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Auditors find World Bank skipped policy steps in approving huge South African coal plant

The World Bank failed to follow several of its own policies when it approved a $3.75 billion loan for the South African utility Eskom to build one of the world's biggest coal plants, an independent audit obtained by ClimateWire found.

The year-and-a-half-long investigation by the World Bank Inspection Panel criticized the bank for insufficiently taking health, water scarcity and the pressures on local services into account when supporting the 4,800-megawatt Medupi power plant in South Africa's Limpopo province.

Yet the decision did not violate World Bank climate change policies, the panel said, partially because the World Bank does not have explicit emission targets. It did, however, say that it found the World Bank's steps to mitigate Medupi's estimated 25 million metric tons of greenhouse gas emissions lacking.

"The magnitude of emissions from Medupi far outweighs emissions avoided through project mitigation measures" like a rail project and energy efficiency additions, they wrote.

'Overly optimistic' view of emissions reductions

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The panel also called the World Bank's statement at the time of the loan that its partnership with South Africa will, over the long term, serve to lower the country's emissions trajectory "overly optimistic ... given that Medupi will emit significant levels of GHG emissions."

The Inspection Panel report was delivered Wednesday to World Bank President Robert Zoellick, the executive board and senior management and was not officially released to the public. It comes at a particularly sensitive time, with thousands of delegates from 194 countries gathering this week and next in Durban, South Africa, for a major U.N. climate change conference.

The April 2010 decision to fund Medupi was enormously controversial both within the World Bank and internationally. Several countries, including the United States, withheld support when the loan came before the bank board for a vote -- yet the abstentions did not block the loan.

In the months since, the World Bank has attempted to codify new rules surrounding coal loans. It developed an energy policy that restricts such loans to middle-income countries, but the blueprint has been essentially shelved in response to opposition from China, India, Brazil and others (ClimateWire, Nov. 18).

In reviewing the Medupi loan, the inspection panel was most critical when it came to water, finding that while bank management studied the availability of water to run the power plant, it did not dwell on what impact the use of those resources might have on others.

The expansion of the Grootegeluk coal mine to supply Medupi will result in significant water scarcity and pollution problems, the panel found, adding, "Management should have taken a broader look at expansion of coal mining to supply Medupi." Auditors also found "significant shortcomings" in the bank's assessment of air quality problems related to the plant.

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