New reports question World Bank’s coal investments

18 November 2011

As the November climate talks in South Africa approach, the World Bank continues to be overshadowed by past and prospective loans for fossil-fuel power plants.

An October report by the Kosovar Institute for Policy Research and Development (KIPRED) and US NGO Sierra Club has sharply criticised the Bank’s cost projections for a proposed lignite-fired power plant outside the Kosovan capital Pristina, which the Bank is considering funding (see Update 77, 75). The Bank’s cost estimates are “clearly out of date”, the report charges, “significantly different from figures provided by neutral government agencies and business entities for similar projects in the region and… demonstrably incorrect.” The report concludes, “it is reasonable to assume that the cost of electricity under the proposed plan might be three times higher.” KIPRED’s Nezir Sinani said: “The proposed plant is supposed to light up the Kosovan economy, but will actually be a huge burden. Sold on bogus figures, it will harm citizens’ health and push up their bills.” The report also accuses the Bank of failing to consider alternatives in the form of wind, hydropower or thermal schemes, contravening its own Strategic Framework on Development and Climate Change (see Update 77, 71). This point was echoed by a coalition of NGOs, including the KIPRED and Development and International Crisis Group, in a September letter to the European Commission, which also blames “inaccurate categorisation” by the Bank for a lack of “attention… to assessing the environmental effects” from the outset.

Meanwhile, the Bank has approved $250 million for renewable energy projects in South Africa, due to host the Durban climate talks, part of a widely-criticised $3.75 billion loan mainly targeted to the country‘s Medupi coal-fired plant (see Update 70). The approval comes more than 18 months after the funds, representing just 7 per cent of the larger loan, were first earmarked.

clearly out of date

As the November G20 Cannes declaration affirmed a commitment to “promote low-carbon development strategies”, a report the same month by UK NGO Christian Aid identifies problems with the economies of sub-Saharan states such as South Africa, whose “growth path is bent on fossil-fuel dependence with minimal targets toward renewable energy” despite it being “widely accepted that South Africa has among the highest solar power potential in the world.”

The Bank’s energy strategy, meanwhile, is still in limbo (see Update 76, 75), after a Bank board sub-group split in April over its proposed phase-out of coal lending to middle-income countries (MICs). The Bank has not indicated any timetable for completion of the strategy. A delegation of Indian activists visited Washington in September to lobby the Bank and IMF at their annual meetings, urging them to follow through on the draft proposal. The activists represent communities fighting a wave of coal-fired developments in India. Long-term impacts of past Bank coal funding in the Singrauli district of northern India are the focus of a November report by UK NGO the Bretton Woods Project, No fairy tale, which documents “environmental squalor” and “massive displacement of local people.”

Figures released in October by US think tank the Brookings Institution back up the proposed phase-out of Bank coal lending to MICs, pointing out that the rate of return on coal-fired projects means finance is readily available from the private sector. Meanwhile, an October report by US consulting firm Climate Advisors finds that coal funding “burdens recipient countries and the poor. The World Bank should redirect its funding to cleaner generation sources.” In November, US-based NGO Oil Change International launched an online “Shift the Subsidies” database, detailing energy sector lending amongst multilateral development banks since 2008.