WORLD BANK: Treasury Department issues coal lending guidelines

Here is some great progress for the Treasury Department. We made these recommendations to Treasury a few months back, and it's great to see them put our recommendations into effect.

If you haven't read it yet, please check out the report we wrote on public international finance of coal-fired power plants, "Foreclosing the Future: Coal, Climate and International Public Finance."

From E&E News:

For the first time ever, the U.S. Treasury Department is preparing guidelines aimed at discouraging the World Bank from lending money to build coal-fired power plants.

In a blueprint that quietly appeared on the agency's Web site last month while world leaders met in Denmark to craft a new climate change plan, the Treasury Department calls on multilateral development banks to "remove barriers to and build demand for no or low carbon resources" that meet the power needs for developing countries.

It recommends supporting fossil fuel plants only if the banks are unable "after substantial effort" to help secure additional funding to pay for the lower-carbon alternative.

"The guidelines were developed in response to increased concern about climate change, a desire to strike the right balance between the goals of poverty alleviation and the global environment, and the need to be transparent," Treasury Department spokeswoman Natalie Wyeth said in an e-mailed statement.

Experts said the guidelines are essentially an internal Treasury Department policy paper that does not affect World Bank decisions. But it comes at a critical time as the bank tries to position itself as the main channel for billions of dollars in climate financing, and several sources said the guidelines are likely to cause consternation within the World Bank and among developing countries.

World Bank officials were not available for comment yesterday, and Treasury officials declined to discuss the guidelines in person.

Public funding for coal-fired power plants remains one of the most divisive issues for the World Bank. The institution has developed a new framework that calls for boosting renewable energy lending and screening new coal projects for climate impacts and cleaner alternatives. But despite a steady drumbeat of criticism, it has steadfastly refused to rule out lending for coal altogether.

The World Bank notes that it is primarily concerned with alleviating poverty. Dirty infrastructure projects, it and developing countries often argue, are sometimes the only way to bring energy quickly and cheaply to millions still living without power.

Environmental activists, meanwhile, praised the Treasury Department for developing the recommendations but pointed to loopholes in the language and questioned whether the political will exists to implement it.

"They're the first to issue this set of guidelines," said Athena Ballesteros, a senior associate at the World Resources Institute. "Doing that sends a very strong political signal that the U.S. is serious about helping support low-carbon development in developing countries."

But Ballesteros as well as advocates from the Bank Information Center, the Sierra Club and others told the Treasury Department in a series of written responses that the World Bank needs to account for the greenhouse gas emissions associated with its energy investments. The practice known as "carbon accounting" is the best way to integrate the cost of climate change into proposed projects, many said.

Bruce Rich, a senior adviser to the Sierra Club, said he questions the agency's definition of "low carbon," and noted that a World Bank loan last year for the rehabilitation of a coal plant in India was announced on the bank's climate Web page because the fixes were aimed at making the plant more efficient and emit less carbon dioxide.

"Of course, the lifetime emissions of the modernized plants would get an extension of over 20 years, a huge net increase of CO2, as opposed to letting the plants shut down as planned and channeling the money into true low-carbon alternatives," he said.

Agreed the Bank Information Center (BIC) watchdog group, "the implication of these policy loopholes is the potential justification for the financing of projects that would otherwise be phased out due to their obsolete generation technologies."

Yong Chen, a sustainable energy expert at BIC, called the guidelines "a positive step." But he added and others said the guidelines might have gone further in actively encouraging the World Bank to find and fund low-carbon energy projects.

"They are trying to push the bar higher without having too much trouble with the multilateral banks in how they're going to adopt them," Chen said. "It's not that useful, except for sending a signal."

The guidelines did not appear in the Federal Register, presumably because they do not affect U.S. government policy. Environmental groups said they met informally with U.S. Treasury officials late last year to discuss the development of the recommendations, and have been asked to submit comments.

