Financial Institutions Should Fund Sustainable Business, Not Coal Plants
Much as entrepreneurs like to believe that innovation always pays off, the reality of todayâs international energy arena is that the success of large projects often depends less on a good idea than on how many loans from international financial institutions the project can attract. In an age of increased concern over the effects of dirty energy and emissions produced by burning fossil fuels, major lenders need to be using their influence to encourage sustainable business, not polluting projects. Unfortunately decision makers at many such institutions seem mired in an old way of thinking. They keep dishing out money to giant coal plants in the developing world.
The past couple of years have seen controversy rage over loans to coal plants in India, South Africa, Botswana, and elsewhere. Earlier this year the World Bank approved a loan to help build the gigantic Medupi coal plant in South Africa. The loan drew so much heat from South African and international environmental groups that at least four countries, including the United States, abstained from voting on the decision. After such a fight itâs to be hoped the World Bank will be leery of giving similar large loans to coal plants in the future, but other lenders may simply step in to fill the void. Backers of another South African coal project, the 4,800 megawatt Kusile power station, are already approaching the US Export Import Bank in hopes of receiving a loan.
In a way, withholding US funds from proposed coal plants in developing countries might seem hypocritical, considering the volume of coal the US itself burns each year. Yet the movement to replace US support for international coal loans with support for sustainable business is less ironic than it seems. Despite a notable failure to pass federal climate legislation, not a single new coal plant broke ground in the United States during 2009. At the same time, last year US utilities announced they would retire a total of over 2,500 megawatts of coal-burning capacity between 2011 and 2017. These are victories won without the help of Congress, mainly thanks to new EPA regulations and the grassroots advocacy of environmental groups like the Sierra Club.
In 2010, the Sierra Club and other organizations have continued to fight new coal plant proposals and win early retirement plans for existing coal plants. Despite the absence of Congressional action to bring down carbon emissions, US coal fired power plants are slowly but surely being eliminated. In this context, the preoccupation with international coal plant loans makes far more sense. In fact it seems quite reasonable that activists working to reduce coal consumption in the United States would be frustrated to see their efforts negated by US policy abroadâespecially when opportunities to support more sustainable business models abound.
Thus we return to the Kusile Coal Plant, the latest major coal project to draw international ire. Though construction on Kusile began in 2008, completing the project will likely require South African backers to secure hefty international loans. If built, carbon emissions from Kusile would pen out to 30.5 million tons of carbon dioxide each year. Environmental groups are already rallying to urge the US Export Import Bank not to supply the money for Kusile, and are targeting bank chairman Fred Hochberg. It will be an enormous loss for clean energy if the bank decides to fund Kusile; developing countries all over the world are hurting for funds to build clean energy infrastructure, and US lenders should seize the chance to help finance sustainable business in these countries. Itâs too early yet to tell how the Export Import Bank will respond to public pressure, but hopefully it will not continue the dangerous practice of financing major coal plants.
What do you think? How can international lenders better help to build up sustainable business models, and ease the developing worldâs transition away from fossil fuels?
Photo credit: Matter Network