The Trouble With the Global War on Coal

A new U.S. strategy aimed at limiting public investment in coal-fired power plants worldwide may do little to slow construction, but may anger allies and developing nations alike.

TO GO WITH AFP STORY BY MATHILDE RICHTER A power plant run by coal from the brown coal open cast mine Garzweiler is pictured on August 5, 2013 in Immigrath, western Germany. The small town Immerath and surrounding towns will be wiped off the map to allow energy giant RWE enlarge the huge open pit mine Garzweiler. 
AFP/Getty Images
Coral Davenport
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Coral Davenport
Oct. 31, 2013, 5 p.m.

On Tues­day af­ter­noon, thou­sands of mine work­ers from Ken­tucky and West Vir­gin­ia ral­lied out­side the Cap­it­ol, with signs protest­ing what crit­ics call Pres­id­ent Obama’s war on coal. Just down Pennsylvania Av­en­ue, in a large, richly ap­poin­ted of­fice on the second floor of the Treas­ury De­part­ment, Lael Brainard, Treas­ury’s un­der­sec­ret­ary for in­ter­na­tion­al af­fairs, briefed re­port­ers on plans for end­ing U.S. sup­port for pub­lic fin­an­cing of coal-fired power plants around the globe — es­sen­tially tak­ing Obama’s fight against coal pol­lu­tion from Wash­ing­ton to the world.

The move is the latest in a series of ag­gress­ive ex­ec­ut­ive-branch ac­tions the pres­id­ent is push­ing as he seeks to fight cli­mate change without help from Con­gress. While the ad­min­is­tra­tion chafes at the charge that it’s wa­ging a war on coal, the fact is that coal-fired power plants are the biggest con­trib­ut­or to glob­al warm­ing, and any ef­fect­ive cli­mate policy will ne­ces­sar­ily tar­get that en­ergy source. In Septem­ber, the En­vir­on­ment­al Pro­tec­tion Agency is­sued a draft reg­u­la­tion that would re­quire new U.S. coal plants to emit just half the car­bon pol­lu­tion of ex­ist­ing plants. The rule is ex­pec­ted to freeze con­struc­tion of do­mest­ic coal-burn­ing fa­cil­it­ies.

When it comes to such plants abroad, the U.S. alone can’t freeze pub­lic fin­an­cing. But it can wield sig­ni­fic­ant lever­age as a seni­or vot­ing board mem­ber on pro­jects fin­anced by the World Bank, the Asi­an De­vel­op­ment Bank, the Inter-Amer­ic­an De­vel­op­ment Bank, and the Afric­an De­vel­op­ment Bank. And Treas­ury of­fi­cials have already star­ted reach­ing out to en­sure that oth­er coun­tries, par­tic­u­larly in Europe, will join the U.S. in those votes, block­ing the pub­lic funds. “What we’re try­ing to do is to use the lever­age as­so­ci­ated with pub­lic fin­ance to help de­vel­op­ing coun­tries move in the dir­ec­tion of clean­er en­ergy,” Brainard said.

The idea is that if these mul­ti­lat­er­al in­sti­tu­tions con­sist­ently veto funds for coal plants around the world, it will cre­ate a ripple ef­fect, ul­ti­mately dis­suad­ing private in­vestors from coal as well. “If you have U.S. money go­ing in­to a pro­ject, it gives a stamp of ap­prov­al. And it sends a strong sig­nal that if the U.S. checks out of a par­tic­u­lar pro­ject, it’s not a good idea,” said Athena Balles­ter­os, dir­ect­or of sus­tain­able fin­ance pro­grams for the World Re­sources In­sti­tute, a think tank that works closely with the Obama ad­min­is­tra­tion on cli­mate-change policy.

About 1,200 coal-fired plants are now be­ing pro­posed glob­ally, ac­cord­ing to the in­sti­tute’s es­tim­ates. Those pro­jects are spread across 59 coun­tries, with the vast ma­jor­ity — 76 per­cent — in China and In­dia. Coal-burn­ing plants have been pro­posed in 10 de­vel­op­ing coun­tries, in­clud­ing Cam­bod­ia, Guatem­ala, Oman, Seneg­al, and Uzbek­istan.

