By Pratap Chatterjee
SAN FRANCISCO, Aug 2 1996 (IPS)

The World Bank is stepping up funding for coal mining despite growing agreement among scientists that burning coal is a major contributor to global warming.

The effort is designed to make the sector profitable, environmentally sensitive, and socially responsible.

After making several loans to India and China for new mining technology about a decade ago, the Washington-based institution mostly overlooked funding for coal mining.

But in the last three months, the Bank has approved 588 million dollars in loans to restructure the coal mining industries in India and Russia. It is now helping to raise another 1.5 billion dollars for the two countries as well for as Mongolia, Poland, and the Ukraine.

Last week, Bank staff put together an internal paper for discussion among senior management about supporting coal mining around the world. A more official policy may be published later this year.

This new trend worries activist groups who point out that late last year, the Inter-governmental Panel on Climate Change confirmed that the planet was getting hotter as a result of the burning of fossil fuels like coal, petroleum, and natural gas.

“Yes, a lot of knowledge has been built up on the impact of coal in the last 15 years, but we are taking this into account,” says Peter van der Veen, who is responsible for industry and mining policy for the Bank.

One month ago, Van de Veen also helped organise a roundtable on “clean coal” for industry and governments at the Bank’s headquarters. “It’s true that there is no such thing as clean coal. But coal is not going to go away, so we want to make it less damaging by doing the right thing,” he told IPS.

Towards this end, the Bank lent India 63 million dollars in May to ensure that Coal India, the state-owned company which extracts 90 percent of the country’s coal, can “deal more effectively with environmental and social issues.”

And in June, the Bank lent Russia 25 million dollars to evaluate the environmental and social impact of coal mining there and to retrain miners who are expected to lose their jobs in coming months.

Coupled with both these loans, however, were major capital injections to increase profits and production at the mines. The Russians were loaned 500 million dollars to shut down half of their 261 mines and increase production at others to compensate. If the project works well, another 250 million dollars in loans could be approved soon, say Bank staff.

Next January, the Bank is expecting to make a 500-million- dollar loan to India to increase production at 25 coal mines which will push production levels in the country from 8.6 million to 104.6 million tons a year. Bank staff say that the Japanese Export- Import Bank has agreed to co-finance the India coal project with another 500 million dollars in loans.

Meanwhile the Bank is considering lending Poland 150 million dollars to restructure its coal mining industry while the Ukriane is negotiating some 96 million dollars in new loans for coal mines and Mongolia has applied for 35 million dollars for similar activities.

Environmentalists say that this is misguided at the very least.

“The Bank is doing barking up the wrong tree,” says Danny Kennedy, a campaigner for Project Underground, a new California- based group that investigates the human rights and environmental impacts of mining and oil and gas exploration around the world.

“Instead of supporting renewable energy like wind and solar or energy efficiency, the Bank is increasing funding for fossil fuels,” he says. “It’s not just stupidity but arrogance in the face of scientific consensus and in face of their own policies.”

Kennedy points out that the Bank is ignoring the success of its own loans for renewable energy in India where a small loan for 30 megawatts in wind power two years ago has already attracted co- financing for 600 megawatts in similar projects. “Why not do this in the former Soviet Union?”

“If you do a simple calculation on the back of an envelope you will see that wind and solar energy will not meet energy demands in India the next 20 years,” says one senior Bank staffer in the India country department. “Energy efficiency means new equipment and companies are unwilling to invest in new equipment.”

The positive impact of these loans, say Bank staff, is that they will help cut budget deficits. For example Russia is estimated to spend some 2.2 billion dollars in annual subsidies for state-owned mines, while India is estimated to spend 1.5 billion dollars in subsidies for the coal industry.

Much of these subsidies are used for wages for the 650,000 coal miners in India and 800,000 coal miners in Russia. The Bank points out that in Russia the loans are partly intended to train miners for new jobs as old inefficient or exhausted mines are shut down.

In India, the Bank has convinced the government to liberalise domestic coal prices to allow them to rise to market levels and provide more money for the government. In addition, demand for domestic coal is expected to slow somewhat because the government has slashed tariffs on foreign coal from 85 percent to 35 percent.

“It seems clear that this money is intended to break the back of the Russian unions which have been leading massive strikes in the last year for non-payment of wages,” says Will Colett of the Citizens’ Coal Council in Washington.

“Coal mining may become profitable for private companies, but it has never brought prosperity to any communities here or in any other country,” he adds. “Coal towns pay higher taxes, have lower incomes and major environmental problems. The Bank’s answer appears to be simple. Let’s sell it to the Indians. They’ll buy anything.”

The Bank’s support for other parts of the coal industry such as power plants continues unabated. For example, the Bank is now considering lending Ukraine 250 million dollars to rehabilitate two coal-fired power plants.

China is meanwhile waiting for approval for a 400-million- dollar loan to set up two, 600-megawatt power plants in inner Mongolia to provide power to Beijing, a follow-up loan to the 350 million dollars provided by the Bank in 1994 for a coal-fired power projects in Jiangsu province.

Another big borrower is Indonesia. The country borrowed 424 million dollars from the Bank in 1992 for 1,800 megawatts in new coal-fired power. The same year, the Bank approved 400 million dollars in loans to add 2,000 megawatts of capacity to coal-fired power plants in Central India.

Activists like the New Dehli-based Public Interest Research Group (PIRG) say that in addition to environmental problems, the loans have promoted human rights abuses.

In late June, Madhu Kohli of PIRG issued an urgent call for help when villagers in Mithini in central India were beaten up and arrested for refusing to leave their homes to make way for a fly- ash pond.

K.K. Sinha, a government official in India who works at the project site, says that the villagers have only themselves to blame.

“The police requested them not to violate the law and allow legal work to be carried out. On their refusal, 13 males were arrested and remanded to police custody. Some of those ladies who were obstructing and were also arrested at site, were later released by the police same day,” he wrote to IPS.

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