Trump Backs Developing Countries' Energy Plans
If American, Japanese, and emerging economies’ policymakers had hoped to pressure the World Bank and International Monetary Fund (IMF) to drop their policies of refusing to fund coal power projects, they were ultimately disappointed. Instead, the World Bank and IMF spring meeting ended on April 22 with the announcement that the World Bank’s capital would see an increase of $13 billion to mobilize finance for development of countries in need of long-term sustainable growth. However, with coal energy seen as a major development enabler, Washington, Tokyo, and others can now be expected to lobby the two financial institutions to invest parts of the new capital into the financing of coal plants in developing countries.
The decision not to fund new coal plants, enacted almost five years ago to drive investment in renewable energy, has drawn increasing scrutiny. Observers have emphasized that it keeps more than 1.2 billion people worldwide — 600 million of which are in Africa — in the dark.
Deprived of electricity, people cook and heat their homes using open fires, burning a lethal combination of wood, dung, and crop waste the toxic fumes from which kill an estimated 3.5 million each year. Even as a variety of innovative projects, including small-scale off-grid solar systems, are deployed, Africa continues to fall behind on its electrification targets. Progress would slow still further if coal, which continues to account for almost one-third of global energy production, was taken out of the picture.
U.S. Energy Secretary Rick Perry has been adamant that the U.S. and other developed nations have a responsibility to pursue renewable energy in a way that will not compromise efforts to expand access to electricity in emerging economies. At an energy summit in March, Perry called any policy which hampers universal electrification in favor of avoiding fossil fuels “immoral.” As part of his efforts to find an approach that reduces emissions while still ensuring widespread access to affordable electricity, Perry has proposed a global alliance of countries interested in developing low-emission fossil fuel projects.
Perry’s idea has engendered its share of pushback from environmental lobbyists. His position has also gathered significant support, both within the United States and abroad. The White House wants to steer the UN Green Climate Fund in the direction of high-efficiency plants employing carbon-capture technology. Philanthropist Bill Gates, who launched a $1 billion clean energy fund in 2016, pointed out:
Even as we push to get serious about confronting climate change, we should not try to solve the problem on the backs of the poor. They can’t afford today’s expensive clean energy solutions, and we can’t expect them to wait for the technology to get cheaper.
Japan has committed to ensuring countries such as India and Indonesia have access to the latest, most efficient coal technologies, enabling them to simultaneously expand access to cheap fuel while still meeting global targets for reduced carbon dioxide emissions.
Policymakers from developing nations have welcomed this help, as they have progressively lost patience with what India’s chief economic adviser has termed “the west’s carbon imperialism.” Kenya’s first-planned coal power plant — part of the country’s plans to double its generating capacity — is a perfect example of the double standard to which developing nations have been subjected. The plant in Kenya, which is being funded by China and the African Development Bank (ADB) after the World Bank and IMF refused to support it, has attracted tremendous attention and pressure from Western institutions. The European Union, for instance, has pushed African countries to invest in renewable energy instead.
Besides being tone deaf, these exhortations ignore the fact that Western emissions dwarf those in emerging economies. The European Union, for example, emits over 21 times more CO2 per capita than Kenya. The EU’s Ambassador to Kenya Stefano Dejak asked: “Coal has fallen out of favor in the modern market, why would Kenya want to go down that route?” Kenyans could no doubt provide many answers to that condescending question. Unlike the Ambassador’s native Italy, Kenya has not yet achieved 100 percent electrification, but has only recently managed to connect 55 percent of its population to the grid. What’s more, renewables only make up 39 percent of the Italian energy mix, while as much as 87 percent of Kenya’s electricity is generated from renewable sources thanks to its strong geothermal and hydro sectors.
The ADB’s decision to step in and fund the coal plant in Kenya, along with similar projects in Nigeria and Senegal, suggests that Africa is not willing to stand idly by as power shortages trim more than 2 percentage points from the continent’s GDP growth every year. As ADB President Akinwumi Adesina remarked last year: “Africa has energy potential … but we need to unlock that potential. And we must do so quickly, because Africans are tired of being in the dark.”
Numerous African countries, including Botswana, Tanzania, South Africa, and Nigeria, are reportedly interested in joining the fossil fuel alliance Secretary Perry proposed. The latter two have been particularly vocal in their criticism of the World Bank’s funding policies.
Not too long ago, even World Bank President Kim would have agreed with them. In 2014, Kim called energy poverty in Africa tantamount to “energy apartheid” and insisted that it was impossible to take a position “where we say no coal, no nuclear, no hydro.” Hopefully, the U.S and leaders of emerging economies will be able to remind Kim of his own wisdom.
Matthew Summers is an independent financial consultant, currently based in London, who maintains a blog at The Market Mogul.