World Bank

By Smita Nakhooda, WRI

The prospect of a $3.75 billion World Bank loan to support the Medupi Supercritical coal plant in South Africa has raised questions about the future of development assistance in a warming world.

The coal plant, part of the national South African utility Eskom’s program to expand generation capacity, is expected to provide 4,800 MW of electricity. Construction of the plant has already begun, and contracts for key components have been signed. Yet Eskom’s longer-term electricity expansion program may have problematic implications for environmentally and socially sustainable development in South Africa.

We often think — wrongly — of ecological systems as linear. Adding a certain amount of CO2 to the atmosphere means a certain amount of warming. Twice that amount, twice the warming. Losing 10 percent of a forest means 10 percent less forest. Twice that amount of deforestation means twenty percent less forest. Stuff like that.

But that’s not how ecological systems operate. They’re integrated. Their components rely on one another to function properly.

As Congress debates climate legislation, critics are pounding their fists about costs, arguing that the United States can't afford to take action during a recession and calling the House-passed American Clean Energy and Security Act (ACES) the biggest tax in U.S. history.

Government analyses from the Environmental Protection Agency and Congressional Budget Office have already concluded that the wild claims about costs are exaggerated, with ACES’s price over a decade likely to be around $24 billion.

What is eye-popping instead, experts say, are the cost of doing nothing to forestall climate change.

“Every time economists look at this, it becomes clear that the costs of doing nothing are quite high, and that is something that is missing in the domestic debate,” says Brenda Ekwurzel, climate scientist with the Union of Concerned Scientists.

“Most people are thinking only about the cost of mitigating climate change without knowing anything about the costs of doing nothing about climate change.”

The Economics of Climate Adaptation Working Group, which was created by the Global Environment Facility and includes reinsurer Swiss Re and consulting firm McKinsey & Company, released a report on Monday showing that failing to take action to stop climate change could cost vulnerable nations, such as flood-prone Guyana, up to 19% of their gross domestic product by 2030. Island nations and coastal communities like the low-lying Maldives, already threatened by rising seas, are weighing an even more expensive mass relocation of their people.

Such losses will grow worldwide without swift international action, the World Bank says in its World Development Report 2010, released today. The report finds that flooding, droughts and other climate change disasters will cost African and South Asian countries up to 5 percent of their GDP if temperatures rise more than 2 degrees Celsius from pre-industrial levels.

"Climate change is costly, whatever the policy chosen," the World Bank says, but it warns that "spending less on mitigation will mean spending more on adaptation and accepting greater damages: The cost of action must be compared with the cost of inaction."

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• Laura Shin's blog
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The World Bank has experienced what it calls a long and complex relationship with hydropower.

In the 1990s, concerns about the environment, water equity, population displacement and social justice led to protests and lawsuits around hydropower projects and a steep decline in Bank funding for hydro development that bottomed out in 1999, when the Bank put no money at all into hydropower.

Then in 2003, the Bank began funding hydropower projects again, including Bujagali in Uganda, Bumbuna in Sierra Leone, Felou in Senegal, Nam Theun 2 in Laos (above), and Rampur in India.

A recent report from a World Bank Group (WBG) team led by Senior Water Resources Specialist Daryl Fields verifies the shift: Directions in Hydropower: Scaling Up for Development describes the World Bank taking a renewed role in hydropower development and examines the challenges and opportunities hydropower presents today.

This realignment of hydropower is being driven by a number of factors, starting with estimates that the developing world has 1,333 GW of potential and unexploited hydro capacity.

Some NGOs, however, say that number, also promoted by the hydropower industry, would be much lower if negative social and economic impacts were taken into consideration. Some also don’t believe large scale hydropower is the answer for rural electrification.

In Washington, it's a popular climate conundrum everyone talks about: Even if the U.S. lowers its greenhouse gas emissions, China and India are on track to dwarf the entire western world's as they build enormous coal-fired power plants. Politicians of all stripes regularly say we must get China and India to use less coal, the dirtiest of fossil fuels, to power their emerging economies.

But who do you think is financing all these new coal plants in the developing world?

Try the World Bank, the Asian Development Bank and other international public financial institutions supported by the world's wealthiest nations.

That's right. While the industrialized world is struggling to cut its emissions and gearing up to negotiate a new international climate treaty in Copenhagen this December, it is simultaneously bankrolling the construction of thousands upon thousands of megawatts of new coal-fired power in developing countries.

The melting of the Andean glaciers. Massive die-off of the Amazonian rainforests. Rising sea-levels and the inundation of low-lying regions on Colombia’s Caribbean coast. By now, this panorama is familiar to anyone who looks at the potential impacts of anthropogenic global warming on Latin America.

Less familiar, though equally serious, is the damage climate change could wreak on the region’s agriculture.

The world’s total agricultural production could decrease between 3 percent and 15 percent due to global climate change, according to the World Bank. Studies suggest those numbers could be much worse in the agricultural regions of Latin America's equatorial belt.