Ex­perts es­tim­ate that only 10 per­cent of those plants are be­ing built with pub­lic fin­an­cing. So even if the United States suc­ceeds in get­ting the glob­al fin­an­cial in­sti­tu­tions to block the coal fund­ing, the im­me­di­ate ef­fect won’t be enough to trans­form the world’s en­ergy mix.

Then there’s ques­tion of whom the Treas­ury policy hurts. The U.S. coal in­dustry raged against it, nat­ur­ally. The sec­tor is already suf­fer­ing, thanks to the new EPA rules and a shift in mar­ket forces. A glut of cheap nat­ur­al gas, a fuel source with just half as much car­bon pol­lu­tion, has left coal com­pan­ies hop­ing that ex­ports would be their life­line. “It will re­strict the mar­ket for U.S. coal and for min­ing ma­chinery,” com­plained Luke Pop­ovich, a spokes­man for the Na­tion­al Min­ing As­so­ci­ation, adding that the rules could hurt Amer­ic­an com­pan­ies such as Cater­pil­lar, which ex­ports coal-min­ing equip­ment. The move will prob­ably also pro­voke un­happy push­back from the world’s oth­er top coal ex­port­ers — Aus­tralia, In­done­sia, Rus­sia, and South Africa.

But while the policy could hurt the world’s richest coal com­pan­ies, it may also af­fect the world’s poorest pop­u­la­tions. About 1.2 bil­lion people live without ac­cess to elec­tri­city, and in many of the de­vel­op­ing na­tions where they live, the like­li­est pro­spect for ac­cess to power is cheap coal, which has tra­di­tion­ally been fun­ded with a help­ing hand from fin­an­cial in­sti­tu­tions such as the World Bank.

Gov­ern­ments of de­vel­op­ing na­tions that des­per­ately need cheap elec­tri­city are likely to re­spond an­grily to the moves. In 2011, after the U.S. is­sued earli­er, and milder, guidelines aimed at cut­ting glob­al fin­an­cial sup­port for new coal plants, a group of de­vel­op­ing na­tions, in­clud­ing Brazil and China, wrote to the World Bank lam­bast­ing the pro­pos­al.

This time around, Treas­ury of­fi­cials have launched what one per­son close to the pro­cess de­scribed as a “mega-out­reach” ef­fort aimed at as­sur­ing poor, en­ergy-starved na­tions that the in­tent is not to block their ac­cess to en­ergy, but rather to en­sure that the money tˆhat would have gone for coal power will in­stead be re­dir­ec­ted to re­new­able en­ergy, such as wind and sol­ar.

One in­ter­na­tion­al en­ergy ex­pert is du­bi­ous that this ar­gu­ment will fly. “It’s un­der­stand­able that we don’t want to use gov­ern­ment money for high-car­bon sources, in the hopes that it will steer gov­ern­ments to low-car­bon sources. But for the South Africas and In­di­as that have cheap coal, but don’t have ac­cess to cheap nat­ur­al gas … it’s not a very ef­fect­ive strategy as re­gards en­ergy poverty,” said Dav­id Gold­wyn, an en­ergy con­sult­ant and a former seni­or en­ergy of­fi­cial in Obama’s State De­part­ment.

Gold­wyn spec­u­lates that al­though the new policy doesn’t spe­cific­ally men­tion nat­ur­al gas, many poor coun­tries will do the same as U.S. com­pan­ies are do­ing, and turn to that fuel, rather than re­new­ables, to gen­er­ate their elec­tri­city. As it hap­pens, the State De­part­ment has re­cently launched a push to boost nat­ur­al-gas ex­ports and pro­mote U.S. nat­ur­al-gas-pro­du­cing com­pan­ies abroad. Which means that Amer­ic­an en­ergy com­pan­ies could stand to be­ne­fit from the new policy — even if that was nev­er the in­tent. P

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