9 April 2010: A woeful World Bank decision

We try to be optimistic and positive at Climate Answers; to emphasise what we support rather than what we oppose. However, that doesn’t mean that there aren’t things to oppose and condemn, and yesterday’s decision by the World Bank to give a $3.75 billion loan for a coal power station in South Africa is certainly one of them. This will enable Eskom, the South African state-owned energy company, to build a 4.8Gw new coal plant at Medupi, in Limpopo province, with none of the carbon being captured.

Eskom and the projects supporters, including the World Bank, have described the plant as “clean coal”.  Coal will never be entirely clean. There will always be some carbon emissions and other pollutants, but a coal station with CCS is much cleaner than a station without. Medupi won’t have CCS. Eskom calls it clean because it is more efficient than old coal stations, using super-critical technology which generates more electricity from each tonne of coal burnt. So yes, it is cleaner than filthy old stations, but it is still pretty filthy. Medupi will also be ‘carbon capture ready’, meaning that CCS can be retrofitted to it sometime in the future. This essentially means no more than leaving an empty bit of land somewhere near the power station on which CCS technology could be constructed.

Eskom argues that South Africa needs more generating capacity. There were severe electricity shortages, and some blackouts, in the first half of 2008. One of the ANC’s achievements is that most South Africans now get electricity from the grid, but this is not why South Africa is short of electricity. The main reason is that industry, including energy-intensive industry, gets electricity at below cost-price because of multi-decade ‘special purchase agreements’ offered to them during the apartheid era (see Ground Work: South Africans say no to Eskom’s R29 billion World Bank loan). Eskom tried to get money to construct Medupi and another large coal station by increasing electricity tariffs by 35%. The state regulator would only allow a 25% increase, which is why Eskom asked the World Bank for a loan. A 25% tariff increase will still be very damaging for domestic consumers, while industrial electricity prices won’t increase.

The sensible way forward for South Africa is to provide cheap electricity for domestic consumers, abandon the special purchase agreements and embark on extensive demand side management programmes to get industry using electricity more efficiently. And, at the same time, it should harness more of its very extensive renewable resources. Eskom states proudly that some of the money that it will get from the World Bank will go on wind and concentrated solar power. Its total loan will be $3.75 billion: $260 million will go on renewables and £3 billion on the coal station. The other $490 million will go on ‘power plant efficiency improvements’ and schemes to transport the coal by rail rather than road. Rail is better than road, but it is still coal. So, 93% of the money is for coal and just 7% for renewables.

Three governments – the US, Netherlands and the UK – abstained on the vote at the World Bank (apparently it’s not the done thing actually to vote against anything; abstention means opposition). They should be commended. Other governments, including ones claiming to be serious about controlling climate change, voted in favour. They should be ashamed of themselves.

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1 Comment

  1. Some specialists state that aid people to live the way they want, just because they can feel free to buy necessary goods. Furthermore, banks present collateral loan for young and old people.

    Stephen Tindale writes: “Low-interest loans are not ideal for everything – sometimes they enable/encourage people to buy an unnecessary car or fly on holiday, and sometimes lead to people falling into serious debt problems. But low-interest loans for energy efficiency improvement are sensible and necessary. It’s true that this will often not lead to as much carbon reduction as expected, because some of the benefit will be through increased warmth and comfort, not lower bills. It will also enable the people living in more efficient homes to spend more on other things, which will generally have their own carbon footprint. But that doesn’t remove the justification for low-interest energy efficiency loans.”

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