World Bank Energy Strategy
Ecoal, Vol 75, August 2011
One of the greatest challenges facing developing countries is access to energy. Energy plays a key role in economic and social development. It is in this context that the World Bank is currently considering a new draft energy strategy - the framework upon which its future funding of energy projects will be built.
The strategy has been the subject of some controversy however, especially since an unofficial draft was leaked in the media earlier this year. The politics enveloping the development of the new strategy have in fact led to a significant delay in the release of the official draft for a further period of consultation.
There has been much debate regarding the World Bank's approach to energy funding for the past few years, but the real controversy comes from the decision of the World Bank in April 2010 to provide funding for the construction of the Medupi power plant in South Africa. In the World Bank's summary document for that project, it stated that its purpose is "to enhance power supply and energy security in an efficient and sustainable manner to support economic growth objectives." The bank also noted that there were no viable alternatives to the construction of that plant.
Apparently due to the pressure from environmental groups and some western governments since that decision was taken, the World Bank looks to be considering stepping away from the position it took in relation to Medupi. The draft strategy proposes that loans for coal plants be restricted to only the poorest of developing countries, leaving other countries with significant development challenges, such as South Africa, without the ability to access this important funding in the future.
IEA Forecast
Given the International Energy Agency's forecast that over 80% of the growth in electricity demand over the next 20 years will come from developing countries it seems illogical to remove one major energy source from the mix.
According to the World Bank's summary document for the Medupi plant - "by all analyses, countries need to use all forms of energy, adapted to individual country circumstances, to help citizens get the energy they need." The Bank also recognised that "without energy, countries face very limited or no economic growth: factories and businesses cannot function efficiently; hospitals and schools cannot operate fully or safely; basic services that people in rich countries take for granted cannot be offered."
Developing Countries
These concerns have also been reflected by developing countries themselves. At the time the Medupi loan was approved, South Africa's Finance Minister Pravin Gordham said "if there were any other way to meet our power needs as quickly or affordably as our present circumstances demand, or on the required scale, we would obviously prefer technologies ... that leave little or no carbon footprint. But we do not have that luxury". It is hard to imagine that if a higher income developing country does not have that luxury how even poorer countries could afford more expensive technologies.
Also recognising the reality of demand for energy and the development needs that the World Bank's client countries have, one of its Executive Directors, Rogerio Studart stated in response to the leaked draft "some countries cannot provide energy access, particularly Africa, without coal, the bank knows that and it would be bizarre to say we're not going to do coal."
Strategic Energy Planning
Without coal, many developing countries would find it impossible to meet their energy needs going forward and economic and social development would flounder.
Furthermore, without international support, countries that utilise their coal resources may well do so using cheaper and less efficient technology with higher emissions, countering efforts to mitigate climate change. In revising its energy strategy, the World Bank should place a particular priority on strategic energy planning based on national priorities, entering countries as a partner in development and not dictating possibly inappropriate technologies.
The developed world has benefited from access to coal to build strong and stable economies. It would be unfair to restrict access to this important resource for countries with significant poverty and development challenges.
At this stage it is unclear when the draft strategy will be released for a further period of consultation. It is clear however there is still much debate to be had before a final decision is made.
Further information on the World Bank Energy Strategy can be found at www.worldbank.org
