The World Bank's Coal Electricity Headache

It has been widely reviewed, reported, and vociferously condemned that the World Bank Group (WBG) is investing heavily in coal. In South Africa, Botswana and India, the Bank has issued over $4 billion in loans for new coal-fired power plants since 2008. As a result, the Bank’s brand name is now tied to more than a billion tons of CO2 emissions over the next four to five decades.

Since energy use and economic development are inter-linked, coal may be a necessary step in equalizing development opportunities for the poorest. Demonstrating that supercritical coal technology is a genuine cleaner option and provides energy access to poor people would be worthy of global congratulations. But can the Bank do it? So far, the outlook is not good.

The Bank has repeatedly justified its coal-fired power plant investments as (1) cleaner than old coal, and (2) vital to improving access for the poor. Our findings contradict both these claims. Empirical evidence of cleaner technology credentials is hard to come by for the supercritical power plants touted by the WBG; 40-year-old plants frequently outperform their new, highly-promoted counterparts. We also show that stipulations for power plant investments in Botswana, India, and South Africa are inadequate for ensuring electricity access to the poor.

Given the significance of these findings, we encourage the WBG to disprove our analysis by adopting a rigorous monitoring plan to track and publicly report the CO2 emissions and energy access gains from its investments. This kind of transparency will be consistent with the recently adopted open-data principle at the World Bank and will further help the bankers prove that their investments live up to expectations.

Coal plant investments have put the WBG between a rock and a hard place. The tradeoff between reduction in energy poverty and CO2 emissions became a major dilemma for the WBG during its energy strategy consultation: coal is cheap and poor countries will naturally continue investing in this carbon-intense power source. The WBG has felt compelled to contribute, but its own technocrats recommend that the Bank restrict future investments in coal plants to the point of near embargo—the exceptional case doctrine. Our analysis bolsters that recommendation. However, for the sake of credibility the Bank must provide a very clear and unambiguous definition for “exceptional,” even if prominent member countries balk at such measures of clarity.

Authors:

Shakeb Afsah and Kendyl Salcito