Agency officials did not say whether they expect to revise the guidelines, but Wyeth wrote that the Treasury Department will work with other World Bank shareholders and staff "with the goal of operationalizing this guidance, recognizing we are but one shareholder."

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FP: Why is the World Bank subsidizing one of the planet's dirtiest fuels?

It's been a while since I've mentioned the report I helped to write about public international financing of coal-fired power plants which can be see HERE. The findings are referenced in this Foreign Policy article:

With the U.N. climate change conference in Copenhagen getting under way this week, the pressure's on for world leaders to come up with some sort of climate agreement. Despite the appearance of a unified plea for action, however, not everyone is playing ball. And one of the shirkers is especially surprising: Even as governments are weighing tough choices to bring down emissions and cope with rising temperatures, the World Bank is financing -- and plans to continue financing -- coal projects to the detriment of renewable energy. In effect, the World Bank is sending the message that coal is not just an acceptable fuel, but also a resource that should be developed with international funding. It's a betrayal of everything the World Bank's member countries are supposed to be working for.

The bank's recently released draft Energy Strategy, which will guide its energy lending and influence partner institutions for the next seven to 10 years and announces its investment in coal, is very, very bad news. Although the proportion of coal to renewable energy is falling, the shift is too little too late. Back in 2004, the World Bank's Extractive Industries Review recommended that the bank "phase-out support for oil by 2008, and formalize its moratorium on lending for coal projects immediately." That was five years ago. Today, the World Bank strategy notes that "In some countries, electricity from coal is significantly cheaper" and the bank "could use its traditional financing instruments to support client countries to develop new coal power projects under certain conditions." Indeed, the Bank Information Center finds that bank funding for coal has increased almost 200 percent between 2007 and 2009.

But even if it saves costs in the short term, each newly constructed coal plant has a life of about 50 years, during which it will emit carbon; rehabilitation extends the life of the plant by an additional 20. So even as World Bank donor countries are fighting political battles to cut emissions, their dollars are funding new World Bank coal projects that will cancel out any hard-won gains.

It's hard to understand why "coal" isn't a dirty word in the halls of the World Bank -- an institution whose mandate is built on the idea of sustainable development. According to the U.S. Energy Information Administration, coal is the most carbon-intensive of the fossil fuels and is the fastest growing carbon-emitting energy source. Coal's share of world carbon dioxide emissions is projected to increase to 45 percent in 2030, meaning that nearly half of all new pollutants can be traced back to coal. Perhaps most outrageous of all is that climate change driven by such investments will disproportionately affect the poor, those who've had the smallest role in producing emissions.

Mining the stuff also wreaks havoc on the environment. Open pit, strip, and underground mines all cause severe erosion, leach toxic chemicals into nearby streams and aquifers, and push animals and plants out of their habitats. Coal is particularly harmful for public health. A 2009 Environmental Defense Fund study estimated that between 6,000 and 10,700 annual deaths can be attributed to the 88 coal-fired power plants and companies receiving public international financing, including from the World Bank.

Yet even knowing coal's blemished track record, the bank is not only subsidizing coal projects but doing so to an increasing degree. During the 2008 fiscal year, the World Bank and International Finance Corporation (IFC) increased funding for fossil fuels by 102 percent compared with only 11 percent for what it categorizes as new renewable energy such as solar, wind, biomass, geothermal energy and hydropower projects under 10 megawatts. On average, fossil fuel financing by the bank still accounts for twice as much as all new renewable energy and energy efficiency projects do, combined. Bloomberg News reported that thanks to World Bank financing, India's Tata "ultra mega" power plant will have the dubious distinction of being one of the world's 50 largest greenhouse gas emitters once it begins operation in 2012. At this very moment, the bank is considering a loan for the South African electricity company Eskom that would commit $3.75 billion for the 4,800-megawatt Medupi coal-fired power station, currently under construction. According to Reuters, if approved, this will represent the single largest World Bank loan awarded to post-apartheid South Africa -- and yes, it's for a coal plant.

