* World Bank approves loan for South African coal plant
* U.S., Netherlands, Britain withhold support for loan
* Project will provide reliable energy supply
* Environmental groups slam decision as a set back (Adds details, quotes from interview)
By Lesley Wroughton
WASHINGTON, April 8 The World Bank on Thursday approved a controversial $3.75 billion loan to develop a coal-fired power plant in South Africa despite the lack of support from the United States, Netherlands and Britain.
The countries, all major donors to the World Bank, said they abstained from supporting the loan for South African state power utility Eskom due to environmental and other concerns.
Eskom has defended the 4,800 megawatt Medupi plant in the northern Limpopo region, saying there is no immediate alternative to easing the country's chronic power shortages and ensuring power supplies to neighboring states.
It is the first World Bank loan approved for South Africa since the end of apartheid in 1994.
"Without an increased energy supply, South Africans will face hardship for the poor and limited economic growth," said Obiageli Ezekwesili, World Bank vice-president for Africa.
The U.S. Treasury said it abstained due to "concerns about the climate impact of the project and its incompatibility with the World Bank's commitment to be a leader in climate change mitigation and adaptation."
It urged the World Bank to increase its support for clean energy projects and cautioned that it should not propose similar coal projects in middle-income countries without a plan that ensures there is no net increase in carbon emissions.
A Dutch Foreign Ministry spokesman said it had advised its representative at the World Bank to abstain, citing concerns that not enough is being done to develop alternatives to coal.
"The Netherlands believes Eskom is doing relatively too little to develop alternatives to coal, so we don't think this is a good proposal," the spokesman told Reuters.
"We also understand that South Africa is in need of extra energy capacity to support its economic growth. Therefore, the Netherlands has advised our (executive director) for our constituency to abstain," he added.
World Bank board decisions are arrived at through consensus among member countries rather than through voting, and countries can indicate their lack of support by abstaining from discussion of the issue.
Asked what message the abstentions sent to the Bank, Ezekwesili noted that while countries abstained they did not oppose the project through a "no" vote.
"It was a signal by the board that it supports the Bank engaging in balanced development of power to help deliver urgently-needed electricity to countries like South Africa... while concurrently charting a path toward a greener energy future," she told Reuters.
GREENING OF ECONOMIES
The U.S. Treasury said the project was inconsistent with guidelines issued in December by the Obama administration on coal-related lending by development banks.
It said the project was also incompatible with the World Bank's strategy to help countries pursue economic growth and poverty reduction in ways that are environmentally friendly.
The Treasury said while it recognized South Africa's pressing energy needs, the project would produce "significant" greenhouse gas emissions and there was uncertainty future efforts to mitigate them.
The UK Department for International Development said the project raised "several sensitive and potentially controversial issues" that it was unable to resolve due to an election campaign in Britain ahead of a May 6 vote.
The opposition to the Eskom loan has raised eyebrows among developing countries who note that Britain and the U.S. are allowing development of coal-powered plants in their own countries even as they raise concerns about others.
The controversy over the Eskom loan goes to the heart of the divides between the developed and developing countries over tackling climate change. Both camps failed to seal a new climate agreement in Copenhagen in December due to differences over emissions targets and who should pay for poorer nations to green their economies.
The South African plant is using the latest so-called clean coal and carbon storage technologies available on the market, which is used by most rich countries to limit the environmental impact of burning coal.
Environmental and development groups slammed the World Bank decision, calling it a setback for development.
"This was a missed opportunity for the U.S. and the World Bank to move away from a traditional focus on fossil-fueled growth," said Peter Goldmark, director of the Environmental Defense Fund's climate and air program.
(Reporting by Lesley Wroughton; Editing by Dan Grebler, Bernard Orr)
Trending On Reuters
India's economic growth picked up in July-September, outpacing China on improving domestic demand and manufacturing activity, and the acceleration could persuade the country's central bank to keep interest rates unchanged at its Tuesday meeting. Full Article