Why Does the World Bank Keep on Funding Climate Change?

As activists in industrialized countries work tirelessly to eliminate coal plants and other major contributors to climate change, they risk seeing their work undone by new fossil fuel projects in the developing world. The temptation for developing nations to turn to cheap coal and oil for fuel makes it all the more important for countries like the US to lead by example and replace their own dirty power plants with clean energy—but projects in the developing world like the Kusile and Medupi Coal Plants in South Africa should raise concerns for people all over the planet. And that fact that the World Bank is using taxpayer money to fund many of these projects rightly has many global citizens seeing red.

For years the World Bank has funded energy projects that cause environmental degradation in developing countries. Recently the institution’s support for coal plants and other large polluters has drawn criticism in the US and Europe thanks to increased concerns about climate change. Yet the World Bank has gone ahead and approved funding for many of these controversial projects. The justification? The World Bank maintains that while addressing climate change is important, it has a duty to help the world’s poor gain access to cheap electricity.

This argument might prove persuasive if it could be demonstrated that coal and oil projects actually help the poor. But in fact a repot by Oil Change International—and the World Bank’s own analyses—clearly show fossil fuel projects funded by the bank have done little or nothing to improve energy access for the poor. According to Oil Change International, the main beneficiaries of such projects have been big business and heavy industry, not poor communities struggling to obtain access to energy.

The World Bank’s own studies do not contradict this view: in fact the World Bank Group was unable to find a single recent coal or oil project that helped decrease energy poverty. The story of the Medupi Coal Plant serves as a good case study to show who actually benefits from large fossil fuel projects. This 4,800 megawatt coal plant, which the World Bank voted to fund last spring, was designed mainly to provide electricity for South Africa’s energy-guzzling mining industry. The expense of building the plant will actually mean electricity rates triple for nearby communities, and the project was strongly opposed by local South Africans.

Yet mainstream media accounts continued to quote World Bank supporters claiming such projects are necessary to help the poor. In the context of the Medupi case, such assertions aren’t just wrong, they’re nonsensical. The Medupi Plant will hurt South Africa’s poor more than it will help them, and meanwhile poor communities are poised to suffer disproportionately from the coming effects of climate change.

So what’s to be done? First of all, the mainstream media should stop portraying funding for fossil fuel projects as a necessary evil that benefits the poor. Second, the World Bank should follow Oil Change International’s recommendation and put an immediate hold on funding for coal and oil projects that don’t clearly improve access to energy. Third, the World Bank should shift from funding construction of centralized power plants that mainly serve the needs of big business, to supporting smaller scale renewable energy that directly serves the needs of the poor. For far too long, the World Bank has funded the worst contributors to climate change without demonstrating any real benefit for local communities. It’s time to turn over a new leaf in this international lending institution’s dirty and carbon-intensive history.

Photo credit: Xstrata
Nick Engelfried is a freelance writer on climate and energy issues, and works with campuses and communities in the Pacific Northwest to reduce the causes of climate change.