World Bank Lends Record Amount for Renewable Energy… But also for Coal

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The World Bank’s lending for renewable energy and energy efficiency projects increased by 300 percent between fiscal year 2007 and fiscal year 2010, to a record $3.4 billion.  But over that same period, lending to fossil fuel projects also jumped 430 percent.

Recent loans for coal-fired power plants is evidence to the fact that the World Bank is still in the business of loaning money for massive construction projects with the most favorable cost-benefit ratio — with benefits measured almost entirely in terms of economic benefits.

“[The World Bank] is constantly stalling on one very important policy: calculating the greenhouse-gas emissions produced by its own projects,” said Janet Redman, co-director of the Sustainable Energy and Economy Network at the Institute for Policy Studies. “In its actions, the World Bank has deviated from its rhetoric,” Redman said.

World Bank loans for fossil fuel projects topped $6.3 billion in the fiscal year ending in June, $4.4 billion of which was for the construction of new coal-fired power plants, according to the Bank Information Center, a Washington-based watchdog group.

One project in particular, the 4,800-megawatt Medupi Station in South Africa and will emit about 26 million tons of carbon dioxide annually until roughly 2050. Together with another World Bank project, India’s Tata Ultra Mega plant, set to go online in 2012, the two projects will emit 50 million tons of carbon dioxide annually — roughly equivalent to the carbon emissions of the country of Ireland.

But World Bank officials say 2010 was an unusual year for the bank in terms of loans for fossil fuel projects because in previous years, spending for renewables had outpaced traditional coal-fired generation.

And heavy criticism for the $3.75 billion loan for the South African Medupi Station — criticism that included a protest from the United States, Britain, the Netherlands and Italy in the form of abstaining to vote on the approval of the loan — has led the World Bank to take steps to present the institution as pro-renewables, including the hiring of an internationally-renowned clean energy expert to help shape strategy.

In September, the World Bank announced that Daniel Kammen of the University of California, Berkeley would be the bank’s first chief technical specialist for renewable energy and energy efficiency. Kammen is as serious as anyone about developing clean technologies of the future, but he’s also a pragmatist.

Kammen says project worthiness should not be measured by carbon emissions alone and that a broad World Bank energy lending portfolio would likely include fossil fuels for the immediate future. “No institution should be fixated on a single metric,” Prof. Kammen recently told The New York Times. “Things that are expensive from a carbon point of view might have a very high social value,” he said.

But a recent internal audit by the Independent Evaluation Group says the World Bank is not sufficiently weighing the long term impacts of energy projects.

The World Bank “and the world at large need to learn faster what works and what doesn’t and focus on results, not just dollars committed,” Kenneth Chomitz, the report’s author, said in a press release.

The independent evaluation recommended the bank help clients “find domestically preferable alternatives to coal power,” saying coal “should be a last resort.”

The bank is currently conducting an energy strategy review in 2010 in hopes of reconciling its mandate of alleviating poverty with the problems and environmental costs associated with traditional coal-fired power projects.

As that process goes forward, World Bank officials say there are currently no plans on the books to finance a new coal-fired power plant.

Article by Timothy B. Hurst, appearing courtesy Celsias.

About Author

Walter’s contributions to CleanTechies over the past 4 years have been instrumental in growing the publications social media channels via his ongoing editorial and data driven strategies. He is the founder and managing director of Sunflower Tax, a renewable energy tax and finance consultancy based in San Diego, California. Active in the San Diego clean technology community, participating in events sponsored by CleanTech San Diego, EcoTopics, and Cleantech Open San Diego, Walter has also been a presenter at numerous California Center for Sustainability (CCSE) programs. He currently serves as an adjunct professor at the University of San Diego School of Law where he teaches a course on energy taxation and policy.