$3.75 Billion Coal Plant Is Just The Beginning

Last Friday, in a move that surprised no one, the World Bank approved a $3.75 billion loan to South Africa for a coal fired power plant that will spew 25 million tons of carbon dioxide into the atmosphere per year. In one fell swoop, that's equivalent to adding more than two million SUVs to the world fleet.

Defenders of the plant argued that South Africa, which had rolling blackouts in 2008, desperately needs the new plant to allow continued economic growth and to alleviate poverty. There's a lot going on here to distract an observer from the real issue, including politics — the president of the World Bank is a neoconservative appointed by the Bush administration.

But the larger and more important theme in this sucker-punch to efforts to stop burning coal is that the world's desperately poor — remember, 2 billion people live on less than $2 a day, and 1 billion live on less than a dollar — aren't about to stop using the world's cheapest source of energy just because it will ravage their environment in the long term.

This is the thing that energy analysts get that environmentalists and climate change activists do not:

"It’s hard to win a fight against a cheap BTU," says Gregor Macdonald, an analyst and energy investor.

From 2000 to 2007, China doubled its use of coal, to 1311 million tons of oil equivalent. India has lots of coal. Russia has an unbelievably huge amount. China has plenty. And of course South Africa has lots of coal — which is precisely why energy from a coal fired power plant will cost that country about half what energy from wind farms would.

Here in the U.S., almost half of our electricity still comes from coal. That isn't to say that we won't move away from it in the future, but we're lucky — we are insanely rich compared to the rest of the world.

The simple fact of the matter is that on a planet with 7 billion, going on 9 billion people, where nearly a billion people are hungry, economics dictate that development will be fueled by the cheapest thing going, and that's coal.

If we're lucky, we'll get an energy breakthrough that's even cheaper than the black stuff, or enough national mandates taxing carbon or coal that its costs to the environment are reflected in price per ton. But that's a tough sell — maybe even an impossible sell — in the developing world.

As Gregor put it, even if the U.S. were to stop using coal tomorrow, based on current growth trajectories in coal use for the rest of the world, countries outside the U.S. would make up 100 percent of that lost coal usage within 5 years. Given that coal is the enemy of the human race, that's a scary thought.