* World Bank board poised to approve Eskom loan
* U.S., Dutch abstain from supporting project
* Eskom says plant is critical to ease power shortages
(Recasts; adds U.S. statement)
By Lesley Wroughton
WASHINGTON, April 8 The United States and the
Netherlands on Thursday abstained from supporting a
controversial World Bank loan for a coal-fired power plant in
South Africa, citing concerns about its impact on the
The World Bank's board, however, is set to approve the
controversial $3.75 billion loan regardless of whether it has
U.S., Dutch or possibly British support.
South African state utility Eskom [ESCJ.UL] has defended
the development of the 4,800 megawatt Medupi plant in the
northern Limpopo region, saying it is critical to ease the
country's chronic power shortages as well as ensuring
electricity flows to neighboring states.
The U.S. Treasury said in a statement it opposed the loan
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."
A Dutch Foreign Ministry spokesman said it had advised its
representative at the World Bank to abstain and withhold its
support for the project. For details, see [ID:nAAT010153]
"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.
While $3 billion of the loan will fund the bulk of the
coal-fired plant, the remainder of the financing will go toward
renewables and energy-efficiency projects.
"We believe this project is important for South Africa and
South Africans and we expect it will be well received by the
board," World Bank spokesman Peter Stephens told Reuters.
CLEAN ENERGY CHOICES
The U.S. Treasury said the project was inconsistent with
U.S. 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 needs, it was concerned the project would produce
"significant" greenhouse gas emissions.
It also said it did not expect the World Bank to bring
forward similar coal projects for middle-income countries
"without a plan to ensure there is no net increase in carbon
It was unclear whether Britain, which had threatened not to
support the project, will back it in the end after a recent
visit to London by South African President Jacob Zuma during
which he lobbied British officials to support the loan.
Since that visit, however, British Prime Minister Gordon
Brown has called an election for May 6 and backing the project
could be politically damaging.
The opposition to the Eskom loan has raised eyebrows among
those who note that Britain and the United States are allowing
development of coal-powered plants in their own countries even
as they raise concerns about those in poorer countries.
The South African plant is using the same so-called clean
coal technology used in the United States and other developing
countries to lower carbon emissions.
Environmental and development groups have stepped up
pressure on the World Bank ahead of Thursday's meeting. A
letter endorsed by 125 groups argued that the project would not
provide electricity to the poor, but would benefit large mining
houses and smelters.
A complaint submitted this week to the World Bank's
independent complaint body, the Inspection Panel, on behalf of
residents living near the Medupi plant, claimed that the
project violated World Bank policies.
In an April 5 letter to U.S. lawmakers, World Bank
President Robert Zoellick said the World Bank had worked with
the South African government to significantly improve the Eskom
project and add renewable sources.
"We have conducted due diligence on all aspects of the
project and have concluded that the projects development and
poverty reduction merits, along with the need to support South
Africa in meeting its energy crisis, should lead us to submit
the project to our board for their consideration," he said.