Climate

The U.S. And Japan Are Close To Reaching A Major Agreement On Coal

CREDIT: AP Photo/Aijaz Rahi

In this Tuesday, Feb. 24, 2015 photo, a worker sprays water in the switchyard area of the under- construction coal-fired power plant, partially financed by the Japan Bank for International Cooperation, in Kudgi, India.

On Friday, environmentalists in D.C. will rally in front of the Japan Bank for International Cooperation, a financing institution.

The protesters will be there because the JBIC is one link in the long chain of global finance that ends at the construction of the world’s largest coal-fired power plant. The Batang Power Plant, which Greenpeace and other environmental groups have been fighting for years, is just one example of Japan’s overseas coal investments.

Japan is the largest exporter of coal finance in the world, to the tune of more than $20 billion between 2007 and 2014.

Japan leads the world in financing coal projects.

Japan leads the world in financing coal projects.

According to a comprehensive report by Oil Change International, more than three-quarters of the money that goes to coal financing goes to building new power plants.

In other words, it’s big business for Japan. The way the financing mechanism generally works is that a Japanese power plant company would go to the JBIC with a project, often in a developing country, where financing is either difficult or the economic outlook is uncertain. The JBIC would supply the funding — with the goal, often, of bringing jobs and investment to a place that needs it — and the Japanese company would do the project, with all its accompanying risk and reward. (There are other reasons the JBIC would fund projects, like this LNG export terminal in Texas, which is intended to help supply the country with American-fracked natural gas.)

But pressure to stop financing coal has been steadily building. In 2013, President Obama announced that the United States would stop funding coal plants overseas (except in rare cases), and the World Bank followed suit shortly thereafter. Since then, the United States has been pushing member countries of the Organization of Economic Cooperation and Development (OECD) to get on board.

Japan, Australia, and Korea have reportedly been resisting this effort. But, just days before the OECD meets in Paris next week, Politico has reported that the U.S. and Japan have reached an agreement.

The agreement would limit investment in the cheapest, dirtiest forms of coal power, but allow continued investment in the so-called ultra-supercritical coal technology.

Despite the leak, there is no guarantee that the deal will go forward next week. If it does, though, it could be a “huge” step towards curbing international coal finance, said Peter Ogden, a senior fellow at the Center for American Progress.

“I think that if the U.S. and Japan can get onto the same page, this is a big deal,” Ogden told ThinkProgress. “Getting Japan to this point is really pretty remarkable.”

Of course, this is just a step. For one, China, which also exports a great deal of coal financing, is not part of the OECD. Australia and Korea have reportedly put forth their own, less ambitious, plans. And, as with so many things, the devil is in the details.

According to a 2007 study from MIT, the difference between the least (subcritical) and most (ultra-supercritical) efficient coal-power technologies is not overwhelming: 34 percent versus 43 percent. (Efficiency rates have not significantly changed in the past several years).

“Now they are encouraging the ultra-supercritical and CCS [carbon capture and storage] and CCU [carbon capture and utilization] technologies,” Kate DeAngelis, a climate and energy campaigner with Friends of the Earth, told ThinkProgress. “To us it doesn’t make any sense and isn’t actually progress.”

The agreement does reportedly include a sunset provision that would scale down investment in all types of coal plants in time. Of course, coal power plants can operate for decades, so there is a big upside to not building them now.

It was unclear whether the agreement would apply to any of the ancillary coal businesses, such as mining and transportation projects, which also serve to prop up the fossil fuel industry.

UPDATE NOV 13, 2015 10:47 AM

This article originally cited a report from Price of Oil. That organization's name is actually Oil Change International. Its website is www.priceofoil.org. We regret the error.

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