On 29 October the US Treasury Department issued new guidance designed to emphasise the Obama administration’s intention, first flagged up in a 25 June speech by the president, to refuse approval of financing for conventional coal plants abroad, except in ‘very rare’ cases.
The Treasury Department has been operating under guidance since 2009 that discouraged funding for coal plants. But it was vaguely enough defined to mean that coal projects were still receiving US funding. The revised policy, intended to block all but the most unusual circumstances, deals with funding for coal projects through multilateral development banks like the World Bank, and it essentially ends US support for new coal plants, or significant modifications to existing plants, unless they include carbon capture and sequestration technology. Projects that get U.S. funding through those banks would need to meet the same greenhouse gas emission requirements recently laid down by the Environmental Protection Agency for new domestic power plants, which mean essentially that a new coal plant would need broadly speaking to perform as well as a comparably sized natural-gas power plant.
The rules do leave an exception for the poorest countries (as defined by the World Bank), in cases where there is a material impact on industrial development and there are no alternatives.
The new guidance only applies to the funds that the Treasury Department provides through multilateral development banks, and other government agencies that provide financing to projects abroad, such as the U.S. Export Import Bank, will issue their own separate guidance. ExIm has already funded a number of coal and other fossil fuel projects abroad, including a 4800 MW plant in South Africa.
Representatives from environmental and international groups briefed on the new policy said that the first major test of the new guidance is likely to be a proposed coal-fired power plant in Kosovo that the World Bank is expected to consider financing in 2014. Kosovo is included on the World Bank’s list of poorest countries, but environmental and civil society groups there and in the USA have been pushing for the Bank to decline funding for the project, arguing that there are better alternatives for the country.
A perceived weakness is that the policy does not appear to extend beyond power plants themselves – for example, the US could still fund mining operations abroad.