.S. Treasury to multilateral institutions in December on coal-based power projects, which infuriated developing countries including China and India.

The guidance directs U.S. representatives to encourage "no or low carbon energy" options prior to a coal-based choice, and to assist borrowers in finding additional resources to make up the costs if an alternative to coal is more expensive.

In a letter to World Bank President Robert Zoellick, board representatives from Africa, China and India said such actions "highlighted an unhealthy subservience of the decision-making processes in the bank to the dictates of one member country".

GOING GREEN

South Africa, together with Brazil, is a leader among developing countries in fighting climate change and foresees a peak in its greenhouse gas emissions between 2020 and 2025. By contrast, the United States is the only major developed nation with no legal target for cutting its own emissions.

To be fair, the Obama administration wants to cut emissions by 17 percent from 2005 levels, or about 4 percent below 1990 levels by 2020, but that plan is stalled in the U.S. Senate.

Britain is better off in lecturing about clean energy -- its emissions were 19.5 percent below 1990 levels in 2008 -- and closure of coal mines and a shift to natural gas primarily for economic reasons explain a large part of the fall.

Eskom has proposed to develop Medupi with the latest supercritical "clean coal" and carbon storage technologies available on the market, which is used by most rich countries.

Still, Medupi will be a major polluter that could make it harder for South Africa to meet its emissions targets.

A U.S. Treasury official told Reuters the United States was in the process of reviewing the Eskom proposal and will develop a position that "is consistent with administration policy and with facts surrounding the project."

World Bank Vice President for Africa, Obiageli Ezekwesili, said South Africa's energy security was key because the country's growth, or lack of it, was felt throughout Africa.

"There is no viable alternative to safeguard Africa's energy security at this particular time," she told Reuters. "This is a transitional investment that they are making toward a green economy and that should count for something."

But the politically connected Center for American Progress in Washington argued in a report last week that the World Bank is a standard-setter for development banks and should push sustainable economic development models in client countries.

"This is a problem for an institution with the moral and financial responsibility to foster large-scale investment in sustainable economic development," it said.

It said the U.S. should press the point in negotiations over a general capital increase for the World Bank, which ponies up billions of dollars a year to fight global poverty.

Environmental groups argue that the Bank shouldn't be allowed to manage a Clean Technology Fund for donors while also funding coal plants that emit tens of millions tons of harmful carbon emissions into the atmosphere.

It is not the first time the Bank is facing a backlash over its support for coal-fired projects. Last year, it backed India's Tata Ultra Mega supercritical coal-fired plant, one of the world's top 50 greenhouse gas polluters.

LOW-EMISSION PATH

Steve Lennon, Eskom's managing director for corporate services, said while Medupi involved a significant chunk of coal, there were also elements of the project that would meet South Africa's Copenhagen commitment.

"The package of projects that we are applying for the funding for is part of South Africa's long-term climate change mitigation scenario, all aimed at putting the country on a low emissions path in the future," said Lennon, who was part of a high-level Eskom delegation who visited Washington recently.

David Wheeler, an environmental expert at the Center for Global Development, said the World Bank should press Western donors to fund the cost gap to help South Africa afford an alternative to coal.

"This recalls a central problem at Copenhagen: ample rhetoric about the need for carbon mitigation in developing economies, but little actual willingness to finance the extra cost of clean technology for countries that remain very poor," he added.

(Additional reporting by Agnieszka Flak in Johannesburg, Editing by Jackie Frank)Este articulo trata del banco mundial y su apoyo a Eskom en Sur Africa, un productor de energia por carbon.

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Jubilee South Africa on the World Bank loan to Eskom

Jubilee South Africa Statement

13 April 2010

Jubilee South Africa is adding its voice to the widespread protest against the World Bank loan to Eskom for the expansion of coal-fired power. We do so on grounds of both the economic and environmental implications of the loan.

The large size of the loan, as well as the signal that the granting of this loan sends to other lenders to make further loans, will have serious economic repercussions. These are already being felt in the form of the dramatic increase in electricity prices. They will be exacerbated in years to come in the negative impact on the South African economy of further outflows of money as the capital and the interest on the loans are repaid.

Decades of struggle against Apartheid, culminating in the highly effective sanctions campaign, resulted in the World Bank and International Monetary Fund (IMF) being forced to stop lending to the Apartheid Regime. This supposed punishment was a blessing in disguise for post-Apartheid South Africa, in that the country, unlike its
counterparts in the rest of Africa and the South, had limited obligations to these agencies.

Yet, the new post-Apartheid Government immediately welcomed the World Bank to write its social and macroeconomic policies, which today are at the root of the service delivery and unemployment debacles. The World Bank had also in the latter years of Apartheid utilised the window of Lesotho to gain a foothold in South Africa in the form of the Lesotho Highlands Water Project, which South Africans have since been paying for in the form of escalated charges for water services.

Now the Government and Eskom have come full circle, welcoming the World Bank back to the country, not just as designers of the country's social and economic policies, but as financiers as well. We are thus standing at the threshhold of the problems that the World Bank and IMF have bestowed on other countries of the South for many decades
already.

The nature of the loan as a promoter of accelerated environmental damage and global warming also has its roots in a longer-term relationship between the post-Apartheid Government and the World Bank. The Government, under Thabo Mbeki, foisted the New Partnership for Africa's Development (NEPAD) onto the continent as a thinly veiled
African government endorsement of World Bank and IMF policies in order to beg for foreign investment in the continent.

This was followed by the cynical manipulation of the United Nations' environmental agenda at the Rio+10 meeting in Johannesburg in 2002. In the build-up to the event, Mbeki and his international backers counterposed environment and development, expressing a supposed concern as regards poverty in order to shift the focus away from the environment to private sector-led development, naming the event the World Summit on Sustainable Development to this end.

This approach also underpins the World Banl loan to Eskom, which is being promoted as supporting development. Nothing could be further from the truth. The loan is based on an intensfication of coal-fired power. This requires the expansion of coal mining, entailing the further dispossession of people from their land. Coal-fired power stations need highly purified water, but mining pollutes water, so people's water needs will also be sacrificed. These local effects will be exacerbated by the impact of the loan on carbon emissions and global warming, the impact of which is felt disproportionately in the South as altered weather patterns impact on agriculture. The privileging of capital-intensive power stations over more extensive small-scale renewable projects also impacts negatively on employment opportunities. Moreover, the negative impacts of local and global environmental destruction will be passed on to future generations.

It is becoming increasingly evident to all that sustaining the environment and engaging in appropriate development go hand in hand. The collaboration between the World Bank, the Government and Eskom towards the granting of this loan represents an attack on both the environment and the people.

It is on the basis of the above that Jubilee opposes the loan and, more broadly, any form of collaboration between South Africa and the World Bank. Indeed, this loan is another glaring example of why the World Bank should be shut down.

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George Dor
General Secretary
+27 (0)11 648 7000
george@mail.ngo.za