June 27, 2013

WORLD BANK: U.S. Could Still Support Overseas Coal Despite Obama Pledge

Nicholas Institute for Environmental Policy Solutions



An E&E Publishing Service

WORLD BANK: U.S. could still support overseas coal despite Obama pledge  (Thursday, June 27, 2013)

Lisa Friedman, E&E reporter

President Obama's new demand to stop funding overseas coal plants may not necessarily mean an end to America's support for a new coal plant in Kosovo, two top former Treasury officials said yesterday.

The controversial lignite plant outside Pristina has advanced in large part because it is a pet State Department project, though in recent months World Bank President Jim Yong Kim has vigorously defended the rights of poor nations like Kosovo to embrace coal.

Now its fate is up in the air as the World Bank prepares to discuss a new energy strategy of its own that imposes fresh limits on coal lending. A draft strategy obtained by ClimateWire and slated for board discussion July 19 calls for the bank to "cease providing financial support to greenfield coal power generation projects, except in rare circumstances where there are no feasible alternatives to meet basic energy needs and other sources of financing are absent."

Activists say the World Bank proposal, coming on the heels of an unambiguous call from Obama to get the United States out of coal overseas, marks the turning point in a long and contentious battle over how what kind of energy sources scarce public dollars should fund. But in interviews yesterday, William Pizer and Gilbert Metcalf -- both former deputy assistant secretaries at the Treasury Department under Obama who worked on World Bank energy issues -- said Kosovo could still go forward.

"It's not the perfect poster child for a coal plant that ought to go forward, but it's not completely obvious that it shouldn't go forward," said Pizer, currently an associate professor at Duke University's Sanford School of Public Policy and a faculty fellow at the Nicholas Institute for Environmental Policy Solutions.

He noted that Kosovo is the poorest country in Europe with limited energy options. Obama in his speech Tuesday did leave some wiggle room, calling "for an end of public financing for new coal plants overseas unless they deploy carbon-capture technologies or there is no other viable way for the poorest countries to generate electricity."

Obama's words somewhat track with guidelines U.S. officials have been working with since 2009 that discourage approval of overseas coal loans. An administration official said Obama's new climate plan "builds on" that guidance, which allowed for green-lighting coal in poor countries with an overriding need for energy access or middle-income countries in which equivalent emission "offsets" are part of the project.

Metcalf, now an economics professor at Tufts University, said the new Obama climate plan "is written such that [Kosovo] is still going to be a gray area."

"Kosovo is a very poor country. It doesn't have good alternatives. It's a country that is incredibly dependent on these unbelievably dirty coal plants," which the new plant would replace, thereby reducing pollution, he said. Of the caveats Obama named, Metcalf said, "it's possible Kosovo is going to fit into that category."

The State Department declined to comment on Kosovo, referring questions to the Treasury Department. That agency also declined, saying it does not discuss projects that are not before the World Bank board. Treasury officials in the past, though, have spoken at length about why the United States supports the project, calling it "desperately needed" (ClimateWire, July 11, 2011).

The World Bank is being equally tight-lipped. Spokesman Frederick Jones said he could not comment on the draft report or the U.S. position on Kosovo, saying the bank will "look forward to a public discussion following the board meeting" in July.

Tim Wirth, former undersecretary of State for global affairs under President Clinton and now vice chairman of the U.N. Foundation, said he doesn't see any way the administration could continue to support Kosovo after Obama's speech.

"Kosovo, that's a tough decision. But of course they shouldn't build it. If the president makes decisions right after a major climate speech to fund a coal power plant right off the Adriatic, we're right back where we started. They're just getting themselves right back in the soup," Wirth said.

No matter how the World Bank board and America's representative to it ultimately vote on Kosovo -- still at least a year away -- Pizer and Metcalf said they believe Obama's broad call to end U.S. support for coal is timely and significant. Both applauded Obama for taking what had been an obscure agency rule and making it a central point of his climate speech.

"I think it's going to strengthen the hand of the U.S. government when the executive directors [to the World Bank] talk to colleagues in other countries and ask for support, because they know it's coming from the mouth of the president and not just a faceless Treasury memo," Metcalf said.

"What makes this important is the president didn't have to do this. He chose to elevate it in a way that these issues have not been elevated before," Pizer added. "It's a meaningful and important step. Even if the initiatives are not brand new, I think the fact that they are being elevated and joined together in this way is important."

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