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Why We Should Take A Super-Critical Look At Coal Financing

As one of the largest energy technology companies in the world, we at GE believe climate change is real and that more should be done to transition to clean energy. We have put our money where our mouth is and developed one of the largest renewable energy portfolios in the world, investing over $20 billion in clean tech R&D over the last 12 years.

However, the reality is that 1.2 billion people still lack access to energy. Many countries— particularly those in the developing world— face severe energy shortages which have profoundly negative effects that stunt economic growth and suppress living standards. In many of these countries, coal power is often the only accessible and economically viable solution. Coal will continue to be a critical part of the energy mix in countries such as Turkey, China, India, Indonesia and South Africa for some time. It is also a reality that wind and solar energy fluctuate and need to be paired with stable sources such as coal or gas to ensure energy is always available. This is why at GE we also have efficient, low emission coal technology in our portfolio of energy solutions.

Financing is key for developing big ticket and long term projects such as power plants and wind farms. This is an area where governments can play a meaningful role, particularly in developing countries that often depend on financing from export credit agencies and global lending institutions. But over the last several years we have witnessed a well-intentioned but counterproductive trend.

The U.S., other governments and global institutions have imposed increasingly strict limitations on coal financing to promote cleaner forms of power. We agree with the goal of promoting more sustainable energy. However, as the International Energy Agency has pointed out, these restrictions often do not curtail coal projects. Instead they force cash-strapped, energy-hungry countries to find other financing and procurement options that can lead to the use of less-efficient, more harmful technology. When a country deems that coal power is necessary, we should enable the financing and development of the cleanest, most flexible and efficient technologies possible, instead of ignoring it.

We were encouraged to see President Trump recently announce that the U.S. will reevaluate rules toward international coal financing. Below are some ideas we think should be considered:

  1. The U.S. government should prioritize assessing and adjusting the coal project financing policies and practices it has implemented at its own financing agencies such as EXIM and OPIC and that it has advocated for at multilateral financial institutions such as the World Bank Group.
  2. As coal financing restrictions are reevaluated, we should maintain that new power plants use the most efficient coal technology available, and economically feasible, given the local context. The AIIB recently approved its energy strategy which lays out conditions for financing of fossil fuel-based generation facilities in a manner that maintains a balanced approach between renewables and fossil fuels. The OECD already has guidelines for export credit financing for high efficiency, low emissions coal projects. Both approaches could serve as a model for others.
  3. Special emphasis should be placed on financing solutions that allow for the upgrading of existing coal plants. The average coal plant can reduce its CO2 emissions by 11 percent with existing hardware and software upgrades. If this was applied to all coal plants in the world, it would be like taking 250 million U.S. cars off the road. Making existing coal plants more flexible will also help enable the integration of more wind and solar power into energy systems.

There is a role for both renewables and fossil fuels in reducing greenhouse gas emissions and promoting energy development around the world. This is an opportunity for the U.S. to once again take a leadership position on climate and energy and enable practical solutions, such as more efficient coal plants, that can have a tangible positive impact in both the short and long term.

(Top image: Courtesy Getty Images.)

Karan Bhatia is Vice President, Government Affairs & Policy with GE.

 

 

All views expressed are those of the author.

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