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2010 Press Releases

Treasury Department Statement on the U.S. Position on the World Bank’s Eskom Investment Support Project

April 9, 2010

Today, the United States abstained on the vote by the World Bank's Board of Directors on the Eskom Investment Support Project.  This reflects 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.  At the same time, the United States recognizes South Africa's pressing energy needs and the lack of near-term feasible low-carbon alternatives.

South Africa and the region face urgent energy needs to promote economic growth and address critical challenges, such as poverty, education and health.  This project would provide significant energy capacity to meet these essential needs.  We recognize that South Africa faces limited options that could provide the required energy base for South Africa and the region in lieu of the project, and that there is a lack of alternative private financing options in the wake of the financial crisis.  We also recognize that, if South Africa's base load power needs are not met, the country's economic recovery will suffer, adversely impacting electrification, job creation, and social indicators.

Despite these benefits, the United States is concerned about the project since it would produce significant greenhouse gas emissions, and uncertainty remains about future mitigation efforts.  Without actions to offset the carbon emissions of the Medupi plant, the project is incompatible with the World Bank's strategy to help countries pursue economic growth and poverty reduction in ways that are environmentally sustainable.  We also remain concerned about other facets of the project, including the inconsistency of Eskom's procurement process with the World Bank's Procurement Guidelines, deficiencies in the environmental impact assessment, and potentially inadequate efforts to mitigate local pollution.  The project is also inconsistent with new guidelines on coal lending adopted by the United States in December 2009.
Over the course of several months, the United States has engaged with the World Bank and the Government of South Africa to encourage resolution of these issues.  We welcome the renewable energy and efficiency components of the project and recognize both the Bank's and the South African Government's commitment to pursue a lower carbon path in the future.
We are encouraged by the South African Government's commitment to use $1.25 billion of World Bank funds to support future emission reduction measures.  We are also encouraged by the government's ambitious carbon mitigation targets, and by its vision of low-carbon development.
 
Considering all of these issues, the United States chose to abstain on today's vote.  Looking ahead, we will continue to seek World Bank engagement with countries to develop low-carbon energy projects and make climate change mitigation and resilience a core part of the Bank's mission.  We expect that the World Bank will not bring forward similar coal projects from middle-income countries in the future without a plan to ensure there is no net increase in carbon emissions.  We also look forward to seeing a growing pipeline of clean energy projects throughout sub-Saharan Africa.

Original release by the US Treasury: http://www.ustreas.gov/press/releases/tg635.htm