World Bank fuelling dirty energy

Wednesday, 17 March, 2010

In solidarity with campaigners in South Africa, WDM has joined a call to the UK government to say no to a World Bank proposal to provide a $3.75 billion loan to South African energy giant Eskom. The project, which Eskom want to use as an excuse to raise rates for people living in South Africa, would increase energy poverty and cause environmental destruction that would hit the poorest people in South Africa hardest.

The project would also increase debt for South Africa which would fall most heavily on the poorest people. Furthermore, the proposal highlights why it is completely hypocritical for the World Bank to be involved in administering funds provided to help tackle climate change. 

WDM are calling for the UK, which is the biggest single donor to the World Bank, to vote against this loan. Below you can read our joint letter asking that Douglas Alexander votes against World Bank funds going towards Eskom’s venture.

Read more about the campaign in South Africa

Dear Secretary of State

Re: Proposed World Bank loan to Eskom, South Africa

We are writing to urge that the UK vote against the proposed $3.75 billion loan to Eskom for the Medupi coal-fired power plant in South Africa when it comes before the World Bank executive board. We enclose a letter sent to all Executive Directors by a South African civil society coalition campaigning against the loan.

Eskom’s proposal is not in the interests of poor communities in South Africa, and approving the loan will undermine both them and the global fight against climate change. While there is significant energy poverty in South Africa this project is not focussed on meeting the needs of poor communities but instead on supplying energy to major energy-intensive industrial users that already have access to some of the cheapest electricity in the world. Those users would be exempted from price increases to meet the costs of this loan by existing power purchase agreements – leaving a disproportionate burden to fall on domestic households. The Medupi
station and the coal mines that would be opened to feed it would also have significant impact on the health, land, air and water of local communities.

The proposed Medupi plant would emit an estimated 25 million tonnes of CO2 per annum for decades to come. Furthermore, support for Eskom’s overall expansion would nearly double the South African power sector’s carbon emissions and put South Africa firmly on a higher carbon development path. This would severely limit any likelihood that the Bank might meet the clean energy targets set out in last year’s DFID White Paper and would run counter to any suggestions that the World Bank should administer climate finance, as well as setting a bad precedent for the ongoing energy strategy review.

This loan if approved would also represent a major increase in South Africa’s dollar
denominated debt – exposing the country to significant debt problems in the event of a currency crash, something which has happened five times since 1996.

Finally, there are serious questions about the lack of due diligence carried out by the Bank when evaluating this proposal, including a failure to properly estimate the social and health costs of the project or to fully examine other options. For example the World Bank’s ‘Expert Panel’ report raised a number of serious concerns about the environmental impacts of this project which do not appear to have been dealt with. 

We would welcome the chance to meet with you, before the loan is approved so we can discuss our objections before you make your decision. We look forward to hearing from you.

Yours sincerely,

Asad Rehman, Head of International Climate, Friends of the Earth
Charlie Kronick, Chief Climate Advisor, Greenpeace
Deborah Doane, Director, World Development Movement
Ian Leggett, Director, People and Planet
James Picardo, Campaign Director, Jubilee Scotland
Jesse Griffiths, Coordinator, Bretton Woods Project
Nick Dearden, Director, Jubilee Debt Campaign
Paul Brannen, Head of Advocacy and Influence, Christian Aid

cc: Susanna Moorehead, Executive Director, United Kingdom, World Bank