Britain has key vote on World Bank loan to Medupi coal power station - three times larger than UK’s Drax

1/4/2010 Guardian South Africa’s proposed Medupi coal-fired power station, which requires a huge $3.7bn World Bank loan on which Britain may have the casting vote, would be three times bigger than the UK’s Drax power station.Britain is likely to cast the deciding vote on whether the World Bank lends South Africa $3.7bn (£2.4bn) to build one of the largest coal-fired power stations in the world. The state-owned Medupi station would be three times the size of Britain’s biggest, at Drax in Yorkshire, but would emit 25m tonnes of CO2 a year – more than 115 other countries including Kenya, Luxembourg, Burma and Croatia.

The decision on what would be one of the biggest bank loans ever made will be taken next Thursday at a World Bank board meeting in Washington. It places Gordon Brown and the UK government in an intensely difficult situation because Britain has led international attempts to persuade South Africa and other rapidly-industrialising countries to take action on climate change. At the same time the government has strongly backed South African industry which has been hit by major power shortages in the last two years.

Britain, the bank’s biggest donor and one of its largest five shareholders, is likely to cast the deciding votes on the loan following President Obama’s new guidelines to diplomats to approve coal plants only if the World Bank is unable to secure additional funding to pay for a lower-carbon option. It is thought that under the guidelines, the US will abstain in Thursday’s vote.

A spokesperson for the UK’s Department for International Development (DFID) said, “We haven’t made the decision yet. It’s very difficult. We have been in negotiations with the bank for some time. We are well aware of the implications of voting either way, and of both sides’ arguments.”

Pro- and anti-Medupi lobbyists this week argued fiercely over the merits of the station, which is planned for Limpopo and will be among the 10 largest in the world. South Africa’s public enterprises minister Barbara Hogan warned that the country’s economy depends on having a secure supply of electricity. “If we do not have that power in our system, then we can say goodbye to our economy and to our country. This is how serious this thing is. The construction of Medupi … is necessary so that we do not derail the country’s economic growth and development”, she said.

She was backed by Jamal Saghir, the World Bank’s director of energy, transport and water. “We cannot afford to see the South African power sector in crisis,” he said in an interview. If the loan is turned down, he said, there would be a “major backlash” for the economy not just South Africa but the entire region.

But opponents in South Africa and Britain have argued that little of the 4,800MW of electricity which the state-owned power company Eskom plans to generate from Medupi will go to ordinary South Africans, but to large foreign-owned companies in the region who dominate the aluminium and mining industries.

“This loan will put South Africa deep into debt, damage the environment and drive the climate impacts already affecting poor South Africans. It is not electricity for the millions of people who live in deep rural areas who still have no electricity. It’s for big industry which uses more than 80% of South African electricity,” said Bobby Peek, director of Groundwork Friends of the Earth. It argues that the power station will amplify South Africa’s climate and poverty crises.

A coalition of more than 100 grassroots organisations, including churches, community groups, conservationists and metal-workers today condemned the loan, saying it is “financing a bad project, contributing to energy poverty and environmental destruction”.

“This is a massive amount of international public finance going to the dirtiest form of energy in a highly unequal society without strong indications that it will have any positive impact on energy access for the poorest. Much of the increased energy provision will go to big, mostly foreign-owned industry which benefits from beneficial electricity pricing agreements”, said Eliot Whittington, an adviser with Christian Aid.

The World Bank has been heavily criticised in the past for funding some of the most environmentally destructive projects. It now calls itself the “climate bank” because it seeks to distribute global climate change funds, but analysis by the Bank Information Centre – an NGO that advocates social justice and ecological sustainability in funding from financial institutions – shows that it loans nearly 10 times as much to fossil fuel projects than renewables.

There are no firm plans to implement carbon capture and storage on the new plant, although Eskom is “considering” the option for new stations, according to Hogan. She said that CCS would not be commercially viable until around 2030.

“It’s time for Gordon Brown to pull the plug and invest money in the clean energy development South Africa needs,” said John Sauven, director of Greenpeace.
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