Of course, the bank does know and admit that cutting emissions is a goal it should strive for. But its rhetoric and actions on the topic are mismatched. Whereas the institution claims in its Energy Strategy that it "support[s] countries in their efforts to shift to a low-GHG-intensity path," the hard data on bank support for coal paints another picture. For each thoughtful, renewable project that the bank supports, such as its $20 million investment in the Yemeni Al-Mokha wind farm, there is another coal-fired power plant or emissions-intensive hydropower project on the horizon.

What does this mean in the context of Copenhagen? World Bank-financed projects are a significant source of the world's greenhouse gas emissions, and they're set to grow. When the fossil fuels involved in the World Bank and IFC lending projects for the 2008 fiscal year are combusted, the projected lifetime CO2 emissions from this one year of financing will amount to approximately 7 percent of the world's annual CO2 emissions from the energy sector. That's twice the amount of Africa's annual energy-sector emissions.

What's even worse is that sustainable alternatives to coal exist. The World Bank could use its sizable energy investment portfolio (more than $7 billion) to promote low-carbon development that helps (rather than hurts) emissions targets. It could push the political consensus to do the same. But it's not doing either -- a failure of great magnitude for an institution that's supposed to lead by example, not follow the path of least resistance.

Clean Coal? Dirty Fraud

T. Boone Pickens and Ted Turner: New Priorities For Our Energy Future

WSJ:

Renewable energy and clean-burning natural gas are the basis of a new strategy the world needs to create a cleaner and more secure future. And the global transformation to a clean-energy economy may be the greatest economic opportunity of the 21st century. According to the authoritative Potential Gas Committee (administered by the Colorado School of Mines), the U.S. sits on top of massive reservoirs of natural gas—an estimated 2,000 trillion cubic feet—that contain more energy than all the oil in Saudi Arabia.

Harnessing this large supply—plus developing wind, solar and biofuel energy sources—is essential to achieve three strategic national priorities:

• Energy security: The internal combustion engine makes us dependent on oil that's concentrated in a handful of countries in some of the world's most volatile regions. In June, we imported 374 million barrels of oil, nearly two-thirds of what we used, at a cost of $24.7 billion. With 70% of imported oil going into cars and trucks, our transportation system is perilously at risk to shaky oil markets and even shakier regimes.

• Economic security: Last year more than $155 billion was invested in clean energy technologies such as wind and solar, and China and India plan to invest hundreds of billions in renewable energy sources. The annual market for clean energy may escalate in the next decade to between $1 trillion and $2 trillion. The race is on.

• Climate security: Likewise, the clock is ticking on potentially devastating climate changes. We already are witnessing the disintegration of polar ice, melting glaciers, rising sea levels and altered weather patterns. But if we act now, we can prevent catastrophic human and economic impacts.

Long-term economic and environmental interests compel us to put a priority on energy independence and a price on carbon pollution. Natural gas and renewable energy are obvious sources for cheap, clean and reliable electric power and transportation fuels.

In the electricity sector, natural gas is already cheap, available and ready to meet the nation's power needs while improving climate security. It emits about half the carbon dioxide per British thermal unit of energy, and far fewer of the heavy metals than does coal.

Adopting a "cash-for-clunkers" program in the utility sector can save money and reduce emissions right away by retiring the oldest, least efficient and most polluting power plants in exchange for modern gas-powered plants. New coal plants should be required to combine natural gas with the coal they burn, resulting in cleaner emissions, and every power plant should meet strict carbon-emissions standards.

We should also adopt a strong national standard requiring that electrical generation include a growing percentage of renewable fuels to help bring down costs over time, and ensure America's place in the burgeoning global competition for innovative renewable and efficiency technologies. Numerous state initiatives have already demonstrated the feasibility of these standards on a smaller scale.

In the transportation sector, renewable energy and natural gas can also be deployed immediately. For a quarter century, natural-gas vehicle technology has been available but stymied by lack of leadership. Of the 10 million natural gas vehicles in the world, fewer than 150,000 are in the U.S.

