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How Much Coal Can Poor Countries Burn?

The World Bank and other aid agencies struggles with the question of fossil fuels and energy poverty
coal in china



Flickr/ishmatt

The World Bank board of directors could today endorse a sweeping new energy policy that for the first time restricts financing for new coal plants in poor countries, bank officials confirmed.

Meanwhile, the U.S. Export-Import Bank will decide later this week whether to move forward with the proposed financing of a new coal plant in Vietnam, making it the first test of President Obama's vow to end American support for coal projects overseas.

Together, the moves bring to a boil long-simmering issues in global climate change politics. In an era in which scientists say the link between carbon emissions and the devastation brought about by rising global temperatures is incontrovertible, what right should poor countries have to seek aid to burn coal? Meanwhile, what responsibility do wealthy countries -- most of which have been burning coal for decades -- now have in deciding where to put limited public dollars for overseas energy development?

"Africa is still largely underdeveloped, and the barrier to Africa's development consists largely of its energy poverty. So we, too, as Africans, want to get to a state of development, and in getting to that state of development, we would not want to be the sole contributors to mitigating what we haven't caused. I think that is the tension," said South African Ambassador to the United States Ebrahim Rasool.

The World Bank informal discussion will center around a new energy "direction" that lays the groundwork for a new funding blueprint all but eliminating new coal projects from the institution's portfolio. A draft of the document leaked to ClimateWire last month calls for the bank to "cease providing financial support for greenfield power generation projects, except in rare circumstances where there are no feasible alternatives available to meet basic energy needs and other sources of financing are absent."

According to Justin Guay, who leads the Sierra Club's international climate program, that language was massaged at the behest of China. But Guay and two World Bank management officials yesterday said the changes are largely semantic and won't alter the fundamental restrictions on coal.

"Tomorrow's vote starts an inevitable process of closing the door for good on coal finance from international public sources," said Guay. He praised World Bank President Jim Kim for working with countries to find agreement on coal without compromising the heart of the proposed restrictions. The effort is a far cry from the last time World Bank management tried to push through somewhat similar changes, about two years ago, which were stymied by China and a coalition of developing nations.

Europe backs coal restrictions
"The fact they were able to get consensus on severely restricting coal finance to 'rare circumstances' is entirely a reflection of Dr. Kim's leadership," Guay said. "Two years ago, the strategy fell apart at the board level under [former President Robert] Zoellick. Fast forward to today, and the only difference is the fact that Dr. Kim has made addressing climate change his overarching priority."

The effort is still far from a done deal. An adviser to the World Bank's executive director from China Shaolin Yang said yesterday that developing countries still share concerns. The adviser declined to say whether the Chinese government would give the green light to the new restrictions, saying, "We are still waiting for instructions from the capital."

World Bank action comes less than a month after President Obama set in motion rules to limit greenhouse gas emissions from existing U.S. power plants and other measures to reduce the United States' contribution to climate change. At the same time, he called for ending U.S. support for overseas coal except in limited circumstances and urged other nations to do likewise.

The administration will have a chance to back up that statement Thursday when the U.S. Export-Import Bank votes on whether to move forward with financing for a 1,200-megawatt coal plant in Vietnam. Export-Import Bank spokesman Phil Cogan said the board has not yet adopted a policy based on Obama's latest announcement, so the vote on the subcritical Thai Binh II plant will be based on the institution's existing carbon policy. That means that based on the plant's expected carbon intensity, the board could decide whether to impose new analyses, call for additional technologies, mandate offsets or dismiss the project altogether.

"Each board member acts independently," Cogan said. "There hasn't been a formal change in policy, but what informs their decisions is a matter for each of them."

Skip Stephens, communications director for the mining equipment producer Joy Global Inc., which does business with the Ex-Im Bank, said the potential changes to coal policy would harm companies that provide U.S. jobs. "To the extent that we become less competitive in selling or making machinery, that will necessarily have an adverse impact on our ability to compete," he said.

