The US and Britain are threatening to withhold support for a US$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.
US$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 US Treasury to multilateral institutions in December on coal-based power projects, which infuriated developing countries including China and India.
The guidance directs US 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.”
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 US is the only major developed nation with no legal target for cutting its own emissions.
To be fair, the administration of US President Barack Obama 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 US 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 US Treasury official said the US 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.
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