We can begin transitioning the nation's fleet of 6.5 million 18-wheelers that run regular routes. It would take just 20 refueling stations along a single highway to get trucks from one coast to the other. Centrally fueled urban business and government fleets also can quickly move to natural gas. The Ports of Los Angeles and Long Beach are in the process of buying new natural gas vehicles for their fleets, and many municipalities are harnessing the economic and environmental benefits of natural gas-powered buses.

Renewable biofuels should also be part of a new energy strategy. Advanced biofuels produced from cellulosic material, such as forest residues, municipal waste or even algae, can play a key role in reducing the vulnerabilities, emissions and costs associated with imported oil, while also providing new economic opportunities for America's farm communities.

The economic, environmental, and national security imperatives of America's energy posture are clear, as is the proven potential of domestic natural resources like gas, wind and solar power. Coupled with energy efficiency, these resources have the potential to help jump-start the economy, drive prosperity and reduce emissions well into the 21st century. The keys are in our hands. All we have to do is unlock the door and start the engine.

Huffington Post editorial: Climate Follies: Bankrolling Dirty Power in Developing Countries by Mindy S. Lubber; President, Ceres

My work mentioned in the Huffington Post? No big deal.

Huff Post:

In Washington, it's a popular climate conundrum everyone talks about: Even if the U.S. lowers its greenhouse gas emissions, China and India are on track to dwarf the entire Western World's as they build enormous coal-fired power plants. Politicians of all stripes regularly say we must get China and India to use less coal, the dirtiest of fossil fuels, to power their emerging economies.

But who do you think is financing all these new coal plants in the developing world?

Try the World Bank, the Asian Development Bank and other international public financial institutions supported by the world's wealthiest nations.

That's right. While the industrialized world is struggling to cut its emissions, and is gearing up to negotiate a new international climate treaty in Copenhagen this December, it is simultaneously bankrolling the construction of thousands upon thousands of megawatts of new coal-fired power in developing countries.

A new study by Bruce Rich, formerly of Environmental Defense Fund (EDF), shows that international public financial institutions have provided $37 billion to finance the construction of at least 88 new coal plants in the developing world since 1994. What's more, that $37 billion in direct financing secured another $60 billion or so from private and local sources, bringing total investment in new coal plants in developing nations to over $100 billion.

Even worse, the World Bank classifies these coal plants as "low carbon" financing projects if they are the so-called supercritical type with marginally better CO2 emissions rates.

Collectively those 88 coal plants will pump out 792 million tons of CO2 a year -- essentially negating pollution reductions the Waxman-Markey climate bill hopes to achieve over the next decade. The bill was approved last month in the House and is now up for debate in the Senate.

Bear in mind that 88 is a minimum number because most export credit agencies do not release detailed information on transactions and only plants for which the financing could be verified were included in EDF's study.

If you're wondering why 1994 is the baseline, it's the year the United Nations Convention on Climate Change took effect, committing industrialized nations to provide funds and technology to mitigate climate change in poorer nations. But instead, the wealthier nations have been locking into place a carbon-intensive energy infrastructure, one that will endure for decades since coal plants typically operate for 40 to 50 years.

Sure, these public international lenders have committed $6 billion over the past 15 years to help the world's most vulnerable citizens adapt to a warming planet -- but it's a fraction of the $100 billion spent on new coal plants.

Some would call that shooting yourself in the foot.

And it's not as though the World Bank is unaware of the dangers of continued reliance on coal. It commissioned a three-year independent study on the future role of the World Bank Group in supporting coal, oil and gas. But when that study recommended decisive action away from fossil fuel lending, the World Bank refused to endorse its findings -- even at the urging
of six Nobel Peace Laureates and the European Parliament.

The World Bank also gets it that the poorest countries will suffer the worst effects of global warming. In 2003 it published Poverty and Climate Change: Reducing the Vulnerability of the Poor through Adaptation, which stated "climate change is a serious risk to poverty reduction and threatens to undo decades of development efforts."

