World Bank Would Restrain Finance for Coal Power in Energy Strategy Draft

The World Bank is considering limiting its financing of coal-fired power plants to the poorest countries as part of a new energy strategy, a draft prepared for the board of directors shows.

Staff at the Washington-based lender have made proposals seeking to reconcile the need for broader energy access in developing economies with the challenges of climate change. They also stressed the “tremendous potential” for developing hydroelectric power in the document dated March 16, a copy of which was obtained by Bloomberg.

World Bank President Robert Zoellick last year urged countries to move away from “the binary choice of either power or environment” after the institution was criticized for approving a $3.75 billion loan to help South Africa’s state- owned electricity supplier build one of the world’s largest coal-fired plants.

“An estimated 1.4 billion people live without electricity, and many in developing countries are faced with recurrent power outages,” the report said. The strategy focuses on how the World Bank “can make a significant contribution to the global goals of reducing energy poverty and achieving sustainable development.”

Under the proposals, the bank could only support new coal power projects for countries that get all of their funding at the institution from the International Development Association, the arm that lends to the poorest countries. This suggests that countries like India and Vietnam, which don’t get loans only from IDA, would not be eligible.

‘Good First Step’

Steve Kretzmann, a spokesman for the non-profit organization Oil Change International, who has seen the report, said in a telephone interview that the proposed move on coal was a “very good first step.”

At the same time “if their two priorities are energy poverty reduction and low-carbon energy, fossil fuels should entirely be phased out, not just coal but oil and gas as well,” he said.

Under the proposals, the bank would support natural gas “where its lower emissions potential can be realized.”

Roger Morier, a spokesman for the bank, confirmed that the management had submitted a proposed strategy to the relevant committee of the board of directors, which will discuss it next month. It will then be posted on line for a round of public consultation and submitted to the board for endorsement early in the U.S. summer.

Protecting Rivers

International Rivers, a Berkeley, California-based nonprofit group that aims to protect rivers and human rights, said it’s concerned that the report’s call for more hydropower will result in the support for large dams.

Such dams are a “risky and inappropriate solution for the problems of climate change,” Zachary Hurwitz, a policy coordinator at the organization, said in a statement. “The World Bank should stay ahead of the curve and support market- ready renewable technologies, such as wind and non-dam kinetic hydropower projects, rather than the large dams of the past.”

To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net