POWER September 2013 - 8

Funding for Coal Plants Overseas Curbed
on Climate Concerns
In his climate change speech earlier this summer, President
Obama announced a major policy shift: The U.S. government
will end financing for virtually all new coal power plants oversees.
In the wake of that policy pivot, the U.S. Export-Import
Bank has dropped plans to fund a 1.2-GW coal plant in Vietnam,
the World Bank adopted a new energy strategy that would restrict
financing of coal plants, and the European Investment
Bank (EIB) said it would screen out investments whose carbon
emissions exceed its threshold.
In his June 25 speech at Georgetown University, President
Obama outlined a number of executive actions to combat and
prepare for climate change, including a directive to the Environmental
Protection Agency to complete issuance of a final rule
to limit greenhouse gas emissions at new power plants and to
draft another rule for existing power plants. The president also
prominently lauded increased U.S. production of natural gas and
renewable power in lieu of carbon-heavy coal power. Then he
added: " Today, I'm calling for an end to public financing for new
coal plants overseas unless they deploy carbon-capture technologies,
or there's no other viable way for the poorest countries to
generate electricity. "
In mid-July, in the first such decision since the speech, the
government-backed Ex-Im Bank voted to stop consideration of
financing for a plant in Vietnam, rejecting loans to the Thai
Binh II coal-fired power plant. That decision sets a precedent
for the independent self-sustaining agency that has provided
financing for a handful of colossal coal plants, including $805
million in 2010 for Eskom's 4.8-GW Kusile Power Plant in South
Africa and $917 million in 2011 for Reliance Power's 4-GW
1. Confining coal. The World Bank and the U.S. Export-Import
Bank have separately funded two massive coal-fired power plants
owned by Eskom that are under construction in South Africa, including
the 4.8-GW Kusile Power Plant in Mpumalanga and the 4.8-GW Medupi
power plant (shown here) in Limpopo. In July, though the country's
power supply is still under pressure, Eskom confirmed the start of the
first of six units at the Medupi plant would likely be delayed from December
2013 to the second half of 2014 due to technical and labor
challenges. The Kusile plant is slated to come online in 2014. In 2008,
power shortages forced the utility to slash power to gold and metal
mines, sending the rand plummeting by 15%. Courtesy: Eskom
Sasan plant in India. In both instances, the agency said it was
creating " opportunities " for U.S. companies in developing areas
of the world.
Even before the president's speech, the World Bank was reportedly
considering a discussion draft of a new energy strategy, and
in mid-July, despite previous proposals to restrict coal financing
in emerging markets like China and Brazil, the Washington-based
bank's board agreed to limit financing of coal-fired power plants
in " rare circumstances, " and only to countries that have " no feasible
alternatives " to coal. Meanwhile, the World Bank reversed
a 1990s decision to abandon support for mega-dam projects for
their potential to displace communities, voting instead to increase
support for hydropower.
Experts noted that the World Bank's new strategy remains untested,
however. The international financial institution committed
to the reduction of poverty last approved funding in 2010 for
another massive coal-fired plant under construction-the 4.8-GW
Medupi power plant (Figure 1) in the northern Limpopo region
of South Africa-despite environmental concerns voiced by the
U.S., the Netherlands, and the UK. But now the bank must decide
whether to provide loan guarantees to the 600-MW lignite-fired
Kosovo Power Project, a power source that the World Bank itself
has admitted could boost prosperity in the war-torn region. The
Eastern European state remains one of the poorest countries in
Europe, the bank acknowledges, noting that nearly a third of
Kosovo's people live on less than $1.61 per day. Meanwhile, the
bank says, " businesses regard the unreliable electricity supply as
a major obstacle to their operations and a constraint to investment
and business expansion. "
Barely a week after the World Bank's decision, the EIB, Europe's
leading development bank, announced it would introduce
a new emissions performance standard and fund only energy
projects whose carbon emissions fall below that threshold. The
standards mean that new coal- and gas-fired plants eligible for
funding could emit no more than 550 grams of carbon dioxide per
kilowatt-hour (gCO2
/kWh).
For comparison, the International Energy Agency estimated
/kWh; for ultrasupercritical plants with
in 2011 that the emissions intensity of conventional coal-fired
power plants is 830 gCO2
pulverized coal combustion, it is 770 gCO2/kWh; and for com/kWh.
The threshold reflects " existing [European Union
bined heat and power plants co-fired with biomass, it is 550
gCO2
(EU)] and national commitments to limit carbon emissions, "
the EIB said.
The announcements have been lauded by environmentalists,
who have fervently criticized the international aid organizations
for providing billions to finance plants they say counter efforts to
curb climate change. Yet, a number of development experts argue
the measures create a direct conflict between development aims
and climate aims. According to Todd Moss, vice president for programs
and a senior fellow at the Center for Global Development,
electricity is one of the top constraints on business growth. An
emissions cap could " effectively deny access to basic electricity
for the world's most vulnerable while making no meaningful dent
in global emissions, " he says. " It also smacks of hypocrisy to impose
caps on say, Ethiopia (which emits less than 1% of the per
capita emissions of the United States) or Nigeria (less than 4%),
when we have no such caps on ourselves. This is, simply put, no
way to fight climate change. "
8
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POWER September 2013

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