Coal Plant Funding Overseas

Jake Schmidt, International Climate Policy Director, Washington, DC

The recent commitments to end public funding of overseas coal projects are set to come up for their first important test. The Asian Development Bank (ADB) is set to vote on whether it will provide $900 million in funding  for a new coal power plant in Pakistan – the Jamshoro Coal-Fired Power Plant. The proposed project is set to come for a vote before the ADB Board this Monday (Dec. 9). This project clearly violates the terms of those public commitments so the U.S., U.K., Nordic countries, and others must vote no on that project.

President Obama made a commitment to end public funding of overseas coal projects, except in rare circumstances. That commitment was followed by a similar commitment from Denmark, Finland, Iceland, Norway, Sweden, and the  U.K. In a follow-up, the Treasury Department – the U.S. agency that oversees funding at the development banks such as the ADB—adopted clear guidelines that signal that they’ll have to vote no on most coal projects. All of these commitments are very similar in their structure in that they don’t allow funding for coal power plants in “non-poor” countries  unless the project deploys carbon capture and storage. There is no ambiguity in those guidelines as the U.S. Treasury Guidelines are quite specific – they explicitly define what qualifies as a poor country and they elaborate precise specifications for carbon capture and storage deployment.   

The project before the ADB fails those tests quite clearly. First, Pakistan isn’t a “poor country” based upon the definitions used in the Treasury guidelines and the commitments of the other countries, which use the World Bank definition for “poor countries”. Second, the Pakistan power plant is a 600 MW coal-fired power plant that doesn’t capture its carbon pollution. It will emit way above the allowed emissions threshold in the U.S. guidelines. Third, the U.S. guidelines require that any plant would have to fully offset its carbon pollution with equivalent emissions reductions from renewable energy or energy efficiency investments. The ADB Pakistan project doesn’t even pretend to do that – it is a coal-fired plant project and nothing else.

So you might think that given those factors these key countries and others would vote no on this project. After all their leaders have publicly committed to reject public funding for these projects. Those commitments also covered how they will vote in the development banks. That is the message that major U.S.-based groups sent in a letter to the U.S. government urging them to vote no.

The countries with public commitments to end overseas coal financing are major shareholders at the ADB so their votes carry significant weight. The U.S. accounts for 16 percent of the vote, the U.K. 2 percent, and the Nordic countries 1 percent – so about a fifth of the vote between them. But these countries – noticeably the U.S. and U.K. – might “abstain”. This sends a weak signal of their commitment and it lets off countries like Canada, Germany, South Korea, the Netherlands, Australia, and Japan that are also major shareholders.

So will the U.S., U.K., and Nordic countries stand strong on their commitments and vote no or will they waffle? And will countries like Germany, South Korea, and Japan start standing up against using public resources for overseas coal plants. We’ll know next Monday when the Pakistan coal-fired power plant comes for a vote before the Asian Development Bank. I hope they vote the right way.

Photo Credit: Coal Funding Restrictions Overseas/shutterstock