One of the most important passages in President Obama’s landmark June 25 speech on climate change got almost no attention at the time: his endorsement of “an end of public financing for new coal plants overseas.” If implemented, that pledge would amount to a reversal of decades of U.S. policy and strike a significant blow in the fight to prevent runaway climate change. Without scores of billions of dollars in loans from U.S. taxpayers, most of the coal-fired power plants now poisoning the people of China, India, and other developing countries would never have been built. Much of this money came from the U.S. Export-Import Bank and the U.S.-dominated World Bank, particularly its private-sector lending arm, the International Finance Corporation.
Within a month of Obama’s speech, his statement appeared to have become actual policy. The Export-Import Bank announced it would not underwrite a proposed coal plant in Vietnam. The World Bank declared that henceforth it would finance new coal plants only in “rare circumstances.”
Bruce Rich’s new book had been printed by the time Obama made his climate speech, so Rich can’t be faulted for not mentioning it or the bank’s disavowal of new coal loans. More problematic, however, is that nothing in the book prepares the reader for the possibility of such a consequential about-face. Rich, who has worked for 30 years for various environmental groups, including Friends of the Earth, has long criticized the bank and other lending agencies for pursuing environmentally destructive policies that have done more to fatten the profit margins of multinational corporations than enable the world’s poor to ascend from poverty. In Foreclosing the Future, Rich reiterates his past critiques while adding fresh material on the bank’s actions under Jim Yong Kim, who, with Obama’s endorsement, became its new president in July 2012.
The question now is whether Kim will actually enforce the bank’s ban on new coal loans. Rich points out that Kim was a surprise choice to lead the bank, because in 2000 he published a searing critique of its privatization of health care and environmental services in Peru, where he worked in the 1990s. Kim charged that bank policies had “led to significant ecological degradation from deforestation, oil spills, and poisoned waterways.”
During Kim’s short tenure as president, Rich argues, he has retreated from his previous truth-telling, perhaps most discouragingly when he visited South Africa two months after taking office and endorsed a $3 billion loan to construct what would be the fourth-largest new coal plant on earth, at Medupi. On the other hand, last year Kim did have the bank release a report, Turn Down the Heat, that warned the earth was heading for a catastrophic warming of 4 degrees Celsius.
Rich’s most valuable insights concern how often the World Bank has been informed—by its own internal review boards, no less—that its policies have not reduced poverty so much as hastened environmental destruction and enabled corruption by public officials in developing nations. Nevertheless, the bank has gone on “pushing money out the door”—giving large loans that make it appear to be moving heaven and earth on behalf of the poor but in practice often do the opposite. This is the mind-set that needs changing if the World Bank is to live up to its potential as an enabler of genuine development. It’s heartening to see Kim echoing Obama’s rejection of coal, but as Rich says, previous bank presidents have made similarly encouraging promises that later were abandoned. Continued vigilance is advised.
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