The World Bank's Coal Plant Financing Controversy

Despite a strong stated commitment to supporting low-carbon development, the World Bank is finding that fossil-based energy often remains the only practical short-term strategy for promoting economic growth in the developing world, leading to a conflict between the Bank and other international financial institutions (IFIs) and their backers, who increasingly insist that all lending and project finance have a “green” emphasis.  The US and other developed countries have sharply criticized the Bank's recent activities, including a nearly $4 billion loan to help build a coal-fired power plant in South Africa, as being contrary to the goal of fighting climate change.  However, other institutions that provide financing to developing countries are making similar decisions, including the Export-Import Bank's backing of a coal-fired power plant in India.  The controversy points to the difficulties that renewable energy deployment faces in emerging markets, as well as the impacts that energy infrastructure choices made in emerging markets today will have over time, particularly in terms of emissions and energy consumption.  This GR Brief takes a look at the recent controversy over the World Bank's energy financing, as well as similar issues faced by the US, looking particularly at the implications for energy investment in emerging markets as well as the impact on upcoming climate negotiations.

Scarcity of Green Investment in Developing Countries

Over the past several years, investment in green technologies has grown in leaps and bounds, but the global economic downturn has made financing difficult to obtain in many parts of the world. Developing countries, for example, are expected to see foreign direct investment over the medium term decline from the 2007 peak of 3.9 percent of GDP to between 2.8 to 3 percent, according to a World Bank study from earlier this year. 

Full article here.