This Friday the United States Export-Import (Ex-Im) Bank is scheduled to consider greenhouse gas impacts of the controversial Kusile coal-fired power plant proposal in the Mpumalanga province of South Africa, a crucial decision point in the bank’s overall decision on whether to finance the project.
With opposition growing, civil society groups from the global north and the global south have demanded that Ex-Im Bank reject the enormous 4,800 megawatts (MW) Kusile coal plant based on the vast levels of greenhouse gas pollution it would generate, as well as local pollution and financial mismanagement concerns.
If built, Kusile would be one of the largest greenhouse gas-emitting power plants in the world, and would also spew other forms of toxic pollution into the local environment. Kusile would increase South Africa’s total greenhouse gas emissions by nearly 10%.
Ex-Im Bank’s financing of Kusile would preempt South African strategies for low carbon growth embodied in the country’s incomplete second integrated resource plan (IRP2) and Climate Strategy Processes. This violates Ex-Im Bank’s policy for highly carbon intensive project financing, which requires that, "[t]he host country shall have developed a Low Carbon Growth Plan or Strategy and the project must be consistent with the results and objectives of that Plan."
"The Ex-Im Bank must respect the Integrated Resource Plan and Climate Strategy processes. South Africans must be able to pursue our own energy development path," said Sunita Dubey, coordinator with groundWork in South Africa.
The project, and the South African state energy utility, Eskom, are the focus of growing opposition from local communities who would bear the brunt of the impacts from such a disastrous decision.
"Eskom and their large industrial customers hide behind the rhetoric of solving energy poverty when it’s clear that it is the poor who will pay the most for this plant by subsidizing big industry with higher rates, and by the damage to the health of our communities, the air we breathe, and the water we drink," added Sunita Dubey.
While Ex-Im Bank meets to discuss the carbon implications of the project, controversies surrounding the finances of Eskom continue to mount. With public anger over financial bailouts to failing industries and banks still fresh in the minds of many American voters, civil society organizations are also questioning the financial wisdom of Ex-Im Bank bailing out Eskom.
Eskom has thus far only secured 11% of the $19 billion price tag required to move the project forward. This comes despite billions in direct loans and loan guarantees from the South African government. With project delays and costs rising every year, a shadow of doubt has fallen over this troubled project, which has consequently been unable to attract adequate private financing to fill the enormous financial gap. Ex-Im Bank’s financing is sought to help prop up this fiasco.
"As if bailing out Wall Street wasn’t enough, the U.S. government is now being asked to bail out this failing and mismanaged foreign utility," said Doug Norlen, Policy Director for Pacific Environment.
In addition to the risks posed by Kusile, large capital needs for another enormous and highly controversial coal power project in South Africa–Medupi–have contributed to the drain on Eskom’s finances. Medupi was met with a firestorm of local and international opposition and required a loan of over $3 billion from the World Bank despite a $6 billion dollar direct loan from the South African government. However, the South African government has made it clear that it cannot directly contribute any more funds, creating a total cash shortfall of $25 billion according to Eskom’s 2010 annual report.
"Eskom has over-reached on these enormous dirty coal-fired power projects. They simply can’t secure the capital needed from foreign investors who see the clear risks associated with these investments," said Karen Orenstein with Friends of the Earth U.S.
Meanwhile, President Obama’s National Export Initiative, which seeks to double exports over five years, has created a perverse incentive for Ex-Im Bank to prioritize large-scale fossil fuel financing, at the expense of the nascent clean technology sector.
"The Ex-Im Bank must say no to this project. What the U.S. needs is dramatically ramped up investments in clean energy technology to help revitalize our economy and launch commerce into the 21st century, not bailouts for irresponsible utilities like Eskom," said John Coequyt, Director of International Climate Programs at the Sierra Club.
Ex-Im is expected to make a decision on the carbon impacts of lending to Eskom by November 5th.
The African Kusile project follows the approval of the Sasan coal plant and mine in India. The Ex-Im bank had rejected the massive 4000 MW project, but approved it because of perverse politics. Bucyrus, a company that would profit from the loan, was prepared to tar President Obama, saying he was costing Wisconsin jobs, resulting in a reversal of the decision. Read what happened.
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