Coal finance

A coal-free KfW: when will the bank drop the climate killers?

KfW finances coal-fired power plants. When will the bank drop the climate killers? © BMWi

New coal-fired power plants? According to the UN Intergovernmental Panel on Climate Change (IPCC), they are no longer feasible. The panel’s latest report states in no uncertain terms that limiting climate change to a reasonably manageable level will require a complete shift away from fossil fuels.

Building coal-fired power plants abroad with public funds?

It would seem that the KfW banking group – essentially the house bank of the German federal government – is not quite heeding the IPCC’s message. While the bank is known in Germany for promoting energy efficiency in buildings and renewable energies, as well as playing an important role in German climate finance, KfW is nevertheless still backing the climate killer coal by providing inexpensive loans for projects such as coal-fired power plants in other countries. Currently, KfW is involved in at least eleven new power plants in countries such as Greece, South Africa, Thailand, Chile and India. According to its own figures, KfW provided 2.8 billion euros to finance coal power between 2006 and 2013.

KfW considers this sum to be peanuts – 2.8 billion euros amounts to only one half percent of its climate and overall environmental investment. It conveniently disregards, however, that every new coal-fired power plant is one too many – and that the plants will leave their mark on their respective countries’ carbon footprints for the next 40 to 60 years. New, efficient plants are frequently slated to replace old, inefficient ones, but in the end, the old plants may simply remain online. Coal is also the cause of significant social and environmental problems in mining regions, including evictions and human rights violations related to strip mining.

KfW justifies its financing practices with the role that coal supposedly plays in poverty reduction in many countries by improving access to power for the poor. One might consider that to be a good argument. However – as described in a new briefing paper by the German faith-based organizations Brot für die Welt and Misereor – the issue in developing countries is not a mere shortage of generating capacity, but the lack of a grid that denies people access to power, especially in rural areas where the construction of new infrastructure is too costly. New coal-fired power plants will not alleviate that problem – none of the coal plants that the World Bank financed in developing countries between 2008 and 2010 resulted in a lasting improvement of access to power for the population, as Oil Change International noted in 2010. A far sounder approach – both economically and ecologically – would be to implement off-grid, decentralized power generation using renewable sources of energy. This would eliminate the need for costly transmission lines and would give local populations a voice with regard to their power supply.

The government is currently reviewing…

Isn’t KfW aware of this? Of course it is, and the bankers have also read the IPCC report on climate change. The German government has, after all, decided to review the criteria for financing coal-fired power plants. The outcome is wide open, however, and a decision will not be reached until the fall. It would be wonderful if the government were able to announce in time for the UN Climate Change Conference in Lima that it is restructuring its funding and providing support for renewable energies exclusively. That would also free up resources to support poor countries in the fight against climate change in the wake of the German government’s recent drastic cuts.

It certainly helps in this regard that the World Bank and the European Investment Bank now only finance coal-fired power plants under very limited, exceptional circumstances. Several countries, including Great Britain, the United States, the Netherlands and the Scandinavian countries have practically ceased financing coal-fired power plants abroad. Is KfW becoming a lifeline for the coal industry in glaring contradiction of Germany’s transition to renewable energy and the scientifically documented requirements of the global climate? Let’s hope not.

Jan Kowalzig / Oxfam