WARSAW, POLAND — On Wednesday at the U.N. climate talks in Warsaw, U.K. Energy and Climate Change Secretary Ed Davey announced that the United Kingdom would join the United States and a growing number of other countries and international financial institutions in ending public financing for new coal-fired power plants overseas, except in rare cases where no alternatives are available.
As the international community discusses steps to address climate change in Warsaw, Mr. Davey observed that “it is completely illogical for countries like the U.K. and the U.S. to be decarbonizing our own energy sectors while paying for coal-fired power plants to be built in other countries.”
In June 2013, President Obama made ending public financing for new international coal plants a key component of his Climate Action Plan and called on other nations to join in this effort. Following President Obama’s announcement, the World Bank and the European Investment Bank declared in July that they would similarly restrict funding for new coal plants except where no alternatives were available.
Denmark, Finland, Iceland, Norway and Sweden joined the U.S. in September 2013 to end their own public financing of new coal plants as well. The U.S. Treasury recently released guidelines that require new World Bank proposals to consider the health impacts and other non-market externalities in evaluating the economic merit of competing options, suggesting a more critical look at the lifecycle costs of new coal plants.
High-Level Ministerial on Climate Finance
Leadership by national governments can play an important role in leveraging the increased amount of private climate finance that is needed by opening up new clean energy investment opportunities, which is why the U.K. timed its announcement with Wednesday’s High-Level Ministerial on Climate Finance.
At the Ministerial, countries discussed how to scale-up investments to meet the goal of mobilizing $100 billion annually by 2020 from public and private sources to help developing countries mitigate and adapt to the impacts of climate change. The U.S. and other developed countries in Warsaw are forcefully restating their intentions to meet the $100 billion commitment, first made during the 2009 U.N. talks in Copenhagen. They vow to work to increase public funds and also point to the private sector as a major source of finance.
Connie Hedegaard, EU Commissioner for Climate Action, said during the Ministerial that one place “where we have done substantial homework since Doha [site of the 2012 U.N. climate talks] is finance. We are on track to something quite substantial and quite big where we can scale up to the level it deserves.”
The U.K.’s announcement regarding overseas coal plants reflects work underway by donor countries to channel public resources to leverage private investment in developing countries by using a number of different methods — including development finance institutions, export credit agencies, multilateral development banks, and a new public-private platform to pilot climate finance instruments to leverage private climate finance.
Stalled Finance Negotiations
Developed countries intend to continue building on this work to scale up climate finance from public and private sources; developing countries, meanwhile, are seeking a fixed percentage of that finance to come from public sources, as well as a plan for increased financing levels through 2020.
In spite of these disagreements, there is broad recognition of the underlying truth that a ramp up of climate finance will be needed to reach the $100 billion target. A 2010 Center for American Progress report with the Alliance for Climate Protection and Climate Advisers outlined what such a ramp-up could like would look like. The report specified the increases in public and private investment necessary to achieve during a ramp-up period — the large majority of which would come from non-public sources, including development bank lending and private finance.
Rebecca Lefton is a Senior Policy Analyst and Ben Bovarnick is a Special Assistant at the Center for American Progress.