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World Bank Boosts Coal In Indonesia

By Countercurrents.org

11 October, 2013

The World Bank Group (WBG) is aiding an Indonesian coal-based power plant, one of the largest coal-fired power plants in southeast Asia, despite its propagated policy of discouraging coal.

According to a recently released report from the environmental group Oil Change International, the World Bank’s infrastructure program in Indonesia stipulates policies and government subsidies that promote the accelerated development of over 16 GW of coal power projects in the country ahead of developing feasible renewable alternatives.

The report “World Bank Accelerating Coal Development in Indonesia” [1] said:

The World Bank-created and financially backed Indonesia Infrastructure Guarantee Fund (IIGF) awarded its first government guarantee of US$33.9 million to the Central Java Power Project, a 2000 MW ultra-super critical coal plant. The Bank states that the guarantee is critical for obtaining long-term infrastructure finance. Moreover, the WBG served as the transaction advisor to this mega coal project, in which role the Bank arranged financing for the project, promoted the project to investors, and supported the project’s expansion.

Heike Mainhardt , senior subsidies analyst with Oil Change International, writes in The Price of Oil [2]:

This huge coal project has incited strong local opposition including a lawsuit and multiple protests by thousands of local residents resulting in violent clashes with project security and the military. There is still time for the World Bank to do the right thing and halt this dirty coal project as well as further WBG support of coal development more generally.

In July, the World Bank Group (WBG) released its Energy Directions paper, in which the Bank pledged to limit coal lending to rare circumstances – only in countries with no feasible alternatives to coal. In order for this pledge to have any significance, the World Bank must immediately reverse its active support for massive coal developments in Indonesia.

Heike Mainhardt writes:

To avoid locking Indonesia into a future of dirty, climate-destroying coal and making a mockery of its Energy Directions’ pledge to limit coal financing, the World Bank must:

• Renounce support for the Central Java Power Project and insist the Government of Indonesia cancel the guarantee extended to the project.

• Stipulate that the World Bank-initiated infrastructure investment tax exemptions and government-provided guarantees and financing do not apply to any fossil fuel projects.

• Assist the Government of Indonesia to prioritize the development of alternatives, including significant geothermal resources, ahead of fossil fuel projects.

• Ensure that the limit on coal financing in the Energy Directions paper is comprehensive and applies to all forms of World Bank Group support, including development policy loans, financial intermediaries, and advisory services.

Kate Sheppard writes in Huffington Post [3]:

The International Finance Corp., the private sector arm of the World Bank, is serving as the transaction adviser for the coal-fired power plant in Indonesia. 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.

"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 told Huffington Post.

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."
On people’s protest, Kate Sheppard writes:

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."

On US position, Kate Sheppard writes:

US 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."

[1] Oil Change International, September 2013

[2] “World Bank Accelerating Coal Development in Indonesia”, Sept 25, 2013, http://priceofoil.org/2013/09/25/world-bank-accelerating-coal-development-indonesia/

[3] Posted: 09/25/2013, “World Bank Aids New Coal Project Abroad, Defying Policy, Environmental Group Says”, http://www.huffingtonpost.com/2013/09/25/world-bank-coal_n_3986125.html?utm_hp_ref=climate-change


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