As for the World Bank decision -- which officials said is not actually a vote, since the board typically adopts projects and policies by consensus -- a U.S. Treasury Department spokeswoman declined to comment on the United States' position. Over the past week, though, top officials from a cross-section of nations shared their views on coal financing with ClimateWire.

Will the poor 'pay the price' for the rich?
Christoffer Bertelsen, a senior adviser in the Department for Green Growth in Denmark's Ministry of Foreign Affairs, said his country has been working with others in the northern Baltic constituency to coordinate a position distancing themselves from coal.

"The World Bank has a challenge when they receive applications for loans for coal-fired power plants from countries with heavy coal resources. However, the public money and publicly supported institutions must pave the way for cleaner solutions. It's a must," he said. Bertelsen said he agreed that donor nations should end support for coal but said there must be an exception for the poorest countries where no cleaner alternatives are economically viable, saying, "You need to be pragmatic."

That same sentiment was echoed by other donor nations. Jochen Flasbarth, president of the German Federal Environment Agency, said in a statement to ClimateWire that Obama's call to end most coal financing "is an important and necessary step to reduce the world's greenhouse gas emissions. In order to avoid the worst consequences of climate change, we have to find ways to leave fossil resources untouched. We believe that not only domestic strategies but also foreign aid should focus on increasing energy efficiency and renewable power generation in order to establish sustainable energy systems."

A spokesman for the Embassy of France called Obama's directive "fully consistent with France's approach" and noted that President François Hollande said recently that he wants the French Development Agency "to pave the way with respect to giving priority to the use of renewable energy and refusing to fund projects that do not seem to match our goals. I am notably thinking of coal-fired power plants that don't use CO2 capture and storage technology." The agency then adopted a resolution to that end.

Lianne Sleutjes, a spokeswoman for the Ministry of the Environment in the Netherlands, said her government policy is that the "World Bank should stimulate the transition to a low-carbon economy."

"There should only be an exception for the poorest countries and also when there is an immediate shortage, with always the condition that there is a transition to renewable energy," Sleutjes said.

And a spokesman for the U.K. embassy acknowledged that "there may be limited cases where coal may be appropriate, as long as it uses the best available technology appropriate for that country."

Developing nations and changing attitudes
Developing nations have been harder to pin down on the coal question. Representatives from India, China, Pakistan, Haiti, Kosovo and Brazil either did not respond to requests for comment or declined to discuss the issue.

Only South African Ambassador Rasool, whose country was at the epicenter of the World Bank's last major battle over coal, agreed to speak to the sensitive topic. He noted that developing countries welcomed Obama's position on climate change but said nations still fear they are being made to "pay the price" for wealthy countries' rampant carbon emissions.

Rasool said what the government learned from its contentious but sucessful 2010 bid before the World Bank to fund the 4,800-megawatt Medupi power plant and a later also-successful request for U.S. Export-Import Bank financing for a separate Kusile power plant was that international donors will be demanding that coal plants have carbon capture and storage technology.

"By the time we came to the U.S. to raise money for Kusile ... we understood that the mood around funding carbon emissions had changed in the world, and unless we were going to be conscientious about it and plan for it, we would have a difficult time raising the capital," Rasool said. "That is the only way that the abundance of coal we have can be harnessed with a good conscience. One has to plan for clean coal technologies, and I think there is an appetite in the world to invest in carbon capture and storage." Meanwhile, Rasool noted, South Africa has a 40 percent renewable energy target by 2030.

Sunita Dubey, a manager on climate justice and energy for Groundworks, a South African nonprofit, said she believes developing countries remain under strong pressure to develop with coal but believes attitudes are slowly changing. She gave credit in part to Obama's most recent actions on climate change and widening acceptance of the economic feasibility of renewable energy.

"It used to be 'Who are you to tell us what to do when you don't do anything?' and I think that argument is falling apart for a lot of emerging economies," she said. "They cannot keep hiding behind the need to grow and hiding behind the poor."

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

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