World Bank Aids New Coal Project Abroad, Defying Policy, Environmental Group Says

INDONESIA - JULY 14:  The logo of PT Adaro Indonesia is displayed at the company's offices in Jakarta, Indonesia, on Monday,
INDONESIA - JULY 14: The logo of PT Adaro Indonesia is displayed at the company's offices in Jakarta, Indonesia, on Monday, July 14, 2008. PT Adaro Energy, the holding company of Indonesia's second-largest coal producer, surged on its first day of trading in Jakarta after raising money in the country's biggest initial share sale in 13 years. (Photo by Dimas Ardian/Bloomberg via Getty Images)

World Bank Group units are aiding the development of a new coal-fired power plant in Indonesia, despite a new bank policy discouraging support for coal projects, according to a report from the environmental group Oil Change International released on Wednesday.

The World Bank issued an Energy Directions paper in July, saying that coal projects should only receive support in “rare cases” when there is "no feasible alternative."

The International Finance Corp., the private sector arm of the World Bank, is serving as the transaction adviser for a 2,000-megawatt coal-fired power plant in Indonesia known as the Central Java Power Project. As the transaction adviser, the IFC described its role as "helping ensure that the bidding was conducted according to international best practices and that the project met international environmental and social standards."

In addition, the World Bank in 2010 provided a $30 million loan to the Indonesia Infrastructure Guarantee Fund, created by the government of Indonesia to obtain financing for the power plant as well as railways to transport coal and transmission lines. The project is to be built and operated as a joint venture between Andaro Power of Indonesia and two Japanese companies.

Oil Change International said the IFC and the World Bank Group are enabling one of the largest coal-fired power plants in southeast Asia.

"If they're going to take the energy directive seriously, they should tell Indonesian government that this fund shouldn't apply to coal projects," Heike Mainhardt, senior subsidies analyst with Oil Change International, told Huffington Post.

The financial agreements on the project are supposed to be finalized by Oct. 6. Oil Change International said it wants assurances that the energy directive covers all types of World Bank Group projects, including policy loans, advisory services, and support through intermediaries.

Josef Skoldeberg, an IFC spokesman, said the organization began involvement in the Indonesia project in 2008, and was not covered by the energy directive.

"The Energy Strategy Directions Paper is not a backward-looking document, but lays out direction for our future engagements in the sector," said Skoldeberg. He said the energy directive "applies to World Bank Group investments and advisory services in the energy sector, as well as privatization support that would enable investments."

There have been major protests against the plant in Indonesia. "Around 7,000 villagers who living around the proposed site of Central Java Coal Power Plant are strongly opposed to the huge coal power project," Arif Fiyanto of Greenpeace South Asia-Indonesia, told The Huffington Post via email. "The local community insists that the coal power plant will harm their livelihood, like what happened in other areas with coal power plants."

President Barack Obama in June called for an end to U.S. funding for fossil fuel projects abroad unless the projects use technology to capture emissions. Since that announcement, the U.S. has declined to finance a coal plant in Vietnam through the Export-Import Bank. Oil Change International argues that the policy shift should also apply to projects like the one in Indonesia.

"As the World Bank’s largest shareholder, the United States has a particular say in the World Bank’s operations," Mainhardt said in a blog post accompanying the report. "The U.S. government needs to be clear that the President's pledge is comprehensive and covers all forms of coal financing, including policy loans and financial intermediaries."



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