By Samantha Smith, Leader, WWF Global Climate and Energy Initiative
In the next two weeks, leaders of developed countries can show they are serious about climate by ending their financing for coal mines and power plants abroad. Will they do it?
Climate change is an immediate and long-term threat, but we can fight it with quick and decisive action. The UN climate conference in December in Paris is one such opportunity, as are the upcoming meetings of the OECD and G7. Developed countries – G7 countries and more largely OECD countries – can show the kind of leadership and consistent decisions that we need.
An urgent priority is coal, the most carbon intensive fuel and the fuel with the single biggest contribution to climate change. If we want to avoid really dangerous climate change, as all countries have agreed, we will need to stop supporting coal projects now and start investing in the alternatives – renewables and energy efficiency. Investors recognize this already. Just last week Norway’s US$900 billion sovereign wealth fund – the world’s richest – was requested by the Norwegian government to divest from companies involved in coal extraction or power. This follows decisions by Bank of America, Credit Agricole and AXA to reduce their investments in coal.
But government action is still in question. Imagine a developed country that supports domestic renewable energy actions and commits to greenhouse gas reductions, but that is still massively funding the development of the coal industry around the globe. How consistent would that be? Wouldn’t it be better to stop financing coal, and instead put that money into supporting renewable alternatives?
This paradox is striking but real. All countries of the Organisation for Economic Co-operation and Development have been using the public financial tool of ‘export finance’ to help their national companies export coal plant and mining technologies overseas (view WWF’s infographic on OECD countries’ coal export finance here).
Although astonishingly opaque, export finance for coal is not a trivial issue. Between 2007 and 2014, the 34 member countries of the OECD countries have provided US$34 billion in export finance for coal. This represents far more international public finance for coal than any other source, including BRICS countries (US$17 billion). Japan alone provided US$17 billion in export finance for coal, followed by Korea, Germany, the U.S. and France (Take a look at “Under the Rug: How Governments and International Institutions Are Hiding Billions in Support to the Coal Industry” – a new report launched today by WWF, Natural Resources Defense Council and Oil Change International – here).
The positions of the key OECD countries on the issue are uneven. Courageously, the U.S. and France recently unilaterally committed to end their export finance for coal plants (with exemptions), creating a strong precedent. At the other end of the scale, Japan is opposed to any restrictions on financing for coal and is even advocating for incentives for higher efficiency coal plants – increasingly isolating itself in the G7 group. Korea and Australia team up with Japan, but most of the other OECD countries seem willing to move forward.
What are their reasons for maintaining public support for export of dirty coal technology? The first one is that export finance for coal is necessary to fight energy poverty in poor countries. But this claim has never been substantiated. To the contrary, analysis shows that OECD export finance did not back a single coal project in low income countries in the last eight years.
The second argument is that ending OECD export finance for coal would open space for less efficient and dirtier coal plant technology from China. However, recent analysis shows that Chinese exports have quickly refocused on coal plant technology that is as efficient as whatever the OECD can offer.
So what does this mean? Simply, OECD countries have no justification to use taxpayers’ money to help export the most polluting power technology, particularly when clean alternatives are available, commercially attractive and creating jobs. Even the most efficient coal plants are at least twice as polluting as gas plants, which in turn are highly carbon intensive when compared to renewables.
Banks with a development mandate, like the World Bank, are quickly reducing their support to coal, and even private financial institutions are starting to follow suit. The call to end funding for fossil fuel projects has been called the fastest growing divestment movement in history, and has seen action from universities to major financial institutions. Should export finance – public money – from developed countries lag behind?
As heads of states and governments of the G7 prepare to meet in Germany on 7 and 8 of June and OECD countries host their annual Ministerial meeting on 3 and 4 of June, developed countries must seize these key political opportunities to show they mean business on climate in advance of a new global climate deal. Ending export finance for coal would send the right political signal. Only by putting their money into climate action, not coal, can developed countries expect emerging countries to follow suit.epopress