Why then does it finance coal? Here's what the World Bank's Chief Economist has to say: "Because coal is often cheap and abundant, and the need for electricity is so great, coal plants are going to be built with or without our support. Without our support, it is the cheaper, dirtier type of coal plants that will proliferate."

Not true says the Center for Global Development. It says most new coal plants that are built without World Bank funds, at least in India, ARE the cleaner, so-called "supercritical" type because the operating and fuel costs of the supercritical coal plants are cheaper.

More to the point, supercritical coal plants are only slightly cleaner, producing about 15 percent less C02 than traditional coal plants, according to EDF. They are still not as clean as even a natural gas-fired plant.

Which leads me to alternatives. Clearly, bringing electricity to the world's poor is a goal we can all get behind, but there's a better way to do it: Renewables, energy efficiency and grid modernization. International financial institutions should be scaling up their support for these rather than financing coal.

Today the Bank spends twice as much on fossil fuel projects as new renewable energy and energy efficiency projects combined and five times as much as new renewables alone.

That's a missed opportunity when large-scale renewables are so feasible in the developing world. Take Gujarat State in India, where a monstrous 4,000-megawatt coal-fired plant, the Tata Mundra, is being built with World Bank support. More than 7,000 megawatts of renewable energy are also in the works there -- with no help from international development banks. AES, a US based energy company, is constructing a $1.2 billion 1,000 megawatt solar thermal array as part of that plan.

Think how many more renewable energy projects could be built if public international financial institutions changed their lending priorities.

Equally important, international financial institutions must also tighten the definition of "low carbon." Supercritical coal plants now meet that feeble standard, which gives the World Bank's claim that 40 percent of its energy lending is "low carbon" a hollow ring.

These reforms are imperative, for if we do not slow the rise of CO2 emissions from coal in the developing world, no amount of emissions cuts in industrialized nations will make a difference.

NYtimes: China Outpaces U.S. in Cleaner Coal-Fired Plants

I've said it before, and I'll say it again: Coal-fired power plants, even when built to be "ultra-supercritical," still put out a great deal of CO2. Yes, it is better than having a less efficient technology because you are putting out more kWh per ton of CO2 emitted, but it is still emitted a shitload of pollution. AND when you build a new plant, which will have a lifespan of around 50 years, you are also making that 50 year commitment to mining coal for that plant, which has a great deal of environmental degradation related to it as well. "Ultra-supercritical" sounds awesome and would have been a great 80s hair band, but it also requires more energy to keep the process going, so while is more efficient than other coal plants, it isn't that much more efficient. Financing new plants, like Tianjin which is in the study we did on public financing for coal-fired power plants, is committed to a constant new source of CO2 emissions for the next 50 years. Bottom line, DON'T FUCK WITH COAL.

NYtimes:

China’s frenetic construction of coal-fired power plants has raised worries around the world about the effect on climate change. China now uses more coal than the United States, Europe and Japan combined, making it the world’s largest emitter of gases that are warming the planet.

But largely missing in the hand-wringing is this: China has emerged in the past two years as the world’s leading builder of more efficient, less polluting coal power plants, mastering the technology and driving down the cost.

While the United States is still debating whether to build a more efficient kind of coal-fired power plant that uses extremely hot steam, China has begun building such plants at a rate of one a month.

Construction has stalled in the United States on a new generation of low-pollution power plants that turn coal into a gas before burning it, although Energy Secretary Steven Chu said Thursday that the Obama administration might revive one power plant of this type. But China has already approved equipment purchases for just such a power plant, to be assembled soon in a muddy field here in Tianjin.

“The steps they’ve taken are probably as fast and as serious as anywhere in power-generation history,” said Hal Harvey, president of ClimateWorks, a group in San Francisco that helps finance projects to limit global warming.

Western countries continue to rely heavily on coal-fired power plants built decades ago with outdated, inefficient technology that burn a lot of coal and emit considerable amounts of carbon dioxide. China has begun requiring power companies to retire an older, more polluting power plant for each new one they build.

