WORLD BANK TO LIMIT COAL-POWER FINACING TO RARE CIRCUMSTANCES

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26 june 2013

Coal-Power Financing Restricted in World Bank Energy Policy

By Sandrine Rastello Bloomberg, Jun 26, 2013

The World Bank plans to limit its financing of coal-fired power plants to “rare circumstances,” according to a draft strategy that reflects the lender’s increased focus on mitigating the effects of climate change.

The Washington-based lender will help countries find alternatives to coal, according to the draft obtained by Bloomberg News which lays out the bank’s policy on lending to its 188 member countries. The paper, which is subject to revision, describes universal access to energy as a priority for the World Bank’s mission to help end poverty.

The bank “will cease providing financial support for greenfield coal 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 the report. Greenfield is a term for a new facility.

“Private sector finance will be the preferred option, but where the World Bank Group does engage, the existing screening criteria for coal projects will apply,” according to the undated report, titled “Toward a Sustainable Energy Future for All: Directions for the World Bank Group’s Energy Sector.”

The World Bank committed $8.2 billion to finance energy projects in the 12 months through June 2012, according to its website. Of that, $3.6 billion was for renewable energy.

July Discussion

World Bank spokesman Frederick Jones said the paper was submitted to board members ahead of discussion in July. The bank’s objectives include “universal access to electricity and safe household fuels,” doubling the share of renewable energy in the global energy mix and doubling the rate of energy-efficiency improvement, he said in an e-mail.

The guidelines, circulated to member countries two years after a failed attempt to limit coal financing to the poorest countries, reinforce President Jim Yong Kim’s pledge to ease the impact of climate change. The bank has not financed a major coal project since 2010, though it is studying whether to offer partial guarantees for a lignite-fired power plant in Kosovo.

Efforts to mitigate the risks associated with climate change were reinforced yesterday by President Barack Obama’s plan to curb carbon emissions, which he called a central global challenge of the 21st century, in the U.S.

‘Reliable’ Supply

The World Bank “recognizes that each country’s transition to a sustainable energy sector involves a unique mix of resource opportunities and challenges, prompting a different emphasis on access, efficiency and renewable energy,” according to the draft. “Every effort will be made to minimize the financial and environmental costs of expanding reliable energy supply.”

The U.S. is the bank’s largest shareholder. A representative of the U.S. mining industry said fewer coal plants around the world means fewer American jobs.

“To the extent that you’re preventing the world from using coal, you’re preventing the U.S. from creating jobs to mine it and export it,” said Luke Popovich, a spokesman at the National Mining Association in Washington. “The economic pain of it will fall disproportionately on working people.”

Popovich said the U.S. will lose coal mining jobs as a result of a smaller export market. The association’s members include Peabody Energy Corp. (BTU), the largest U.S. coal producer.

The U.S. exported a record 125.7 million tons of coal last year, the third straight year of more than 100 million tons of exports of the power-plant fuel and steelmaking component, according to the U.S. Energy Information Administration.

To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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