The Heat Is Online

World Bank Funds Two More Massive Coal Plants

World Bank Pressured on Clean Energy

The New York Times,  Oct. 11, 2010
NEW YORK — Once the coal-fired Medupi Power Station in Lephalale, South Africa, is fully operational in 2015, it will emit 26 million tons of carbon dioxide a year. And when the Tata Ultra Mega plant in western India is fully serviceable in 2012, its annual carbon dioxide emissions are expected to total 23.4 million tons.
Both plants, which will rank among the world’s largest sources of greenhouse gases — together producing about as much carbon dioxide as nations like Ireland and Norway — are being built thanks to more than $4 billion in financing from the World Bank.
The amount of money that the World Bank is lending for fossil fuel energy projects like these — for coal in particular — is rising faster than ever, even though it said only two years ago in a policy document that climate change posed one of the greatest threats to development in poor countries.
According to the Bank Information Center, a Washington-based watchdog group, World Bank group funding for fossil fuel projects reached a record $6.3 billion in the fiscal year that ended in June, up from $1.6 billion in fiscal 2007. Funding for coal projects in 2010 was $4.4 billion, also a record, the group said.
“In its actions, the World Bank has deviated from its rhetoric,” said Janet Redman, co-director of the Sustainable Energy and Economy Network at the Institute for Policy Studies in Washington. “It has not done clean energy when it could. It has not prioritized clean energy sources over traditional fossil -fuel sources. And it is constantly stalling on one very important policy: calculating the greenhouse-gas emissions produced by its own projects.”
With 1.5 billion people worldwide living without access to electricity and many more whose energy services are either sporadic or cost-prohibitive, the World Bank has sought to fulfill its core mandate of alleviating poverty in part by increasing access to energy. But the bank is now finding itself under growing pressure to deliver that energy without an accompanying increase in carbon emissions.
When the World Bank approved its loan for the Medupi station in South Africa in April, Britain, Italy, the Netherlands, Norway and the United States abstained from the vote in protest. In Washington, the Treasury said the project was incompatible with the bank’s “commitment to be a leader in climate change.”
Karen Orenstein, a spokeswoman for the environmental group Friends of the Earth, was more blunt: “The World Bank is far more adept at causing climate change than mitigating or responding to it.”
For its part, the bank says that it has had an “unprecedented demand” for loans for renewable energy and energy efficiency and that it has responded by appointing its first clean energy chief, Daniel M. Kammen, an energy policy expert at the University of California, Berkeley. In an interview, Mr. Kammen, who was appointed last month, acknowledged that the World Bank had long focused on big energy projects, many based on fossil fuels, but he insisted that this was changing.
“There are a lot of things coming together now that make this a critical moment for change,” he said. “We have new technologies that are commercially competitive, new financing tools and a great deal of interest and momentum in donor countries to make this transition to an economy-based renewable energy happen.”
He said World Bank lending in fiscal 2010 was “a bit of an anomaly” because of the South African project and that the bank’s financing for renewable energy and energy efficiency has been growing at faster percentage rates than lending for fossil fuels.
The bank’s lending for renewable energy and energy efficiency projects increased by about 430 percent from fiscal 2007 to fiscal 2010, to a record $3.4 billion, according to the Bank Information Center.
Lending for fossil fuel projects posted a roughly 300 percent increase over the same period.
“We have a lot of examples already of innovative projects based on wind and solar being done,” he said. “My mandate is to identify and expand those opportunities.”
Mr. Kammen said his focus at the bank would be to help develop a broad portfolio of clean energy technologies that could be adapted to many different local situations, especially to poor rural communities in places like Africa and Central America that are not connected to power grids.
“Work I have done in rural East Africa, rural China and rural Central America has shown that smaller projects can be bundled together and that many of these smaller projects have better economics than big projects,” he said.
He noted, for example, that energy efficiency could have the greatest effect among the world’s poorest people, who may spend 30 percent of their income on energy, compared with only about 2 percent in the United States.
But he said a broad World Bank energy lending portfolio was likely to include fossil fuels for the immediate future and he rejected calls that the bank’s lending decisions be tied strictly to the amount of greenhouse gases a project would produce.
“No institution should be fixated on a single metric,” Mr. Kammen said. “Things that are expensive from a carbon point of view might have a very high social value.”
He said he hoped to develop a suite of metrics to measure not only carbon emissions but to assign values to things like the environmental and social damage produced by a particular energy system.
“We are creating a new economy that does not just look at the dollar bottom line but at a wider set of things we care about,” he said.
Environmental groups reacted to the appointment of Mr. Kammen and to the naming of Andrew Steer as the World Bank’s first climate change chief, as possible signs of a new seriousness about its environmental mandates.
But many remain skeptical.
“The World Bank is sort of moving in the right direction on climate change but not moving fast enough or deep enough,” said Jake Schmidt, international climate policy director at the National Resources Defense Council. “But the bank is a very big ship and it is not clear that these two guys paddling in the right direction will have what it takes to turn it around.”