Coal finance

Netherlands follows United States and other countries in halting overseas coal funding—KfW carries on undeterred

Despite its crucial role as an implementing organization for German climate finance, the Kreditanstalt für Wiederaufbau (KfW) is not yet joining the halt to funding for international coal projects, through which some countries are trying to coordinate their energy policy more effectively with climate policy.

The Netherlands has just become part of a small band of pioneers: an alliance of states that have pledged to abandon international public funding of coal-fired power plants. According to a statement made jointly with the White House:

“… the Netherlands is joining the United States, the United Kingdom, and others in agreeing to end support for public financing of new coal-fired power plants abroad except in rare circumstances. This includes our bilateral development finance institutions and projects financed through the multilateral development banks, where it should be noted that the Netherlands is a member of mixed constituencies. Complementing action already taken by the United States, our two countries are working together to promote a technology-neutral standard in the OECD Export Credit Group that limits support for high carbon intensity power plants by export credit agencies.”

Alongside the United States and the United Kingdom, the “others” include the World Bank, the European Investment Bank, the European Bank for Reconstruction and Development, France, Denmark, Norway, Sweden, Finland and Iceland. Yet Germany—home of the “energy transition” to renewables—is not among them. Worse still, the German state-owned development bank Kreditanstalt für Wiederaufbau (KfW) has gone on the offensive to publicly defend its pro-coal position:

“In developing and emerging countries—particularly in countries with their own large coal reserves and in neighboring states—coal-fired power plants are an important option in the long run to improve energy access. They offer a high level of security of supply with relatively low electricity generation costs. In this way, coal-fired power plants can serve as an important building block for economic development and thus for fighting poverty.”

At least so far, the KfW seems to be impervious to the criticism coming from civil society (urgewald briefing on coal, Climate Alliance Germany campaign, campaign, petition by WWF Greece). But following the Dutch decision, the German government faces growing pressure to use its influence in the KfW—after all, the bank’s board includes not only Sigmar Gabriel, the minister responsible for the energy transition, but also Environment Minister Barbara Hendricks and Development Minister Gerd Müller. Certainly, it would be very interesting to know what exactly the KfW (the bank itself and its subsidiaries DEG and IPEX) actually funds and where. Due to the organization’s lack of transparency, this is impossible at present.

Of course, even in Washington all that glitters is not gold. The halt to international funding for coal-fired power plants is far from heralding the end of the US coal industry. Quite the contrary: since Obama took office, US coal exports have risen by 50 percent (source: RollingStone). That should not be an excuse for the KfW and the German government—it should spur them on. Unfortunately, however, Angela Merkel’s flirtation with the Canadian prime minister over the import of oil sands to replace Russian natural gas is currently pointing in a very different direction.

Following the pressure from the different sides, coal financing was finally discussed last week at the KfW board meeting. It was decided that the German government will put coal financing by the KfW under review. This is far from enough, but a small first step.

Lili Fuhr, Heinrich Böll Foundation