The United States will abstain today when the World Bank directors vote to loan South Africa $3.75 billion for a coal-fired power plant, sources told ClimateWire.
The loan decision is among the most controversial in recent history, and environmental activists have leaned hard on the Obama administration to oppose it. They argue the United States must stand behind a recent guideline discouraging U.S. board members of multilateral banks from approving coal plant loans because of the impacts of climate change. The 4,800-megawatt Medupi power plant would emit 25 million tons of carbon dioxide into the atmosphere.
Yet South Africa also has been leaning hard on the administration and Congress, arguing the loan to the country's state-owned utility Eskom Holdings Ltd. is critical to the national economy. The power plant is South Africa's first in more than 15 years.
U.S. Treasury spokeswoman Natalie Wyeth declined to discuss the U.S. position yesterday. She said in an e-mail that Treasury "is not in a position to comment on its potential vote" before the board meeting.
But, she added, "given the concerns raised about the project, the United States has been encouraging the World Bank and the South African government to address issues related to the environmental soundness of the project and enhance its developmental impact."
Yet several sources say the United States plans to abstain, which will allow the Obama administration to put its objections on the record while still allowing the project to move forward. An abstention also eliminates the diplomatic tension that might have occurred had America actively tried to block the loan.
One person close to the negotiations said Treasury will base its vote on five main objections: that the loan is incompatible with the administration's new coal lending guidelines; that there is an asymmetry between the amount of dirty fuel to be used at the new plant and the level of renewable or clean energy development; concerns with procurement guidelines; and South Africa's local sulfur dioxide pollution control policy, which the United States considers weak.
Finally, the United States will argue that its hands are tied by a 1989 law known in Congress as the Pelosi Amendment, which prevents America's World Bank directors from voting for any loan unless an environmental assessment has been conducted at least 120 days before the vote.
In return, the source said, the United States won a number of concessions from South Africa as well as the World Bank.
Among them, South Africa will commit to decommissioning old power plants more rapidly and to incorporating carbon capture and storage technology into any new plants. South African leaders also will promise to explore "reducing policy barriers" to private investment in clean energy technology.
Meanwhile, country is revising its partnership strategy with the World Bank to include a $1.25 billion commitment toward emission reduction projects in the power sector.
The World Bank did not commit to a policy of ending or discouraging loans for coal plants, the source said. Such a commitment has been the top goal of environmental groups, which argue that limited public funds should not go to dirty energy.
About 60 green activists took to the streets yesterday in front of the World Bank's downtown Washington, D.C., offices in a last-ditch attempt to convince the United States to vote "no."
South African activists are charging that their country's ruling party will be the greatest beneficiary, having secured a stake in a consortium that won a major contract for boilers at the plant. They also decry "sweetheart deals" between Eskom and industrial users of electricity, while rates for South Africa's poorest continue to rise.
"It's not benefiting the ordinary black South Africans," said Desmond D'Sa, an activist with the South Durban Community Environmental Alliance who traveled to Washington this week to oppose the loan. Moreover, he argued, emissions will skyrocket across a country already grappling with the worst consequences of climate change. "If this deal goes through, the rest of the continent will pay the price."
The United States has been caught in a difficult spot throughout the vote controversy. Environmental groups say the United States should act as a leader on climate change by voting against the loan. Yet if the United States opposes the loan package, it will face criticism from developing countries that it is trying to reduce global emissions on the backs of the world's poor.
The South African government, which requested the loan, maintains that the plant is critical to the expansion of the country's economy. Meanwhile, they note that it will be the first to use cleaner "supercritical" technology, and $750 million will go toward a variety of related clean energy projects.
Lawmakers in Congress are split over the project. Rep. Gregory Meeks (D-N.Y.) and other African-American lawmakers have called on the Treasury Department to support the loan, citing South Africa's need to develop. Sens. Patrick Leahy (D-Vt.) and John Kerry (D-Mass.) along with Rep. Barney Frank (D-Mass.) sent a separate letter to World Bank President Robert Zoellick that did not oppose the loan but cited "serious concerns" and called for specific new plans to ramp up clean-energy portfolios in South Africa and elsewhere. Zoellick responded within days with a five-page letter defending the plant.
World Bank leaders note that coal makes up less than 3 percent of the institution's lending, but maintain that South Africa and other developing countries deserve to increase energy access. To do that, they argue, countries like South Africa must be able to use the cheapest and most abundant fuel source: coal.
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