MAC: Mines and Communities

South Africa: World Bank-backed coal project roundly criticised

Published by MAC on 2011-12-05
Source: ClimateWire, statement (2011-12-02)

And by Bank's own Inspection Panel

Just as Durban's global climate conference enters its final week, an explosive new critique of a South African coal power plan, backed by the World Bank, has been released to the media.

It's the summary of a review carried out by the World Bank's independent Inspection Panel into the consequences of the Bank's US$3.75 billion support for South Africa's Eskom Investment Support Project (EISP) in 2010. See: World Bank probe of Eskom's loan

According to ClimateWire, which obtained a copy of the November review:

"The year-and-a-half-long investigation by the World Bank Inspection Panel criticized the bank for insufficiently taking health, water scarcity and the pressures on local services into account when supporting the [Eskom]4,800-megawatt Medupi power plant in South Africa's Limpopo province."

The decision "did not violate World Bank climate change policies, the panel said, partially because the World Bank does not have explicit emission targets."

However, the panel reportedly criticised the Bank for failing to take steps to mitigate Medupi's estimated 25 million metric tons of greenhouse gas emissions; pointing out that "the magnitude of emissions from Medupi far outweighs emissions avoided through project mitigation measures".

"In reviewing the Medupi loan", says ClimateWire, "the inspection panel was most critical when it came to water, finding that while bank management studied the availability of water to run the power plant, it did not dwell on what impact the use of those resources might have on others."

Water and coal mining

"The expansion of the Grootegeluk coal mine to supply Medupi will result in significant water scarcity and pollution problems, the panel found, adding, 'Management should have taken a broader look at expansion of coal mining to supply Medupi.' "

The panel's auditors also found "significant shortcomings" in the bank's assessment of air quality problems related to the power plant.

The World Bank issued a statement the same day that ClimateWire  "leaked" the panel's findings.

This defended the Bank's support for the power plant, citing its recent R1.9-billion loan towards the building of South Africa's "largest solar energy and wind power generation projects under the associated Eskom Renewables Support Project."

Officially the Bank will not even "consider" the Inspection Panel's report on the EISP for several weeks ("during the first quarter of 2012"), nor release its management response until then.

Auditors find World Bank skipped policy steps in approving huge South African coal plant

By Lisa Friedman, E&E reporter

ClimateWire

2 December 2011

The World Bank failed to follow several of its own policies when it approved a $3.75 billion loan for the South African utility Eskom to build one of the world's biggest coal plants, an independent audit obtained by ClimateWire found.

The year-and-a-half-long investigation by the World Bank Inspection Panel criticized the bank for insufficiently taking health, water scarcity and the pressures on local services into account when supporting the 4,800-megawatt Medupi power plant in South Africa's Limpopo province.

Yet the decision did not violate World Bank climate change policies, the panel said, partially because the World Bank does not have explicit emission targets. It did, however, say that it found the World Bank's steps to mitigate Medupi's estimated 25 million metric tons of greenhouse gas emissions lacking.

"The magnitude of emissions from Medupi far outweighs emissions avoided through project mitigation measures" like a rail project and energy efficiency additions, they wrote.
'Overly optimistic' view of emissions reductions

The panel also called the World Bank's statement at the time of the loan that its partnership with South Africa will, over the long term, serve to lower the country's emissions trajectory "overly optimistic ... given that Medupi will emit significant levels of GHG emissions."

The Inspection Panel report was delivered Wednesday to World Bank President Robert Zoellick, the executive board and senior management and was not officially released to the public. It comes at a particularly sensitive time, with thousands of delegates from 194 countries gathering this week and next in Durban, South Africa, for a major U.N. climate change conference.

The April 2010 decision to fund Medupi was enormously controversial both within the World Bank and internationally. Several countries, including the United States, withheld support when the loan came before the bank board for a vote -- yet the abstentions did not block the loan.

In the months since, the World Bank has attempted to codify new rules surrounding coal loans. It developed an energy policy that restricts such loans to middle-income countries, but the blueprint has been essentially shelved in response to opposition from China, India, Brazil and others (ClimateWire, Nov. 18).

In reviewing the Medupi loan, the inspection panel was most critical when it came to water, finding that while bank management studied the availability of water to run the power plant, it did not dwell on what impact the use of those resources might have on others.

The expansion of the Grootegeluk coal mine to supply Medupi will result in significant water scarcity and pollution problems, the panel found, adding, "Management should have taken a broader look at expansion of coal mining to supply Medupi." Auditors also found "significant shortcomings" in the bank's assessment of air quality problems related to the plant.


Background on the World Bank Inspection Panel's Review of the Eskom Investment Support Project

World Bank

2 December 2011

WASHINGTON -The World Bank's Inspection Panel has completed its review of the Eskom Investment Support Project (EISP) and submitted it to the Bank's Board of Executive Directors and Management on November 22, 2011.

Consistent with the provisions governing the Inspection Panel process, Bank Management is now carefully reviewing the findings of this report and will prepare a detailed response to the issues raised, at which time we will be better able to provide further comment.

It is anticipated that the Board will consider both the Panel's Report and Management's Response during the first quarter of 2012. Both reports will be released to the public after Board consideration, along with a press release that summarizes the outcome of the Board meeting.

Why the Bank is supporting Eskom: South Africa is Africa's largest economy and, at the time when the EISP was approved by the Board in April 2010, was in the throes of its first recession. This was triggered in part by the global downturn and the severe energy crisis of 2008-2009 that had shuttered mines, closed factories, and led to job losses.

The risk was real that absent an increase in generation capacity, a protracted energy crisis would prolong the recession, threaten recovery and impede plans to increase energy access for all South Africans. It would also impact neighboring countries as Eskom widely exports energy to the southern Africa region.

The development objective of EISP is to enhance power supply and energy security in an efficient and sustainable manner to support economic growth and accelerate South Africa's long-term carbon mitigation strategy, which pursues a mix of emission reduction, efficiency improvements, renewables, and clean coal technologies.

Bank support to Eskom covers US$3.75 billion for investments in thermal, wind and solar energy generation. This includes funding to support the completion of the Medupi Thermal Power Plant, to the northwest of Pretoria, which was already under construction when the Bank was requested to consider providing funding to Eskom.

As part of this program, on November 14, Eskom signed a R1.9-billion loan from the Bank to finance the building of South Africa's largest solar energy and wind power generation projects under the associated Eskom Renewables Support Project. The 40-year loan will help finance the building of a 100 megawatt solar power plant near Upington and the 100 megawatt Sere wind farm near Vredendal in the Western Cape.

The EISP is governed by the Bank's Policy on the Use of Country Systems for environmental and social safeguard policies, where the Bank uses project-relevant national, sub-national and corporate standards provided that those are equivalent in their coverage and acceptable in their implementation to the provisions of the World Bank's own safeguard policies. The World Bank has world-class safeguards to protect the environment and communities.

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