Fits and starts in evolution of energy finance

Keith Schneider for



Banks and nations are starting to move from financing high-carbon to investing in low-carbon fuel sources. For example, the World Bank, the second largest multilateral finance institution, says it no longer invests in most coal projects, including new power plants. A select number of governments have also indicated that they will no longer finance coal plants overseas, including the U.S., France, Scandinavian nations, and the Netherlands. Private banks and sovereign wealth funds also are starting to back away from financing coal projects.

Last November, the Paris-based Organization for Economic Co-operation and Development (OECD), an alliance of 35 nations including China and the United States, reached agreement on “aligning export credit policies with climate change objectives to achieve lower emissions.” Support for the dirtiest coal-fired technologies would stop, said the organization, though critics asserted that the policy is not air-tight.

Coal under fire
The evolution in financing comes during an era of severe disruption in the world’s coal markets. The number of coal-fired plants is declining in the U.S. as less expensive and cleaner alternative energy sources gain priority in electrical generation. China, the largest consumer of coal, earlier this year also cancelled over 200 new and proposed plants. International coal production has declined two straight years and prices have tumbled.

There is evidence, moreover, that the realignment in energy finance priorities, especially in the electrical generating sector, also is having some effect. The United Nations Environment Program found in its latest assessment of renewable energy financing that $US 265.8 billion was spent in 2015 on wind, solar, and small hydropower plants. The renewable energy sector added 118 gigawatts of new generating capacity last year, or nearly 54 percent of all new generating capacity around the world.

It is not enough, say climate advocates. Trends in financing coal-fired electrical generation, and the damage to water resources that mining and burning coal causes, remain worrisome. The world’s big private, multilateral, and national development banks, led by the China Development Bank, continue to pour huge sums of capital into coal-fired power plants.

A study in May by the Global Economic Governance Initiative, a research unit at Boston University, found that from 2007 to 2014 the China Development Bank spent an average of $US 16.8 billion annually on energy projects outside China, two-thirds on coal-fired power plants. Most of the financing was for power plants in Asia. China Development Bank officers did not respond to requests for an interview.

A separate study this year by the Rain Forest Action Network and several more environmental groups found that private banks, among them Bank of America, Citigroup, Barclays, Credit Agricole, Deutsche Bank and others, invested $US 42.39 billion in coal mining projects last year, and $US 134 billion in coal-fired power plants around the world.

A third study by Oil Change International, the Natural Resources Defense Council and four more environmental groups found in May that from 2007 to 2015 the G7 industrialized nations invested an average of $US 5 billion annually on coal mining and coal-fueled power projects around the world. Japan, which manufactures boilers and heavy equipment, was the top financier with $US 22 billion invested during those eight years in coal sector projects beyond its borders.

The torrent of credit, loans, and other financial instruments translates into a surprising number of new coal-fired plants proposed around the world. Oil and Gas 360, an industry news site, projects that 1,550 gigawatts of new coal-fired power generation is planned internationally, much of it in Asia. That is almost four times the coal-fired generating capacity that now exists in the United States, and more than new planned generating capacity for wind, solar, and natural gas fueled plants combined. “More than $US 1 trillion of power generation spending activity is planned for the next 24 months – mostly coal-fired,” said the news site.

Data compiled by Global Coal Plant Tracker, a database developed by CoalSwarm, reached consistent conclusions. It also found that nearly 1,100 gigawatts of coal-fired power is planned around the world. Construction expenses amounted to nearly $US 1 trillion.

Turkey’s government insists the nation needs 70 new coal-fired power plants to serve its domestic electricity needs. Protests to protect rivers, lakes, and coastal estuaries from pollution from mines and power plants have erupted in many towns. According to the Climate Policy Initiative, the China Development Bank spent $US 2.7 billion to finance construction of three of Turkey’s newest coal-fired plants. The bank is prepared to finance nine more plants.

Bangladesh also has attracted China Development Bank financing for six new coal- fired power plants, according to Climate Policy Initiative. Reuters reported in April that “Dhaka plans to set up 25 coal-fired power plants by 2022, to generate 23,692 megawatts in order to meet rising electricity demand.” Several of the projects touched off protests over water safety that turned violent this year, said Rohini Kamal, a research fellow at the Global Economic Governance Initiative at Boston University.

“China speaks strongly about curbing climate change,” said Kamal in an interview from Dhaka, the Bangladesh capital. “Bangladesh does too. Their plans are good. The truth is, though, that they are bringing in workers to start building these plants. It doesn’t seem promising for meeting emissions commitments.”

Coal still a mainstay for some
Though geothermal and solar plants are part of the discussion for increasing Indonesia’s supply of electricity, coal continues to be a mainstay for the island nation. The hazards of Indonesia’s coal sector start with the country’s coal mines. In March, the bodies of two high school students were found drowned in an abandoned coal-mining pit in East Kalimantan, Indonesia’s principal coal production region. The teenagers’ deaths, according to Tessa Toumbourou, writing for Inside, “bring to 22 the number of children that have drowned in unused, water-filled mining holes in East Kalimantan since 2011.”

Indonesia’s leaders have moved slowly to address the drownings and rehabilitate abandoned mines. A more urgent concern, they assert, is to bolster the country’s slumping domestic coal industry by promoting new power plants. In June, the government released the 10-year electricity supply plan that proposes 35,000 megawatts of new coal-fired power between now and 2025. According to the Climate Policy Initiative, the China Development Bank and other Chinese financial institutions helped to finance 30 existing and planned coal power plants in Indonesia.