Institute for Governance & Sustainable Development

Obama climate plan wins overseas support in run-up to G20

September 5, 2013

President Obama’s plan to cut overseas funding of coal plants got the support of five Nordic countries during the president’s trip to Stockholm ahead of the G20 summit. Can China and other emerging economies reduce their coal dependence?

President Obama’s climate plan got a Nordic boost in the run-up to the G20 summit.

A group of five Scandinavian nations agreed Wednesday to objectives that build upon goals outlined in the president’s June speech on climate and energy.

The international push aims to cut carbon emissions domestically and curtail financial support for new coal plants abroad. But developing countries rely heavily on the carbon-heavy fuel, and critics of the plan say it will slow the spread of electricity to regions of the world without it.

“Climate change is one of the foremost challenges for our future economic growth and well-being,” reads the joint statement by Denmark, Finland, Iceland, Norway, Sweden, and the US. “We underscore the importance of continuing to encourage innovative approaches to promoting energy efficiency and clean energy, including renewables, and of taking action on climate change, domestically and internationally.”

While emissions are down in the US and other Western countries, they are ballooning elsewhere. Carbon-heavy coal is fueling the emerging economies of China, India, and other countries – sometimes with the US financing the construction of new plants.

Wednesday’s agreement calls for a major reduction of that financing. It is unclear how much of an effect the new agreement will have on emerging powerhouses. As of late last year, India and China alone were preparing to build some 820 of the 1,200 coal-fired plants planned worldwide, according to World Resources Institute. And in the poorest parts of the world, there is a delicate balance between the push for clean energy and a need for any kind of energy at all. Nearly one-fifth of today’s global population lives without electricity, according to the World Bank.

“For developing countries in desperate need of energy, these decisions have serious consequences,” Milton Catelin, chief executive of the World Coal Association, wrote in an e-mailed statement. “Rather than taking decisions that simply restrict the energy choices available to developing countries, these governments should be supporting steps to increase energy access, while encouraging the use of best available technologies.”

The Export-Import Bank of the United States finances a variety of projects abroad in an effort to promote US exports and job creation. In the past five years it has financed two coal projects. In 2010, it loaned $600 million for a 3,960-megawatt coal plant in India. In 2011, it loaned $800 million for a 4,800-megawatt coal plant in South Africa.

In July, the Bank’s board voted to withhold financing for a 1,200-megawatt coal-fired power plant in Vietnam.

“The Bank’s Environmental Policy contains special guidelines that apply to high carbon intensity projects,” the Bank said in a statement in July. “The guidelines call for the board to decide whether to proceed with such high carbon intensity projects after an initial enhanced environmental assessment has been completed by staff, and before the Bank and exporters expend further resources performing subsequent due diligence on the project’s financial, commercial, legal and technical merits.”

Coal supplies roughly 40 percent of the world’s power and about 44 percent of the world’s energy-related carbon emissions, according to the US Energy Information Administration. China leads the world in coal use, accounting for 47 percent of world consumption. The United States consumes 14 percent of the world’s coal and India uses 9 percent.

But economic development and environmental stewardship need not be mutually exclusive, some say.

“The scaling back of coal financing should be coupled with a scaling up of renewable and efficiency financing,” Jennifer Morgan, director of the climate and energy program at the World Resources Institute, said in a phone interview. “It’s a much more sustainable energy solution for countries that do a lot of importing.”

Wednesday’s agreement echoes the World Bank’s plan to limit investment in fossil-fuel projects. The Bank announced in July it will provide financial support for new green-field coal power generation projects “only in rare circumstances,” such as when basic energy needs must be met.

Those steps and others represent a subtler but potentially more effective piecemeal approach to global climate policy, said Durwood Zaelke, founder and president of the Institute for Governance & Sustainable Development, an advocacy organization based in Washington and Geneva.

“If you think of climate as one monolithic problem – which is often the way it’s approached – and you think of one venue in which to solve it, you create a very complicated structure. That’s what the world has done,” Mr. Zaelke said in a telephone interview. “That has been the old paradigm and it hasn’t worked.”