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A Coal Loan Under Fire

Human Rights, Green Groups Fight Power Plant

A recent decision by international lenders to underwrite a new South African power plant is setting off a fight among interest groups and Members of Congress, who are at odds over whether the coal-fired facility will help — or pollute — the developing nation.

The World Bank agreed Thursday to loan $3.1 billion to a South African utility company, Eskom, to put the finishing touches on its coal-fired plant in Lephalale. The institution also is lending Eskom $260 million for a wind-energy project and $485 million “for low-carbon energy efficiency components, including a railway to transport coal with fewer greenhouse gas emissions,” the World Bank said in a statement.

The bank’s leaders added that the loan will help the poor, AIDS-ravaged country. According to the CIA, roughly one-quarter of the South African population is unemployed, and 50 percent live below the poverty level.

“Without an increased energy supply, South Africans will face hardship for the poor and limited economic growth,” World Bank Vice President Obiageli Ezekwesili said after the loan was approved. “Access to energy is essential for fighting poverty and catalyzing growth, both in South Africa and the wider subregion.”

But following the World Bank vote last week, Members were quick to argue that the loan is not a cure-all for South Africa’s energy and economic woes. Citing environmental concerns, Senate Foreign Relations Chairman John Kerry (D-Mass.) criticized the loan, saying, “There are better ways to promote urgent energy access in the developing world without exacerbating the looming threat of catastrophic climate change, which will ultimately hit Africa and the developing world the hardest.”

“Moving forward, the World Bank should be leading the way by leveraging its funding and broad expertise to promote new, low carbon footprint energy sources that mitigate climate change,” Kerry said in a statement.

Late last month, a bicameral coalition led by Kerry lodged concerns with World Bank President Robert Zoellick over proposed financing for what may become one of the world’s largest coal-fired plants. On March 26, Kerry, Senate Judiciary Chairman Patrick Leahy (D-Vt.) and House Financial Services Chairman Barney Frank (D-Mass.) signed a letter urging Zoellick to scrap the loan, which they said “does not meet World Bank standards for procurement or acceptable standards for environmental impact assessments of associated facilities.”

Ten days later, Zoellick wrote back to inform the lawmakers that the bank was moving forward with the loan.

“We have conducted due diligence on all aspects of the project and have concluded that the project’s 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 of executive directors for their consideration,” the former U.S. trade representative and deputy secretary of State under President George W. Bush wrote.

Meanwhile, as lawmakers and Zoellick squabbled over environmental concerns, Rep. Gregory Meeks (D-N.Y.) was leading a faction of Congressional Black Caucus members in support of the loan. Ahead of last week’s World Bank vote, Meeks wrote to Treasury Secretary Timothy Geithner to express his support for the loan, which he wrote on his Web site will provide “economic growth and geopolitical stability in southern Africa.”

“At a time when South Africa and its neighbors experience rolling blackouts, providing an additional, greener source of energy is vital to contributing to economic growth in Africa,” Meeks wrote.

The letter was signed by six other Democratic CBC Members: Reps. Donald Payne (N.J.), Bobby Rush (Ill.), Yvette Clarke (N.Y.), William Lacy Clay (Mo.), Maxine Waters (Calif.) and Sheila Jackson Lee (Texas). In addition, Rep. Jack Kingston (R-Ga.) also signed.

Aides for Kerry and Meeks did not respond to requests for comment for this story.

The Sierra Club, human rights advocates and other nonprofit organizations say the final word has yet to be uttered on the multibillion-dollar South African loan package. Environmental advocates say they are particularly concerned about the plant’s potential to pollute nearby towns Onverwacht and Marapong.

Michael Stulman, a spokesman for Africa Action, called the loan “disappointing,” writing in an e-mail that South Africa’s impoverished majority will now find themselves stuck with the bill for the Eskom plant.

“The truth is that commercial industries will receive the lion’s share of this loan and now the burden is on poor communities in South Africa,” Stulman wrote. “There will be [a] 127 percent electricity price increase for poor people over the next four years. That’s not going to reduce poverty.”

With the loan paperwork signed, Stulman’s group will pivot to renewing demands for more transparency at U.S.-backed lending institutions like the World Bank. If the U.S. is not able to exert its considerable leverage with the groups, Stulman said that Members should consider cutting off the money supply from U.S. taxpayers.

“Given that the Government of South Africa and the World Bank managed to persuade many Members of Congress that this loan would be beneficial to South Africans, we simply ask U.S. Congress to demand accountability,” Stulman wrote. “Until there is a formal energy policy in place that would prohibit loans from the World Bank for fossil fuel based projects, we oppose [any] future general capital increase from the U.S. Congress.”

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