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April 22, 2011

U.S. Gives South Africa Coal for Earth Day

An Open Letter on U.S. Support for New Coal Plants in Africa, from Mary Anne Hitt, Director of the Sierra Club Beyond Coal Campaign, and Bobby Peak, Director of groundWork South Africa.

Dear Export Import Bank President Fred Hochberg,

As Earth Day approaches we write to express our shock and disappointment at the Export Import Bank's (Ex-Im Bank) continued support for one of the most destructive and polluting sources of energy on earth - coal. The agency's continued support for whatever colossal coal fired power projects happen to come its way demonstrates that it is incapable of utilizing its resources in a way that moves the world towards a 21st century economy, creates new clean energy jobs, or benefits the planet.

The Ex-Im Bank's blatant disregard for our planet is exemplified by its fossil fuel binge, which has lead to skyrocketing levels of pollution. This binge now includes support for the largest carbon emitting project in the agency's history, the 4,800-megwatt Kusile coal-fired power plant in South Africa. A plant that you, and the rest of the Ex-Im Bank board, voted to finance last week.

Ex-Im Bank's actions not only tar Earth Day and the agency's own image, they also increasingly undermine our country's international standing. As a result of Ex-Im Bank's decision, civil society in South Africa and around the world now question the position of the U.S. administration when it comes to clean energy.

On one side the U.S. administration has recognized that coal is a fuel of the past that has no place in the financing plans of the United States – either at home or abroad. This stance was made clear by the U.S. Executive Director to the World Bank's abstention from voting for another colossal coal fired power plant in South Africa – the highly controversial Medupi plant. The World Bank eventually approved financing for the plant, bringing a firestorm of criticism down upon the institution.

Yet just a year later, the U.S. Ex-Im Bank has now approved financing for Kusile – a plant the exact same size as Medupi in the exact same country. The contradictory message this decision sends to the international community is devastating for the U.S. administration’s credibility.

As if that weren't enough, the timing of the decision demonstrates just how out of sync this agency is with the rest of the administration; The same day the Ex-Im Bank approved Kusile, the Tennessee Valley Authority (TVA) announced historic plans to retire 2,700-megawatts of dirty coal power. This was a monumental decision your agency was able to cancel out in one fell swoop by supporting a project that clearly violated the environmental, social, and climate standards of your institution.

Even the arguments for the project don't pass the laugh test. It is rumored that Ex-Im Bank's $805 million loan for Kusile will support a mere 100 jobs over five years. That works out to about $1.6 million per job per year. So at a time when the U.S. Congress is making painful spending cuts, Ex-Im is spending millions of dollars to create a handful of jobs. It's not quite the bang for our buck that U.S. taxpayers are looking for. In fact this egregious use of public funds contributes to the loss of an enormous opportunity to create new clean energy jobs and position the U.S. as a leader in clean technology markets worldwide.

While we deplore the effects of such a decision on U.S. leadership regarding climate disruption, it is the decades of toxic pollution and economic injustice that you have ensured for local South Africans that truly tarnishes the reputation of the administration and its climate negotiators. To read the full list of deplorable effects of this project for ordinary South Africans read our fact sheet.

For instance, the project's own environmental impact assessment (EIA) - the one Ex-Im Bank staff decided fully complies with its standards - states that sulphur dioxide (SO2) pollution from existing sources were six times over hourly SO2 limits prior to construction. According to the project EIA "Impacts on human health as a result of the additional emissions of SO2 are therefore deemed to have a high significance."

Most importantly for South Africa's poor, this project will increase the rates average South Africans pay for electricity by 25%, a rate increase that large industrial users are not forced to bear due to special pricing agreements. 

By its own admission Ex-Im Bank did not consider these impacts in its financial review of the project. The fact is this price increase will likely lead to substantial increases in the number of South Africa's poor who are unable to pay for electricity, as it comes on top of already substantial rate increases to pay for other coal plants currently under construction.

In essence, Ex-Im Bank financing is forcing poor South Africans off the grid – the exact opposite goal of increasing energy access for the poor, which the U.S. Administration firmly supports.

What's more, Ex-Im financing now supports Eskom, the South African utility, which has publicly stated it has no intention of helping put the country on a low carbon path. However, in order to lend for high carbon intensity projects like Kusile, Ex Im Bank's own policies require that the South African government have a plan to move towards low carbon growth. Instead, South Africa will seek to double its carbon emissions by 2025, and by 2030 renewables will only make up 9% of South Africa's energy mix. 

Just as the Ex-Im Bank's timing on the Kusile decision was out of sync with other areas of the administration working to retire and clean up TVA coal plants, it now seems its actions are undermining U.S. climate negotiators.

This December U.S. State Department negotiators will arrive in Durban, South Africa, with a second round of "fast-start finance" pledges to help steer investments towards clean energy. These investments are a precursor to the Green Climate Fund which will eventually steer $100 billion annually to spur low carbon growth in the developing world. Now however, U.S. negotiators must explain how its own climate finance pledges have been dwarfed by a single disastrous decision that Ex-Im Bank has made.

U.S. negotiators, along with the administration, must now sort through the damage Ex-Im Bank has done to the reputation of the United States on the global stage. Indeed global civil society groups led by groundWork South Africa will hold a "dirty energy gathering" in Durban to highlight administrative, corporate and global institutional hypocrisy on climate disruption and support for coal. With the Kusile decision, it's now clear that Ex-Im Bank's role in financing coal will be front and center.

In order to clean up its image as a basket case of an agency, and erase the black stain it has put on U.S. climate negotiators, it is clear Ex-Im Bank must make a clear break from its fossil fuel binge, and once and for all end its financial support for coal.

Sincerely,

Mary Anne Hitt, Director of the Sierra Club Beyond Coal Campaign

Bobby Peak, Director of groundWork South Africa

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