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."

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.

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.

International Public Financing of Coal in a Carbon-Constrained World

I'll be presenting the research and data analysis methodology.

"IFC's Facebook Page Tops 1,000 Fans"

Was just on the IFC's (International Finance Corporation) website looking up some private equity fund they have set up for infrastructure projects in sub-Saharan Africa, and on their front page they have the story "IFC's Facebook Page Tops 1,000 Fans."

The IFC is a branch of the World Bank which specializes in making loans to international companies instead of governments. They are notorious for providing unclear loans to private banks in countries, which then disperse the money to other projects which fall through the broad loopholes of IFC lending regulations.

The fact that they have 1,000 Fans on Facebook, must be tallied through some loophole in IFC reporting requirements. Seriously? They aren't Dave Matthews or American Idol. It is a financial arm of the World Bank. Who the fuck is a fan of the IFC. Even if you work there, are you a FAN of the IFC? They won't give you a loan because you are a fan. WHO ARE YOU PEOPLE?

Foreclosing the Future: Coal, Climate and International Public Finance

I've been working on this for the last 2 months for work. Check it out.


http://www.edf.org/coalfinance

An Environmental Defense Fund report has found that the World Bank and other international public financial institutions are continuing a 15-year trend of supporting coal-fired power plant construction throughout the developing world and economies in transition.

By financing this new carbon-intensive infrastructure, multilateral development banks (MDBs) and export credit agencies (ECAs) of the industrialized world are hamstringing the fight against global warming and setting back longer term efforts to alleviate poverty in the world's poorest countries.

* Since 1994, the World Bank, other MDBs and ECAs financed new construction or expansion of 88 coal-fired power plants.
* These plants will generate roughly 791 million tons of CO2 emissions per year, or more than 75% of the current emissions for coal-fired power in the entire European Union.
* According to the International Energy Agency, without a decisive reorientation of energy investment from carbon-intensive sources in developing and emerging economies, atmospheric CO2 will overshoot the point of no return for dangerous global warming, even if the industrialized world were to reduce its CO2 emissions to zero by 2030.

The time for change is now

EDF urges the MDBs and ECAs to hasten the shift to renewable energy by adopting the following recommendations:

1. Deploy public international finance in support of renewable energy, energy efficiency and other alternatives to coal. Scarce public international resources should go to renewable technologies and energy efficiency programs, which will help countries grow and alleviate poverty while reducing the impacts of global warming on the poor.

2. Calculate coal's true cost; MDBs and ECAs should institute comprehensive Greenhouse Gas Screening and Accounting and Shadow Carbon Pricing for all projects that emit greenhouse gases. (Shadow Carbon Pricing includes the external cost of carbon emissions to society and the economy.)

3. Create under the auspices of the United Nations Framework Convention on Climate Change the first international database of GHG-intensive investments (including coal plants) and their emissions by public finance institutions. No such database currently exists.

4. Negotiate as soon as possible, an international agreement among OECD member nations on a common climate/GHG policy for their ECAs.

Read the summary [PDF] of "Foreclosing the Future" to learn more about the financing behind these plants and their impact on the fight against global warming.