Western Institutions Bankrolling Dirty Power in Developing Countries

In Washington, it's a popular climate conundrum everyone talks about: Even if the U.S. lowers its greenhouse gas emissions, China and India are on track to dwarf the entire western world's as they build enormous coal-fired power plants. Politicians of all stripes regularly say we must get China and India to use less coal, the dirtiest of fossil fuels, to power their emerging economies.

But who do you think is financing all these new coal plants in the developing world?

Try the World Bank, the Asian Development Bank and other international public financial institutions supported by the world's wealthiest nations.

That's right. While the industrialized world is struggling to cut its emissions and gearing up to negotiate a new international climate treaty in Copenhagen this December, it is simultaneously bankrolling the construction of thousands upon thousands of megawatts of new coal-fired power in developing countries.

A study by Bruce Rich for the Environmental Defense Fund shows that international public financial institutions have provided $37 billion to finance the construction of at least 88 new coal plants in the developing world since 1994. What's more, that $37 billion in direct financing secured another $60 billion or so from private and local sources, bringing total investment in new coal plants in developing nations to over $100 billion.

Even worse, the World Bank classifies these coal plants as "low carbon" financing projects if they are the so-called supercritical type with marginally better CO2 emissions rates.

Collectively, those 88 coal plants (see map) will pump out 792 million tons of CO2 a year — essentially negating pollution reductions the Waxman-Markey climate bill hopes to achieve over the next decade. The bill was approved last month in the House and is now up for debate in the Senate.

Bear in mind that 88 is a minimum number because most export credit agencies do not release detailed information on transactions and only plants for which the financing could be verified were included in EDF's study.

If you're wondering why 1994 is the baseline, it's the year the United Nations Convention on Climate Change took effect, committing industrialized nations to provide funds and technology to mitigate climate change in poorer nations. But instead, the wealthier nations have been locking into place a carbon-intensive energy infrastructure, one that will endure for decades since coal plants typically operate for 40 to 50 years.

Sure, these public international lenders have committed $6 billion over the past 15 years to help the world's most vulnerable citizens adapt to a warming planet — but it's a fraction of the $100 billion spent on new coal plants.

Some would call that shooting yourself in the foot.

And it's not as though the World Bank is unaware of the dangers of continued reliance on coal. It commissioned a three-year independent study on the future role of the World Bank Group in supporting coal, oil and gas. But when that study recommended decisive action away from fossil fuel lending, the World Bank refused to endorse its findings — even at the urging of six Nobel Peace Laureates and the European Parliament.

The World Bank also gets it that the poorest countries will suffer the worst effects of global warming. In 2003, it published Poverty and Climate Change: Reducing the Vulnerability of the Poor through Adaptation, which stated "climate change is a serious risk to poverty reduction and threatens to undo decades of development efforts."