‘Ideological mercenary’: World Bank follows in Obama’s footsteps on coal

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Michael Bastasch DCNF Managing Editor
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The World Bank announced this week that it would cap its financing of coal-fired power plants in developing countries and focus on scaling up natural gas and hydroelectric power in an effort to address global warming.

This announcement comes just weeks after President Barack Obama declared that the U.S. would cut off most funding for coal plants overseas.

“Today, I’m calling for an end to public financing for new coal plants overseas unless they deploy carbon-capture technologies, or there’s no other viable way for the poorest countries to generate electricity,” Obama said in his speech at Georgetown University.

Yet some critics dub the World Bank an “ideological mercenary” of the Obama administration.

“One might say this signals the war on coal has gone global,” Competitive Enterprise Institute senior fellow Chris Horner told The Daily Caller News Foundation. “Except, of course, the overwhelming majority of the world is building out its coal-fired capacity… So this really just reflects the Bank serving as the president’s ideological mercenary.”

The World Bank’s proposal mirrors Obama’s in that the international financing group will “only in rare circumstances” give financial support to coal power projects if they are needed to meet basic “energy needs in countries with no feasible alternatives.”

Though the World Bank has not funded a major coal project since 2010, the true test of its commitment to getting the world off coal will be its upcoming decision on whether to finance a lignite coal-fired power plant in Kosovo.

World Bank president Jim Yong Kim previously signaled that Kosovo could be an exception.

The World Coal Association’s chief executive Milton Catelin said that the World Bank’s report on financing “clearly demonstrates the challenges we face in providing electricity to the more than 1.2 billion people who currently live without it. It shows the devastating impact that a reliance on traditional fuels, such as dung, has on the 2.8 billion people worldwide who still use these fuels. Yet, the World Bank’s answer to these huge challenges is to limit funding of coal projects to ‘rare circumstances.’”

In the U.S., Obama’s plan will affect lending done by the U.S. Export-Import Bank, which gives government-backed loans to boost American exports. According to The Washington Post, “the bank has provided financing for a handful of large coal plants, including $805 million for a 4,800-megawatt plant in South Africa and $917 million for a 4,000-megawatt facility in India.”

However, even without international financing, demand for cheap energy is driving developing countries to build coal-fired power capacity.

The World Resource Institute reports that nearly 1,200 coal plants have been proposed globally, totaling more than 1.4 million megawatts of power. Most of these coal plants are being built in developing nations — 76 percent of the proposed coal-fired capacity is in India and China.

However, the Bank’s redirection to focusing more on hydropower could drum up opposition from environmentalists who oppose the power source.

“Hydropower was once considered to pose an unjustifiable social and environmental risk and it’s now perceived as suddenly justifiable by a climate change perspective, which in many ways demonstrates the co-option of the sustainability agenda to serve commercial interest,” said Thulsi Narayanasamy, director of Aid Watch.

Hydropower is necessary if the World Bank is serious about getting poor nations off of carbon-heavy fuels.

“But if [the Bank is] serious about renewables and it wants to meet the energy needs of you know, the two-thirds of people in the poorest countries who don’t have access to electricity, it clearly needs to consider large scale hydro as one of the options in the mix,” said Robin Davis, associate director of development policy at the Australian National University.

While international financing for coal is being cut, funding for renewable energy has doubled, according to the World Bank. By 2012 the Bank spent $12.5 billion in six years on renewable energy projects — which was about one-quarter of what it spent on energy financing during that same period.

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