As close as the US gets to saying No to coal

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The US Treasury Department has released guidelines calling on the World Bank and other Multilateral Development Banks (MDBs) to significantly reduce the funding they grant to coal power stations, encouraging them to ‘ensure full consideration of no or low carbon options …’ before approving funding to coal-fired power generation projects in developing countries.

The guidelines encourage MDBs to consider all ‘technologically feasible and commercially available’ alternatives when assessing coal-based generation projects and to fund coal-fired projects only if, ‘after substantial effort,’ they are unable to help secure any additional funding needed to make a lower-carbon alternative economically viable.

If, after this analysis, a decision is made to fund coal, the guidelines promote the use of the ‘best internationally available technology for reducing GHG emissions’ and suggest ‘offsetting actions’ should be incorporated into the plans for any proposed coal project.

While this guidance is effectively a US Treasury policy document and the World Bank and other MDBs are not obliged to take note of US Treasury policy, it sends a strong political signal that the US is keen to promote low-carbon development. That is, as long as it doesn’t affect US domestic energy policy, the US are keen to promote low-carbon development.

Reaction to the US guidance has been mixed. Developing countries including China and India are concerned that any decision by the World Bank to stop financing coal could have a significant impact on their plans to increase electricity generation. Environmental activists have voiced support for the aims of US Treasury guidelines and for the political signal they send but there has been some disappointment that the guidelines didn’t go further and actively encourage the MDBs to find and fund new low-carbon energy projects. Environmental groups have also reiterated calls for the World Bank and other MDBs to systematically calculate the net carbon impact of projects and to use this as the basis for making decisions about providing funding to projects.

Among the MDBs, the call to curb coal-fired power generation in favour of lower-carbon options is most likely to fall on receptive ears at the World Bank who have recently been struggling to reconcile their ongoing lending to coal projects with their intention to play a key role in the provision of climate change finance.

According to this article, energy projects funded by the World Bank group currently produce approximately 7% of annual global CO2 emissions. That’s twice the CO2 emissions of the whole of Africa’s energy sector produced by projects funded by just one of the MDBs. Any shift by the MDBs away from funding coal and other fossil-fueled power stations could clearly have a major environmental impact.

Environmental groups have been asking the World Bank to take stop lending on coal-based projects for many years, with new support from such unlikely quarters as the US Treasury will they finally be able to force the World Bank to take a stand against coal?

Read CleanTechnica’s report on this story

Find out about Rowan Ryrie’s work on the European Investment Bank and accountability.

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