(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.
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
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
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
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.
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.
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Jon Morgan, Laurie Asseo