A major showdown is under way at the World Bank over a coal-fired power plant under construction in South Africa, which if approved would be the largest and dirtiest investment project the bank has ever financed. The fight pits big developing-world governments and economic development advocates, who argue that the plant is essential to growth and poverty reduction, against those worried about climate change, who contend that the bank should not support carbon-spewing power.
The bank's shareholders -- primarily developed-country governments -- are caught in between. Their vote on the $3.75 billion package, expected April 8, will not only determine the course of this one project, but will influence how global institutions balance their current core priorities with climate change going forward. The debate raging over this plant is a case-study in how multilateral organizations adapt (or don't) their central missions to the emerging focus on climate change. How will these global heavyweights balance their primary goals -- for the World Bank, enabling development -- against the trade-off of pumping more carbon into the atmosphere? In this case, the bank's shareholders should say yes now, but reinforce a cleaner future direction.
The fight over the Medupi plant, a 4.8-gigawatt behemoth -- equal to more than 10 percent of South Africa's current generating capacity, roughly equivalent to five nuclear plants -- is unfolding against the backdrop of two crises. The first is a crisis in South Africa's electricity sector. The country is plagued by chronic power shortages, which are only projected to get worse, crippling economic growth.
When plant construction started in 2007, Eskom, the South African utility that is building it, expected to pay for it through a mix of rate increases, government money, and private financing. But the 2008 financial crisis, combined with mismanagement and poor planning, has left the project unable to tap sufficient private capital. As a result, Eskom turned to the World Bank to keep construction on track.
If this were the entire picture, the case for approving the loan might be relatively straightforward (though mismanagement and corruption would still have to be taken into consideration).
Instead, the debate over Medupi's fate is unfolding against a second crisis in global climate-change policy. Governments are struggling with the task of shifting their economies onto a cleaner, less carbon-intensive trajectory, and the World Bank, with its dominant position in shaping developing-country economies, could be a critical tool in that effort.
Given that, backstopping Medupi would seem to be taking things on the wrong track. Indeed, many argue that the World Bank should instead fund a mix of renewable energy and energy-efficiency projects to close South Africa's power gap.