In Coal Setback, Rich Nations Agree to End Export Credits

(Bloomberg) — Members of the Organization for Economic

Cooperation and Development struck an historic agreement Tuesday

to scale back public financing for coal-fired power plants,

dealing another blow to the industry ahead of a global summit on

climate change in Paris.

Under the agreement, detailed by the White House in a

conference call, the world’s richest economies will restrict

subsidies that helped companies export technology to build coal-fired power plants, among the largest sources of emissions

blamed for rising global temperatures. The policy would cut off

financing for 85 percent of coal projects going forward,

according to a senior administration official who briefed

reporters. The official requested anonymity because he wasn’t

authorized to speak publicly.

Major lenders including the U.S. Import-Export Bank, the

World Bank, and the European Investment Bank have already cut

support for coal projects. The new agreement among the 34 OECD

nations means countries including Japan and South Korea will for

the first time restrict their funding as well. It’s more bad

news for a coal industry already hit by slumping global prices,

new environmental regulations and slowing growth in China.

Obama Victory

The agreement is also an international environmental

victory for President Barack Obama, whose domestic climate

policies remain under attack. The Republican-led U.S. Senate

voted Tuesday to block new rules on power-plant pollution,

saying they’d be too costly. The White House threatened to veto

the measure.

According to an analysis by the World Resources Institute

in Washington, about 1,200 coal-fired plants have been proposed

for construction across the globe. More than three-quarters are

in India and China.

“Climate change is one of the greatest challenges of our

time,” OECD nations said in an official communique on Tuesday.

“We reaffirm our commitment to rationalize and phase out fossil

fuel subsidies that encourage wasteful consumption.”

The National Mining Association was critical of Obama’s

role in the agreement and said the president was glossing over

the fact that the phase-out doesn’t begin until 2017 and still

permits financing of advanced coal technology.

“The president is on the wrong side of history,” National

Mining Association spokesman Luke Popovich said in an e-mailed

statement. “He may think coal’s day is done, but the 19 other

rich nations of the OECD evidently don’t, let alone the emerging

nations that will continue to rely on coal long after he’s out

of office.”

Japan Opposition

The Obama administration has sought the international

financing change for years but faced opposition by Japan, which

objected to reducing subsidies benefiting domestic technology

exporters, including Toshiba Corp. The breakthrough came earlier

this year when the two countries agreed to a deal to allow some

financing to continue.

Japan is the biggest backer of public coal financing

globally, according to a June report co-authored by the Natural

Resources Defense Council, a U.S. environmental group, and

partners. The country also ranks last among Group of Seven

nations in efforts to move away from coal, according to a

statement last month from E3G, a non-profit group promoting a

low-carbon economy.

‘Ultra-Supercritical’

The new policy, which will take effect in a year, would

provide subsidies only for so-called “ultra-supercritical” coal-fired power plants — those built to the most stringent

environmental standards. The Obama administration estimates that

85 percent of coal power plants will be ineligible for financing

from OECD countries going forward.

Financing restrictions would again tighten in four years

under the agreement. 

Industry representatives said the OECD agreement reflects a

recognition that coal will be needed to power the developing

world for years to come.

“It tacitly acknowledges the importance of continued

financing for advanced coal technologies and then is heavily

conditioned to reflect the continuing importance of coal to the

world,” Popovich said.

The Obama administration official said OECD financing had

helped the purchase of more than $35 billion in coal products

over the past seven years.

Some Concern

The accord was welcomed to a degree by environmental

activists in Japan, though with some trepidation.

“This agreement is an important step forward as the OECD

has set the tone to restrict new coal power plants globally,”

the Center for a Sustainable Environment and Society, the Kiko

Network and the environmental group Friends of the Earth Japan,

said in an e-mailed statement. “But even ultra-supercritical

plants emit about twice as much carbon as plants powered by

natural gas, so revisions at an early date are needed to make

support for coal power be excluded in principle.”

The deal represents the culmination of months of talks, and

comes after negotiators from South Korea and Australia were able

to secure an exception allowing the construction of small coal

plants in developing countries that don’t meet the most

stringent environmental standards. The administration official

described the concession as immaterial to the overall deal.

“Our position has been that the promotion of highly

efficient coal power generation is an effective and realistic

measure to tackle climate change,” an official at Japan’s

foreign ministry said by phone. “We welcome the agreement as

Japan’s position has been sufficiently reflected in the

agreement,” the official said, speaking on condition of

anonymity in line with ministry policy.

The announcement of the agreement comes two weeks before

world leaders are scheduled to gather in Paris for global

climate negotiations. The talks among almost 200 nations may

culminate in the first agreement committing all countries to

rein in carbon pollution from coal and other sources.

To contact the reporters on this story:

Justin Sink in Washington at jsink1@bloomberg.net;

Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editors responsible for this story:

Reed Landberg at landberg@bloomberg.net

Jon Morgan, Laurie Asseo

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