Cao Peixi, the president of the China Huaneng Group, the country’s biggest state-owned electric utility and the majority partner in the joint venture building the Tianjin plant, said his company was committed to the project even though it would cost more than conventional plants.

“We shouldn’t look at this project from a purely financial perspective,” he said. “It represents the future.”

Without doubt, China’s coal-fired power sector still has many problems, and global warming gases from the country are expected to continue increasing. China’s aim is to use the newest technologies to limit the rate of increase.

Only half the country’s coal-fired power plants have the emissions control equipment to remove sulfur compounds that cause acid rain, and even power plants with that technology do not always use it. China has not begun regulating some of the emissions that lead to heavy smog in big cities.

Even among China’s newly built plants, not all are modern. Only about 60 percent of the new plants are being built using newer technology that is highly efficient, but more expensive.

With greater efficiency, a power plant burns less coal and emits less carbon dioxide for each unit of electricity it generates. Experts say the least efficient plants in China today convert 27 to 36 percent of the energy in coal into electricity. The most efficient plants achieve an efficiency as high as 44 percent, meaning they can cut global warming emissions by more than a third compared with the weakest plants.

In the United States, the most efficient plants achieve around 40 percent efficiency, because they do not use the highest steam temperatures being adopted in China. The average efficiency of American coal-fired plants is still higher than the average efficiency of Chinese power plants, because China built so many inefficient plants over the past decade. But China is rapidly closing the gap by using some of the world’s most advanced designs.

After relying until recently on older technology, “China has since become the major world market for advanced coal-fired power plants with high-specification emission control systems,” the International Energy Agency said in a report on April 20.

China’s improvements are starting to have an effect on climate models. In its latest annual report last November, the I.E.A. cut its forecast of the annual increase in Chinese emissions of global warming gases, to 3 percent from 3.2 percent, in response to technological gains, particularly in the coal sector, even as the agency raised slightly its forecast for Chinese economic growth. “It’s definitely changing the baseline, and that’s being taken into account,” said Jonathan Sinton, a China specialist at the energy agency.

But by continuing to rely heavily on coal, which supplies 80 percent of its electricity, China ensures that it will keep emitting a lot of carbon dioxide; even an efficient coal-fired power plant emits twice the carbon dioxide of a natural gas-fired plant.

Perhaps the biggest question now is how much further China can go beyond the recent steps. In particular, how fast will it move toward power plants that capture their emissions and store them underground or under the seafloor?

That technology could, in theory, create power plants that contribute virtually nothing to global warming. Many countries hope to develop such plants, though progress has been halting; Energy Secretary Chu has promised steps to speed up the technology in the United States.

China has just built a small, experimental facility near Beijing to remove carbon dioxide from power station emissions and use it to provide carbonation for beverages, and the government has a short list of possible locations for a large experiment to capture and store carbon dioxide. But so far, it has no plans to make this a national policy.

China is making other efforts to reduce its global warming emissions. It has doubled its total wind energy capacity in each of the past four years, and is poised to pass the United States as soon as this year as the world’s largest market for wind power equipment. China is building considerably more nuclear power plants than the rest of the world combined, and these do not emit carbon dioxide after they are built.

But coal remains the cheapest energy source in China by a wide margin. China has the world’s third-largest coal reserves, after the United States and Russia.

“No matter how much renewable or nuclear is in the mix, coal will remain the dominant power source,” said Ashok Bhargava, a China energy expert at the Asian Development Bank in Manila.

Another problem is that China has finally developed the ability to build high-technology power plants only at the end of a national binge of building lower-tech coal-fired plants. Construction is now slowing because of the economic slump.

By adopting “ultra-supercritical” technology, which uses extremely hot steam to achieve the highest efficiency, and by building many identical power plants at the same time, China has cut costs dramatically through economies of scale. It now can cost a third less to build an ultra-supercritical power plant in China than to build a less efficient coal-fired plant in the United States.

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