Banking on Coal

Why is the World Bank subsidizing one of the planet's dirtiest fuels?

With the U.N. climate change conference in Copenhagen getting under way this week, the pressure's on for world leaders to come up with some sort of climate agreement. Despite the appearance of a unified plea for action, however, not everyone is playing ball. And one of the shirkers is especially surprising: Even as governments are weighing tough choices to bring down emissions and cope with rising temperatures, the World Bank is financing -- and plans to continue financing -- coal projects to the detriment of renewable energy. In effect, the World Bank is sending the message that coal is not just an acceptable fuel, but also a resource that should be developed with international funding. It's a betrayal of everything the World Bank's member countries are supposed to be working for.

The bank's recently released draft Energy Strategy, which will guide its energy lending and influence partner institutions for the next seven to 10 years and announces its investment in coal, is very, very bad news. Although the proportion of coal to renewable energy is falling, the shift is too little too late. Back in 2004, the World Bank's Extractive Industries Review recommended that the bank "phase-out support for oil by 2008, and formalize its moratorium on lending for coal projects immediately." That was five years ago. Today, the World Bank strategy notes that "In some countries, electricity from coal is significantly cheaper" and the bank "could use its traditional financing instruments to support client countries to develop new coal power projects under certain conditions." Indeed, the Bank Information Center finds that bank funding for coal has increased almost 200 percent between 2007 and 2009.

But even if it saves costs in the short term, each newly constructed coal plant has a life of about 50 years, during which it will emit carbon; rehabilitation extends the life of the plant by an additional 20. So even as World Bank donor countries are fighting political battles to cut emissions, their dollars are funding new World Bank coal projects that will cancel out any hard-won gains.

It's hard to understand why "coal" isn't a dirty word in the halls of the World Bank -- an institution whose mandate is built on the idea of sustainable development. According to the U.S. Energy Information Administration, coal is the most carbon-intensive of the fossil fuels and is the fastest growing carbon-emitting energy source. Coal's share of world carbon dioxide emissions is projected to increase to 45 percent in 2030, meaning that nearly half of all new pollutants can be traced back to coal. Perhaps most outrageous of all is that climate change driven by such investments will disproportionately affect the poor, those who've had the smallest role in producing emissions.

Mining the stuff also wreaks havoc on the environment. Open pit, strip, and underground mines all cause severe erosion, leach toxic chemicals into nearby streams and aquifers, and push animals and plants out of their habitats. Coal is particularly harmful for public health. A 2009 Environmental Defense Fund study estimated that between 6,000 and 10,700 annual deaths can be attributed to the 88 coal-fired power plants and companies receiving public international financing, including from the World Bank.

Yet even knowing coal's blemished track record, the bank is not only subsidizing coal projects but doing so to an increasing degree. During the 2008 fiscal year, the World Bank and International Finance Corporation (IFC) increased funding for fossil fuels by 102 percent compared with only 11 percent for what it categorizes as new renewable energy such as solar, wind, biomass, geothermal energy and hydropower projects under 10 megawatts. On average, fossil fuel financing by the bank still accounts for twice as much as all new renewable energy and energy efficiency projects do, combined. Bloomberg News reported that thanks to World Bank financing, India's Tata "ultra mega" power plant will have the dubious distinction of being one of the world's 50 largest greenhouse gas emitters once it begins operation in 2012. At this very moment, the bank is considering a loan for the South African electricity company Eskom that would commit $3.75 billion for the 4,800-megawatt Medupi coal-fired power station, currently under construction. According to Reuters, if approved, this will represent the single largest World Bank loan awarded to post-apartheid South Africa -- and yes, it's for a coal plant. 

Of course, the bank does know and admit that cutting emissions is a goal it should strive for. But its rhetoric and actions on the topic are mismatched. Whereas the institution claims in its Energy Strategy that it "support[s] countries in their efforts to shift to a low-GHG-intensity path," the hard data on bank support for coal paints another picture. For each thoughtful, renewable project that the bank supports, such as its $20 million investment in the Yemeni Al-Mokha wind farm, there is another coal-fired power plant or emissions-intensive hydropower project on the horizon.

What does this mean in the context of Copenhagen? World Bank-financed projects are a significant source of the world's greenhouse gas emissions, and they're set to grow. When the fossil fuels involved in the World Bank and IFC lending projects for the 2008 fiscal year are combusted, the projected lifetime CO2 emissions from this one year of financing will amount to approximately 7 percent of the world's annual CO2 emissions from the energy sector. That's twice the amount of Africa's annual energy-sector emissions.

What's even worse is that sustainable alternatives to coal exist. The World Bank could use its sizable energy investment portfolio (more than $7 billion) to promote low-carbon development that helps (rather than hurts) emissions targets. It could push the political consensus to do the same. But it's not doing either -- a failure of great magnitude for an institution that's supposed to lead by example, not follow the path of least resistance.



