WORLD BANK TO LIMIT FINANCING OF NEW COAL PLANTS

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17 july 2013

[4C Note: After the article posted here, we copy a similar article by the same reporter from July 16th, which discusses more broadly the reactions of governments and environmentalists to the World Bank's turn away from coal.]

World Bank approves landmark coal restrictions

Lisa Friedman, E&E News, Wednesday, July 17, 2013

The World Bank board of directors yesterday embraced strict limitations on financing new coal plants, effectively closing the door on an issue that has vexed the global development lender for years as it struggled to balance its mission of eradicating poverty with a growing concern for climate change.

The new policy endorsed by the United States, China, India and others instructs the World Bank Group to provide financial support for new coal projects "only in rare circumstances." That includes cases in which a country has "no feasible alternatives to coal" for meeting basic energy needs and no other financing options available. It's a stark departure from its current guidelines, which say coal will continue to play an "important role" in the primary energy mix of developing countries.

"I am delighted that the World Bank Group board today supported a pragmatic and balanced approach to investments in the energy sector," World Bank President Jim Yong Kim said in a statement to ClimateWire. "The paper the board discussed will serve us well as we work to meet countries' needs for energy access, increased energy efficiency and more investment in renewable energy."

The bank's sweeping "Directions for the World Bank Group's Energy Sector" emphasizes bringing energy access to the estimated 1.2 billion people living without electricity and 2.8 billion without modern cooking facilities. It promises financial solutions for the most feasible energy options in poor, fragile and conflict-ridden states. It embraces renewable energy, energy efficiency and off-grid technology while also vowing to increase assistance for natural gas and large hydropower development.

But it's the shift on coal that has caused the most headaches at the bank. The process of officially phasing out coal lending, which began under former World Bank President Robert Zoellick, was stymied by China, Brazil and developing countries and eventually abandoned. Bank leaders and environmental activists credited Kim's advocacy as well as a heightened awareness of clean energy as a development issue with bringing about a consensus decision before the board.

"We're turning a page," said Rachel Kyte, vice president of sustainable development at the World Bank. She said the board discussion yesterday had an "extremely different tenor" than discussions in years past, saying that while countries differed on energy preferences and other issues, those objections this time were no longer deal-breakers.

"This is the first time in a very long time that you have an unequivocal statement with complete support of the board. All this question mark and hesitation over the years is gone," Kyte said. "It puts energy at the heart of the poverty and prosperity challenge we've set for ourselves, and given that climate change is reshaping development, we have to do that in that context.

"What I'm really looking forward to is that with this kind of clarity, our staff can just get on with conversations with clients about where we can help," she said.
Coal was 'a distraction' from climate work

The policy did undergo some last-minute tweaks. A draft leaked to ClimateWire and other outlets last month said the World Bank Group "will cease providing financial support" for greenfield coal generation except in limited circumstances. But the version that won the board's blessing yesterday was changed at the behest of China to positive verbiage, saying the bank "will provide financial support for greenfield coal power generation projects only in rare circumstances."

Analysts called it a semantic difference, though sources said the United States raised an objection and urged the more strongly worded version before agreeing to the policy.

"The World Bank's strategy to enhance energy access and energy security by promoting renewable energy sources and limiting support for coal-fired power plants to rare circumstances is a significant step forward, consistent with the direction and vision of President Obama's Climate Action Plan. We welcome this move and Dr. Kim's leadership on addressing climate change," Lael Brainard, undersecretary for international affairs at the U.S. Treasury Department, said in a statement.

Dan Kammen, a professor at the University of California, Berkeley, who previously served as the World Bank's renewable energy czar and helped write the previous, stalled coal-ending policy, called a vote to restrict coal "an excellent and critically needed step to put into practice the commitment to avoid warming of 4 degrees [Celsius], and ideally get the bank on a path where lending is consistent with a maximum of 2 degrees warming."

Scott Morris, a visiting fellow at the Center for Global Development and former deputy assistant secretary for development finance and debt at the U.S. Treasury Department under Obama, called the decision "a political success."

He noted that Zoellick, frustrated at seeing the former policy blocked, imposed a de facto ban on coal, and with the exception of a looming vote on a 480-megawatt plant in Kosovo, the bank has effectively restricted coal even without a formal policy. While some over the years have argued that the bank could continue operating that way, Morris said it was untenable.

"The bank has to be guided by rules and strategy, so in that sense, it's important for them to move forward," he said. "The coal debate was really a distraction from the positive agenda the bank could have on climate."

It remains to be seen what the bank will do in Kosovo, a project that the United States largely forced upon it. Kyte, for her part, was circumspect, saying the project is still under preparation and "if it comes forward for further decision, it will be prepared in line with the directions paper."
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World Bank, U.S. Ex-Im Bank facing showdowns over coal


Lisa Friedman, E&E reporter, Tuesday, July 16, 2013

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 Fran├žois 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."


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