US to abstain from voting on WB loan for coal plant in South Africa

New York Times reported that United States will abstain when the World Bank directors vote to loan South Africa USD 3.75 billion for a coal fired power plant.

The loan decision is among the most controversial in recent history, and environmental activists have leaned hard on the Obama administration to oppose it. They argue the United States must stand behind a recent guideline discouraging US board members of multilateral banks from approving coal plant loans because of the impacts of climate change. The 4,800 MW Medupi power plant would emit 25 million tonnes of carbon dioxide into the atmosphere.

Yet South Africa also has been leaning hard on the administration and Congress, arguing the loan to the country's state owned utility Eskom Holdings Limited is critical to the national economy. The power plant is South Africa's first in more than 15 years.

Ms Natalie Wyeth spokeswoman of US Treasury declined to discuss the US position. She said in an e mail that Treasury is not in a position to comment on its potential vote before the board meeting.

She added that "Given the concerns raised about the project, the United States has been encouraging the World Bank and the South African government to address issues related to the environmental soundness of the project and enhance its developmental impact."

Yet several sources said that the United States plans to abstain, which will allow the Obama administration to put its objections on the record while still allowing the project to move forward. An abstention also eliminates the diplomatic tension that might have occurred had America actively tried to block the loan.

Finally, the United States will argue that its hands are tied by a 1989 law known in Congress as the Pelosi Amendment, which prevents America's World Bank directors from voting for any loan unless an environmental assessment has been conducted at least 120 days before the vote.

In return, the source said, the United States won a number of concessions from South Africa as well as the World Bank. Among them, South Africa will commit to decommissioning old power plants more rapidly and to incorporating carbon capture and storage technology into any new plants. South African leaders also will promise to explore reducing policy barriers to private investment in clean energy technology.

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