Why coal?

Some readers and activists may question why the World Bank Group funds coal-fired power plants and yet professes to embrace sustainable development. The answer is that there is an urgent need for energy in the poor countries that we serve and indeed in my home country, China. There are roughly 1.6 billion people in developing countries--700 million of whom are in Africa and 550 million in South Asia--who lack access to electricity. Because coal is often cheap and abundant, and the need for electricity is so great, coal plants are going to be built with or without our support. Without our support, it is the cheaper, dirtier type of coal plants that will proliferate.

Do developing countries have a choice? Only up to a point. Renewable energy offers great potential--and we promote it and invest in it very actively--but it alone cannot, by any stretch of the imagination, provide all the electricity that is needed. Analyses from organizations ranging from the UN's Intergovernmental Panel on Climate Change to the International Energy Agency to researchers at MIT shows that a mix of energy sources will be required for decades to come. To ensure that our efforts to alleviate "energy poverty" and fight climate change go hand-in-hand, we work on multiple fronts to increase energy efficiency; promote renewable energy; support new technologies to reduce GHG emissions; help carbon markets develop; and support countries as they reform energy markets.

We will continue to push in the right direction. The energy mix in our portfolio is significantly different from the current global mix. In our last financial year (July 2007 to June 2008), our total energy lending doubled--and of this, renewable energy and energy efficiency accounts for 35 percent (including hydroelectric projects) and fossil fuels account for 27 percent. The current global mix is 18 percent renewable and 82 percent fossil and nuclear. It's also worth keeping in mind that the private sector plays a critical role in addressing the challenges of global warming. More than 80 percent of all current investments related to climate change come from non-government owned companies and investors.

Since coal will inevitably be used, countries simply must operate cleaner coal plants. New technologies (e.g. carbon capture and storage) are still in the early stages of R&D, not ready to be deployed commercially, and hugely expensive. It is critical, though, for developing countries to have access to these new technologies when available since that will allow energy production from coal while eliminating GHGs. This is how Clean Technology Fund will help those developing countries.

What the Clean Technology Fund will do is only finance coal if it meets or goes beyond the highest standards for emissions limits that currently exist--criteria that very few power plants anywhere today meet, and only finance coal that is ready to take advantage of these newer technologies once they are available.

For more resources on the World Bank's operations and climate change, visit the Bank's climate change website, which has detailed FAQs.