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World Bank, coal, India and Einstein

Posted Jul. 26, 2012 / Posted by: Karen Orenstein

World Bank Group loans for coal.
Subsidizes multinational industry on backs of the poor.
Devastates local livelihoods.
Degrades air, land and water.

Sound familiar?

You could be forgiven if you thought we were talking about the Medupi coal-fired power plant in South Africa, built and operated by the Eskom power utility.

You’d be mistaken, though it’s easy to understand why. The World Bank’s $3.75 billion loan to Eskom in 2010 for a 4800 MW coal plant debacle led to global protests over the serious financial hardship it would create for the poor while providing exceptionally cheap electricity for heavily polluting industries that ship their profit overseas. South African communities were left shouldering not only a monetary bill but lifelong payments in compromised health, dirty water and poisoned air.

But today we are talking about a $450 million loan from the International Finance Corporation -- the World Bank Group’s private sector lending arm -- to the Coastal Gujarat Power Limited’s Tata Mundra project, a 4000 MW coal-based thermal power plant in the western state of Gujarat in India. Although the loan was made in 2008, it’s grabbing headlines today for the harm it is causing to fisherfolk, pastoralists and many others.

Earlier this month, a high level fact-finding team released a report entitled The Real Cost of Power, which documents the unfolding calamity at the Tata Mundra project.  In the report, the eminent experts urge the IFC and the Asian Development Bank, the other major multilateral financier, to immediately suspend financing for Tata Mundra until those institutions undertake a complete review of the project’s compliance with safeguard policies.

The report finds that

  • The project has disproportionately high social, environmental and economic costs.
  • The company, the licensing agencies of the Government of Gujarat and India, and the national and international financial institutions have either ignored or willfully neglected the social and environmental high costs and did little to mitigate them.
  • The Social Impact Assessment and Environmental Impact Assessment are misleading and erroneous, having excluded a large number of communities whose loss of livelihood was overlooked. Cumulative impact studies required to understand the overall impacts were not done.
  • Both the governments and the IFIs [international financial institutions] failed to earnestly monitor the adherence to laws and their safeguard policies.
  • The failure to monitor contributed to the continuance of the violations by the company.
  • The governments and the IFIs are equally complicit in the violations by the company.

Even at the time of the project’s inception, little of the project’s electricity was expected to reach India’s poor. Now, things are looking even worse. Not only did Tata Power completely underestimate the capital costs of the project, they totally underestimated the cost of coal! Standard and Poor’s has even lowered Tata Power’s credit rating. To boot, they’re trying to get the Indian government to bail them out on the backs of taxpayers. (That also sound familiar?)

Moreover, an April 2011 report, published by Friends of the Earth and other groups, pointed out that the project is expected to emit some 25.7 million tons of carbon dioxide annually for at least 25 years, making it among the largest point sources of CO2 on the planet. What’s worse, these estimates do not account for emissions that take place prior to the coal’s arrival at the plant, including the import of coal from an energy poor area of Indonesia. As we wrote at the time, “Without a dramatic transformation, the World Bank will continue failing to live up to its motto of ‘Working for a world free of poverty,’ while undermining any attempts it makes to claim leadership in halting climate change and hastening the transition to low-carbon economies.”

Indeed, the World Bank continues its greenwashing activities, with press releases like: World Bank to Boost Access to Electricity and Clean Fuels, Renewable Energy and Energy Efficiency.  This bit of puffery came out of the so-called Sustainable Energy for All initiative on the sidelines of the Earth Summit in Rio in June.

But as parents and teachers have told children through the ages, it matters what you do, not what you say….

The IFC’s independent recourse mechanism -- the Compliance Advisor/Ombudsman -- is expected to decide very soon on whether to conduct a full audit of the IFC’s role in the Tata project. There’s a lot riding on this case -- the lives and livelihoods of thousands of people, the future of an ecologically fragile ecosystem and a planet in peril from climate change.

To reference Albert Einstein, making the same mistake over and over again and expecting different results is what constitutes insanity. Let’s hope the CAO helps IFC bosses see the error [insanity] of their ways. It’s time for the IFC -- and the Asian Development Bank -- to pull the plug on this boondoggle. The IFC has a chance to stop the insanity of financing another massive climate polluting project that will leave ordinary people destitute, under the false pretense of helping India’s poor while protecting the planet.

Photo: Pagadiya, a local fishing practice on the coast of Mundra. Credit: Machimar Adhikar Sangharsh Sangathan.

 

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