Coal, Power, and the World Bank
It’s no surprise that the emerging economies, notably China, India, South Africa, and Brazil, are asserting themselves more in multilateral institutions like the World Bank. The divide between the Bank’s donor countries—who control most of the voting shares—and its lenders has grown increasingly sharp in recent years. In April, the Bank tweaked its voting shares ...
It's no surprise that the emerging economies, notably China, India, South Africa, and Brazil, are asserting themselves more in multilateral institutions like the World Bank. The divide between the Bank's donor countries—who control most of the voting shares—and its lenders has grown increasingly sharp in recent years. In April, the Bank tweaked its voting shares to give the developing world more say, but the governance tension within the institution has not eased significantly.
It’s no surprise that the emerging economies, notably China, India, South Africa, and Brazil, are asserting themselves more in multilateral institutions like the World Bank. The divide between the Bank’s donor countries—who control most of the voting shares—and its lenders has grown increasingly sharp in recent years. In April, the Bank tweaked its voting shares to give the developing world more say, but the governance tension within the institution has not eased significantly.
The recent clash over a Bank loan to South African utility provider Eskom for the Medupi power plant was an important test case. The United States and several major European countries objected to funding a coal-burning plant at a time when the Bank is trying to green its portfolio. The project’s backers pointed out that Western countries continue to build coal plants at home and that the Eskom plant is critical for economic development in South Africa.
The vote on the project produced a fire drill inside the Obama administration and Congress. Key members of the Congressional Black Caucus supported the project and butted heads with House speaker Nancy Pelosi and other climate change hawks, who insisted that U.S. funds should not support coal projects through the Bank. South Africa reportedly lobbied the administration furiously. And at the eleventh hour, new U.S. executive director Ian Solomon was instructed to abstain rather than oppose the project.
Now, there’s a twist. Using established Bank procedures, several affected communities—advised by major environmental groups—have filed a complaint based on health and environmental concerns, as well as apparent irregularities surrounding the project. Swirling in the background are allegations of corruption involving the ANC, South Africa’s ruling party. The Bank has created an inspection panel, which should report in the next few months. Mark Kresowik, who’s followed the issue closely at the Sierra Club, doubts that the inspection panel will unravel the project, but he does hope that it will make the Bank think twice about any future such projects.
A few years ago in FP, Sebastian Mallaby described clashes between NGOs and the Bank over projects in China and east Africa. In those cases, developing-country governments saw coveted World Bank projects held up or even scuppered because of civil society activism, often channeled through members of Congress (Mallaby thought much of that activism was misinformed). With major developing countries increasingly powerful in the Bank—in influence, if not yet voting share—those fights may now reach a new level of intensity.
David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist
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