U.S. anti-coal dominoes hit BRICS wall, other skeptics
WASHINGTON (Reuters) - A year ago, U.S. President Barack Obama sought to mobilize the nation behind a grand plan: fight climate change by slashing carbon pollution at home, while prodding other countries to follow.
A key part of that strategy was for the United States to stop using public money to finance the construction of most coal-fired power plants abroad, seen as one of the main causes of rising pollution from heat-trapping gases.
But a year later, momentum has stalled on the Obama administration's plan for a global "domino effect" that would choke off financing for coal projects from public lending institutions around the world. Some key lenders continue to finance coal projects, and the Export-Import Bank of the United Stastes has put its ban on hold.
In the past year, Japan has approved funding for three major coal plants in energy-thirsty emerging markets. And Germany, typically a leader in global climate action, continues to support coal projects.
Observers say a new development bank from the BRICS group of emerging markets - Brazil, Russia, India, China and South Africa - is also unlikely to follow strict coal limits when it launches in two years.
If countries move away from coal as a fuel source, they are likely to do so for reasons other than a lack of public funding.
In 2012, according to the World Resources Institute, almost 1,200 coal-fired power plants had been proposed globally, with China and Pakistan accounting for the majority of the projects.
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U.S. officials say their plan to limit public support for coal has had a global impact, with the World Bank, the European Investment Bank, the United Kingdom, the Netherlands and the Nordic countries joining the effort over the past year.
Now, the United States is trying to persuade other countries to change their export credit policies "to help level the playing field for U.S. coal-related energy exporters and bring other countries' financing practices in line with their climate change policies," Treasury spokeswoman Holly Shulman told Reuters.
U.S. officials have floated proposals at multilateral forums such as the G20 but have been rebuffed by Japan and Germany. U.S. Treasury officials have also discussed with China the role that public funds can play in developing less carbon-intensive energy sources.
Scott Morris, a former Treasury official for development finance, said the rapid change the United States has hoped for was never realistic.
"It's harder to be pure, whether on climate or any other issue, in the face of domestic commercial interest," said Morris, now a senior associate with the Washington, D.C., think tank Center for Global Development.
Even within the United States, some lawmakers, especially from coal-producing states, want to end coal project restrictions at the Export-Import Bank.
The bank has suspended its internal ban on coal plant financing until September and is mulling funding for a massive coal mine in Jharkhand, India.
Japan's development bank, JBIC, is the world's biggest public investor in coal projects and is likely to help India if the United States and European countries pass.
From 2007 to 2013, Japan invested $19.7 billion in coal projects overseas, according to the Natural Resources Defense Council, an environmental group.
The 2011 Fukushima nuclear accident prompted Japan's government to rely more on coal technology to boost exports and the economy, said Kimiko Hirata, international director for the Kiko Network, a climate-focused non-governmental organization.
Germany, meanwhile, is expected to publish a review of its stance on funding coal plants in October. A spokesman for the German Federal Ministry for Economic Cooperation and Development declined to provide more details.
From 2006 to 2013, KfW, Germany's state development bank, lent $3.7 billion to coal projects in Greece, India, Serbia, South Africa and Australia.
KfW said its support for coal is dwarfed by its investments in environmental protection, but added that it continues to support coal to give energy access to countries that cannot move away from fossil fuels immediately.
The World Bank and many developing countries agree, contending that there are not enough economically feasible alternatives to fossil fuels.
The Bank agreed to support new coal projects only in countries with no other options to meet energy needs, but has said a strict no-coal policy is not realistic.
For reasons of energy access, the new BRICS development bank is unlikely to have the same limits on coal lending as the World Bank.
Although public finance for coal plants will continue, some countries are trying to reduce their dependency amid domestic politics and economic pressures, analysts say.
China's total coal production is likely to grow as its economy expands, but Beijing wants to curb the fuel's share of its energy mix to fight air pollution.
And in India, coal projects are running into problems with economic viability, said Ashish Fernandes, a campaigner for Greenpeace.
"This kind of warning signal (on coal), as the actual reality of investing in coal plants today, is just as important as whether the BRICS bank announces new restrictions," said Justin Guay, policy analyst with the Sierra Club.
($1 = 0.7491 euro)
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