| LONDON/WASHINGTON July 23
LONDON/WASHINGTON July 23 The EU's main lending
arm, the European Investment Bank, will later on Tuesday decide
whether to stop financing coal-fired power stations to help the
28-nation bloc reduce pollution and meet its climate targets.
Directors of the EIB, who are nominated by member states,
will make a decision following moves by other multilateral
lenders such as the Washington-headquartered World Bank to fund
coal-fired power stations only in "rare circumstances".
Since the start of 2007, the EIB has loaned around 11 billion
euros ($14.5 billion) to fossil fuel-fired plants, most of it to
gas rather than coal, out of its total lending for power of 83
A decision to end EIB financing of coal power in Europe could
influence other lenders as well, Ingrid Holmes of think-tank E3G
"If the EIB votes in favour of tougher lending criteria for
coal-fired power stations, it is a very clear message that coal
has a limited shelf life in Europe. But in developing countries
the message is much less clear cut," she said.
U.S. President Barack Obama said earlier this month that
financing to coal-fired power should be curbed to all but the
world's poorest countries.
The EIB is proposing that new fossil-fuelled power plants
would have to emit 550 grams of carbon dioxide per kilowatt hour
(gCO2/KWh), which would effectively rule out new hard coal and
lignite power plants but would enable some new plants to burn
the fossil fuel if they mix it with biomass.
On Thursday, the European Bank for Reconstruction and
Development, which finances projects mainly in former communist
countries and lends more to coal-fired projects than the EIB,
will also discuss new lending criteria aimed at slowing
development of the sector.
Last week the U.S. Import-Export bank said it would refuse
to lend to a coal-fired power project in Vietnam, the first
clear example of a project that has been rejected by a major
western lending institution since Obama's speech.
The move by public sector lenders in the United States and
Europe is likely to pressure private sector banks and investment
funds to shrink the amount of money lent to coal both at home
Already banks including Hong Kong's HSBC,
Germany's West LB, Dutch lender Rabobank and Norwegian finance
provider Storebrand have all said they will refuse to lend money
to projects that burn the fossil fuel.
"My view would be that the World Bank's lending plan should
send a rather large red-flag message to the private sector about
its involvement in the coal sector," said Tom Sanzillo, head of
the Institute for Energy Economics and Financial Analysis.
But the risk is that state-owned investors in countries such
as China and Abu Dhabi will simply fill the gap by allocating
more lending to build coal-fired plants in countries such as
Turkey, Botswana, Indonesia, Malaysia, Pakistan and Thailand.
Vietnam's government said earlier this month it would raise
its coal-fired power capacity five-fold by 2020 to 36,000
Energy demand in the Asia Pacific region is on track to
double by 2030, according to the International Energy Agency.
African countries without access to gas are also turning to coal
to fuel economic growth and lift populations out of poverty.
($1 = 0.7580 euros)
(Reporting by John McGarrity in London and Valerie Volcovici in
Washington; editing by Jane Baird)