The United States cut a deal yesterday with wealthy countries to curb public financing for coal plants, an agreement the White House called a “major step forward” ahead of U.N. climate change negotiations in Paris this month.
The deal agreed to by members of the Organisation for Economic Co-operation and Development (OECD) marks the first time a large number of nations have set common standards for coal subsidies. The White House estimated yesterday that about 80 percent of coal technology in the current export credit agency pipeline would become ineligible for financing because of the agreement.
“This is a landmark agreement that is the culmination of a long process,” a senior Obama administration official said.
The agreement, obtained by ClimateWire, comes just two weeks before leaders from nearly 200 countries meet in Paris to negotiate a new global climate change accord. Coal restrictions won’t be part of that deal, but many do hope it will set a long-term goal defining how countries will meet a previously stated goal of keeping temperature rise below 2 degrees Celsius.
Environmental activists applauded the agreement but said they were disappointed by changes from an earlier proposal that they argue weakened it.
Made at the behest of Australia and South Korea—which for months fought against any restrictions whatsoever—the final version allows financing for somewhat more efficient coal technology known as supercritical to countries with an electrification rate of less than 90 percent. That, according to International Energy Agency data, includes almost every country in Africa and most of Asia, including coal-hungry India, Indonesia, the Philippines and Pakistan.
“I would describe it as a signal that coal is not welcome in a climate-safe future. But I do think that it’s been severely weakened by Australia and South Korea,” said Alex Doukas, a senior campaigner with Oil Change International.
He and others also noted that the agreement goes into effect in 2017 and won’t be revised for four years, something they called worrisome.
“Already the proposal has no restrictions on ultra-supercritical [technology],” said Michael Westphal of the World Resources Institute. “Having no restriction on ultra-supercritical until 2021 seems like a very long time. Technology moves quickly, and that seems like a generation time for technology.”
‘Last nail in the coffin’
Coal advocates, meanwhile, also expressed disappointment. Benjamin Sporton, CEO of the World Coal Association, said in a statement that high-efficiency coal technology “has a vital role to play” in cutting emissions while delivering energy access, and countries that choose coal must be able to access lower-carbon options.
“Export credits are a key mechanism to ensure that [efficient] technologies are utilized rather than cheaper but higher-emission coal plants,” he said.
“Restrictive funding policy that prohibits support for [efficiency] technology, such as ending export credits for coal-fired power generation, will directly impact economic development and undermines the OECD’s commitment to the proposed Sustainable Development Goals,” Sporton added, referring to anti-poverty targets set by the United Nations.
The Obama administration two years ago set new guidelines to end most overseas coal financing through the Export-Import Bank of the United States and the Overseas Private Investment Corp. Since then, the United States has pushed the issue with dozens of countries and brought the issue before the OECD.
The United Kingdom, France, the Netherlands and several Nordic countries as well as the World Bank have since enacted similar restrictions, most of which allow coal financing only for the world’s poorest nations. Some also allow funding for wealthier nations like India but demand that carbon capture and storage or ultra-supercritical technology be used.
Other major coal exporters, like Japan, resisted, often arguing that China would fill whatever void was left by other countries pulling out of coal. But in September, the United States closed off some of that argument when China, too, agreed to “work towards strictly controlling public investment” of high-carbon projects at home and abroad.
The United States then struck a “finely balanced compromise” with Japan that “sort of unlocked the final stages of this agreement in the OECD,” the administration official said. That compromise, first reported by ClimateWire, ran into stiff opposition from Australia and South Korea (ClimateWire, Oct. 27).
The White House argued yesterday that the exemptions extracted by those two countries in order to cut a final deal were merely “tweaks.” An administration official said the small and medium-sized supercritical coal plants—under 500 megawatts—for which middle-income countries will be allowed financing are “extremely rare” and allowing financing for those does not change the stringency of the restrictions.
Westphal called the overall deal “another nail in the coffin” for coal.
“If it wasn’t for the actions of Korea and Australia, we would have had a much stronger agreement, but it is important to note that it is a significant moment,” he said.
Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500