Coal for Christmas
The World Bank is still subsidizing one of the world's dirtiest fuels.
BY PHIL RADFORD | Foreign Poicy | DECEMBER 22, 2009
(VOLKER HARTMANN/AFP/Getty Images)
I welcome Jamal Saghir's timely response to my Dec. 9 article, "Banking on Coal," despite its misrepresentation and, perhaps, misunderstanding of the World Bank's role in energy.
We commend the World Bank on an increase in renewable energy and energy efficiency lending in 2009, but one year of figures hardly points to a trend. Although the bank reduced coal lending from over $1 billion in 2008 to $226 million in 2009, this value still exceeds coal lending in2006 ($119 million) and 2007 ($140 million). Furthermore, if Saghir insists on examining the World Bank's energy lending on a year-by-year basis, then I can't help wondering how he would explain the bank's 2010 figures based on the projects that are currently being presented to the board. Significant loans for South Africa's Eskom coal power plan and several other Bank-financed coal projects currently in the pipeline will push up 2010's numbers, and the result won't be pretty.
Saghir states that renewable energy and energy efficiency financing constitutes more than 40 percent of the World Bank's 2009 energy financing. Yet while the bank deserves credit for increased funding for environmentally friendly projects, it has failed to reduce the absolute value of the funding it provides for coal. In essence, the proportion of coal to renewable energy and energy efficiency is shrinking not because actual coal lending has lessened from 2006 values but because the overall energy pot is much larger than it used to be.
The World Bank cannot claim ignorance about the dangers of its own lending portfolio. For at least half a decade, the World Bank has been aware that fossil fuel extraction is both bad for development and bad for the environment. The bank-commissioned 2004 Extractive Industries Reviewrecommended an immediate moratorium on coal lending. And yet, despite the urging of five Nobel Peace Prize laureates, the bank has yet to fully implement these findings.
Saghir also misrepresented the realities of the World Bank's efforts to "clean up inefficient, polluting old plants." Refurbishing a coal plant extends its life for an additional 20 years, marginalizing if not completely diminishing the energy-efficiency gains. One of the bank's own studies, a September 2006 progress report on the Clean Energy Investment Framework, concluded that these very sorts of high-efficiency plants "would still emit more than twice the CO2 of efficient gas-fired technologies." New and rehabilitated plants commit the planet to decades of unnecessary carbon emissions and set developing countries on a path inconsistent with goals to reduce greenhouse gas emissions.
I stand by my claim that World Bank-financed projects are a significant source of the world's greenhouse gas emissions. It is interesting that Saghir refutes this when the bank does not compute or publish emissions figures for a large majority of its projects. If anything, the estimate I cited is a conservative one, produced by a Bank Information Center employee who has produced similar greenhouse gas accounting for the Intergovernmental Panel on Climate Change and the U.S. government.
We appreciate that the bank's primary focus is fighting poverty and its recognition of the inextricable link between access to energy and economic development. Yet the World Bank is not prioritizing energy loans and grants to the poorest, low-income countries. Of the approximate $7.5 billion allocated for the World Bank's energy portfolio in fiscal year 2008, only $1.4 billion was spent on the neediest countries. While Saghir sings the praises of the Eskom and Tata Mundra projects, he neglects to mention that both are being undertaken in middle-income countries. It's also important to point out that the more than $3 billion loan under consideration for South Africa's Eskom is for a country that already derives 90 percent of its power from coal. This is hardly a move toward sustainability.
Furthermore, the World Bank's support of coal as an "interim measure" on the way to a more renewable energy future is deeply flawed. Coal-burning thermal plants cost more than twice as much to build as natural gas-based plants (it's the running costs of coal that are relatively inexpensive). If the United States is any indication, countries or companies will be unlikely to shut down new plants shy of their 50-year life span after such a heavy up-front investment. While the construction of new coal plants in the United States shows signs of winding down, getting rid of the current ones still operating is proving a political nightmare.
If cost is the concern, one only need rethink the way that coal, the supposedly cheapest energy solution, is being valued. The fossil fuel appears feasible because its full environmental and health costs are not included in its price. If the World Bank utilized greenhouse gas accounting methods that have been adopted in its other departments, such as its Carbon Finance Unit, alternative energies, not coal, would actually emerge as the cheapest option, delivering power with substantially less carbon emissions.
We appreciate the World Bank's attempts at cleaning up its energy investments, and we hope to work with the bank as it continues to shape its Energy Strategy in the coming year. For now, however, it is still quite far from being a climate-friendly bank.
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