Eskom might face difficulties in raising funds for its coal-fired projects in future if environmental organisations kept challenging decisions to fund coal plants, Econometrix’s chief economist, Azar Jammine, said yesterday.
Jammine was reacting to the release of a report by the World Bank on Friday, which showed that water and environmental concerns regarding the coal-fired Medupi power plant were valid.
The World Bank’s inspection report shows that significant environmental, social and climate impacts were not adequately addressed by the bank when it awarded a $3.75 billion (R31bn) loan to Eskom for the construction of Medupi.
The multilateral lender said its inspection panel found that there had been specific instances of non-compliance or inconsistency in areas which included water and air externalities.
Environmental organisations such as groundWork and Earthlife Africa have been involved in monitoring and challenging the World Bank’s loan to Eskom for the development of Medupi from the beginning. The organisations asked for the World Bank investigation on behalf of the community living near the plant’s site outside Lephalale in Limpopo.
GroundWork said it had not seen the report before it was released by the bank on Friday and was now reviewing it.
But Earthlife Africa already had a “leaked” inspection report in December. The organisation called for the World Bank to act urgently and withdraw the loan, on the grounds that it contradicted the stated intention of the funding.
Jammine said if the World Bank backed out of funding coal projects in the country, this would cause a problem.
big competitive advantage is that we can source coal very cheaply compared to other sources, such as nuclear. What this is doing now is threatening the competitiveness of our electricity supply,” he said.
The World Bank approved the Eskom loan on April 8, 2010, with the objective of enhancing energy security while supporting South Africa’s long-term carbon mitigation strategy.
But the bank had received a request for inspection before awarding the loan, on April 6, 2010. The request focused on a specific component of the project and the bank’s board authorised a full investigation three months later.
This was the first investigation relating to the application of the World Bank’s Operational Policy 4.00, which deals with “piloting the use of borrower systems to address environmental and social safeguard issues in bank-supported projects”.
Earthlife Africa said the illegal sand mining used for the construction of Medupi had affected the water flow from the local river. It said the region was already struggling with water scarcity. GroundWork said the communities situated next to coal-fired power stations did not even have access to electricity and had to suffer from the health impacts.
World Bank said yesterday that any bank-financed loan could be investigated by the inspection panel, which was a forum for people who believed that they might be adversely affected by bank-financed operations and brought their concerns to the highest decision-making levels of the bank.
But it said in the case of Eskom, the panel had not found instances of current harm stemming from non-compliance.
Instead of withdrawing the loan, the bank said it would provide intensive support for project implementation, covering technical issues, environmental and social safeguards. The bank would monitor the project through to 2022.
It would be involved in reviewing emissions monitoring, annual ambient air quality monitoring reports, and would work closely with the Department of Water and Environmental Affairs.
The bank’s “management will thus closely monitor the project and potential future impacts, and remain engaged with the borrower regarding the management and mitigation of any potential adverse impacts that may arise,” the US-based lender said.
Eskom did not respond to questions on whether it had looked at alternatives water sources for Medupi or ways of capturing carbon dioxide and minimising emissions so that they would not pose a health risk to local communities.