Iran's Conservative Crackup

A series of political defections and a new poll proves that Ahmadinejad is losing support among the conservatives who once made up his base.

The circle around Iranian President Mahmoud Ahmadinejad is hardening and shrinking -- and more and more, his former allies are turning against him. The regime seems determined to pursue a policy of dictatorship at home and isolation abroad, whatever the cost. Iran's snub of Western attempts to negotiate a deal over its nuclear program -- and the added insult of its recently announced plans to expand its uranium enrichment program tenfold -- are clear signs that cooler conservative heads in Tehran and Qom have lost ground to Ahmadinejad's hard-liners. Many religious Iranians and some conservative clerics, for example, have begun to increasingly feel that the theocratic system has become un-Islamic.

The demonstrations that erupted on Dec. 7 in cities across Iran included not only Westernized students but conservative Iranians as well. The Islamic Republic attempted to thwart the rally by shutting down Internet access, but thousands of Iranians nevertheless marched in the streets. The protests included not only Westernized students, but religious and conservative Iranians as well -- evidence that conservative Iranians are becoming more and more opposed to the state, even if their response is not usually to participate in social unrest.

It's not just protesters, either. A groundbreaking Iranian survey, first published on, shows that, in provinces where Ahmadinejad once held widespread support, Iranians now say they wished they had not voted for him.

The polling surveyed more than 11,000 people from 11 rural and small villages in the provinces of Fars and Isfahan. Polling was conducted in four intervals from the summer of 2008, before the contested June 12 presidential election, to the fall of 2009. In the two pre-election polls, respondents were asked to state their choice of candidate. In the two post-election polls, respondents were asked for their views on the disputed election.

Before the election, Ahmadinejad had enjoyed 58 percent support in rural areas and 44 percent support in the small urban areas. After the election, however, it was a different story. The two post-election polls showed that 39 percent of the youth and 23 percent of those over 45 who had voted for Ahmadinejad now regretted their vote. The reasons for this included the rape, murder, and torture of young men and women who participated in demonstrations after the June presidential election and the belief that Ahmadinejad was to blame for the country's economic crisis. In fact, 57 percent of those who said they no longer supported Ahmadinejad admitted that they had received money from Ahmadinejad's subsidy program, which was designed to solidify the president's support among poorer segments of Iran's population. Still, they said, even the money wasn't enough to keep their support.

Ahmadinejad is also facing increased public opposition from traditional conservatives. Their action can only be viewed as an act of protest against Ahmadinejad and his all-powerful supporter, Supreme Leader Ali Khamenei. Now, clerics from the traditional right have joined leftists, such as Ayatollah Hossein Ali Montazeri and Ayatollah Mohammad Mousavi Khoeiniha, in moving away from Ahmadinejad's political faction.

The most prominent cleric to resign is Ayatollah Abdollah Javadi-Amoli, one of Iran's most senior conservative clerics, who quit on Nov. 26 as one of Qom's Friday prayer leaders. Amoli was one of Ayatollah Ruhollah Khomeini's close confidants during the 1979 establishment of the Islamic Republic. Three other prayer leaders from Qom have also resigned their posts, despite the prestige and influence of the pulpit, after criticizing the events in Iran in the wake of the stolen presidential election.

In his last Friday prayer sermon, Amoli told worshippers that he felt hapless in trying to fulfill his religious duties because he no longer had the power to solve their problems. "I can no longer serve as your prayer leader," Amoli said. "A prayer leader has two duties, and if he does not fulfill them he will be responsible before God."

As the regime's powerful inner circle shrinks, formerly central figures are being alienated in the political realm, too. These conservative politicians and military figures have nowhere to go: Disillusioned with Ahmadinejad and Khamenei's clique, they are also at odds with the symbolic leaders of the opposition movement, including Mir Hossein Mousavi, Mehdi Karroubi, and former President Mohammad Khatami.

One such figure is Mohsen Rezai, the former commander of the Islamic Revolutionary Guards Corps who ran as a candidate in June against Ahmadinejad. Rezai has been outspoken in the past about the need for Iran to reach a diplomatic solution with the international community on its nuclear program. But he, like many other conservatives including Parliamentary Speaker Ali Larijani, are at odds with Ahmadinejad and his hard-line faction. In a recent interview with the conservative Panjereh weekly, Rezai spoke candidly about the rifts within the conservative establishment and how conservatives tried desperately before the presidential race to reach a consensus on a conservative candidate who would have a good chance of defeating Ahmadinejad. He said they feared another four years of Ahmadinejad would lead Iran to ruins.

Now that the system is so fractured -- even among conservatives -- Iran's political future is uncertain. But it is unlikely the conservatives who now oppose Ahmadinejad and Khamenei will remain silently on the sidelines for too much longer.

Brent Stirton/Getty Images