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This is a joint posting with Joel Meister.

Even as President Obama breaks new ground this week on U.S. environmental policy, an upcoming vote by country members of the World Bank’s Clean Technology Fund Trust Fund Committee may perpetuate business-as-usual policies that subsidize coal-fired power plants and contribute to global warming. On Friday morning, the committee is scheduled to consider and approve investment criteria that include coal-fired power projects among “clean” technologies that are eligible for billions in MDB financing.

The bank rationalizes its decision to finance coal-fired projects by requiring the use of technologies that are somewhat more efficient than conventional coal-fired plants in developing countries. But this is only a marginal improvement: Large plants that meet the proposed CTF requirements will still be enormous emitters of greenhouse gases. So, as I testified before Congress last summer, funding any coal-fired project undermines the basic rationale for the CTF. This includes plants that are supposedly “CCS (carbon capture and sequestration) ready,” because scalable CCS technology will not be ready for at least a decade, at a cost that may prove prohibitive, with risks that may prove untenable. And we have to start limiting emissions now, not ten years from now. To fulfill its mandate, the CTF must focus on making renewable energy from solar, wind and other sources cheaper than energy from fossil fuels (particularly coal). If this does not happen, poor countries will be very unlikely to develop along the low-carbon growth path that the bank itself now touts.

As my colleague Robin Kraft has recently noted, the bank’s perverse energy policy has now created the ultimate embarrassment for the bank in Gujarat. This Indian state has set a goal of 7,000 MW of renewable energy capacity in the next four years, and a private firm, AES, has announced its intention to install a 1,000-MW solar facility as part of the program. Meanwhile, in the same state, the bank’s International Finance Corporation is investing $450 million in a coal-fired power plant that will emit more than 25 million tons of CO2 per year for at least 25 years!

Consider the tragic irony here: The publicly-funded World Bank is investing in coal-fired power for India, claiming that solar power is “too costly.” Meanwhile AES, a private, profit-seeking firm, is going heavily into solar power for India and planning to make money. This is obviously absurd.

President Obama shows every sign of being serious about international action on climate change. In light of debacles like the Gujarat affair, the President, his climate team, and their Congressional allies will undoubtedly think long and hard about whether US financial support for clean technology should be entrusted to the World Bank’s CTF. And if the U.S. walks away from the table, other countries may well follow. Time is short, but the World Bank can still act to prevent this from happening. In fact, it can start this week -- by deleting coal-fired power (including “CCS ready” power) from the set of candidates for CTF funding.

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CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.