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September 26, 2013

Is the World Bank Serious About Ending Finance for Dangerous Coal Projects?

SmogStarting with President Obama's announcement of an end to overseas coal financing in his Climate Action Plan, and quickly followed by new energy strategies at the World Bank and European Investment Bank that also reject coal, large international financial institutions are finally wising up to the fact that coal is a financially risky investment that causes massive suffering in local communities while doing little to alleviate energy poverty. But investigations by our partners at Oil Change International reveal that the World Bank continues to fund development policy loans and financial intermediaries that then use the money to fund coal projects, a clear violation of the coal ban that must end now or risk calling into question World Bank President Dr. Jim Yong Kim's commitment to protect public health and fight climate disruption.

So how exactly does this work? In their report, Oil Change International shows how the World Bank Group’s International Finance Corporation (IFC) created and financially backed the Indonesia Infrastructure Guarantee Fund, which then provided a $33.9 million guarantee for the Central Java coal-fired power station, for which the IFC served as a transitional advisor. In what Oil Change calls a "coal industry wish list," the World Bank's infrastructure program in Indonesia includes policies and government subsidies to promote over 40 coal projects, promoting dirty and deadly coal over renewable alternatives.

The danger posed by massive coal-fired power plants like Central Java cannot be understated. More than 7,000 local residents are strongly opposed to the project, and they have successfully stalled the $4 billion project by refusing to sell their land over the environmental impact of the plant. This is a story we've seen repeated time and time again across the globe, as local communities band together to save their land, their water, and their health from deadly coal.

The truth is that coal-fired power does little to reduce energy poverty. While industry likes to claim coal can provide power to those without access, the truth is that local communities are forced to contend with all of the devastating effects while transmission lines carry the energy to industries that can afford to pay more for electricity. In fact, the International Energy Agency found that over half of energy services must be provided by clean, off-grid renewables if we are ever going to reach 100 percent energy access.

Programs like the Indonesia Infrastructure Guarantee Fund provide a backdoor to funnel money towards dirty coal projects and undermine both the World Bank's energy strategy and President Obama's Climate Action Plan. As the Bank's largest shareholder, the U.S. has an obligation to oppose these loopholes, and as a longtime public health advocate, Dr. Kim must recognize the danger posed by coal and support local communities striving for safer alternatives. But there is good news. Project finance for Central Java will not go forward until October 6, which means the World Bank still has one week to reverse course and stop this deadly project.

-- Nicole Ghio, Sierra Club International and Trade Representative


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