Coal finance

OECD decision on coal finance: an important signal, but not yet enough

Coal-fired power plants are still being constructed worldwirde. This will go down after the OECD decision. Source: Heinrich-Böll-Foundation/Friend of the Earth 2015

On November 17, 2015, the industrialized countries of the OECD agreed on massive restrictions on export credits for new coal power plants. The deal came about through pressure from the United States government after hard negotiations with coal-friendly countries such as Japan, South Korea and Australia. While this is an important signal for climate protection only days before the Paris summit, the outcome could have been bolder.

According to the decision, which comes into force in 2017, OECD countries will only be able to provide export financing and export credit guarantees for coal power plants if climate-friendly alternatives are not feasible, or the projects are compatible with a strategy of national climate change policy that prioritizes the expansion of renewable energies and increased energy efficiency. The OECD decision also makes distinctions between different power plant efficiency categories, the size of planned power plants and the destination countries:

  • Ultra-supercritical power plants are the most efficient and have the lowest relative emissions. The export of such power plants of any size to any country can be promoted as before.
  • Supercritical power plants are average with regard to efficiency and relative emissions. The export of large (>500 MW) supercritical power plants may no longer be promoted; the export of smaller power plants to poorer countries will still be eligible.
  • Subcritical power plants are the least efficient and have the highest relative emissions. The export of small (<300 MW) subcritical power plants to poorer countries may still be promoted.

Civil society organizations welcomed the step, which is a move toward phasing out the financing of fossil fuels and a further signal to the coal industry. They did, however, criticize the fact that it will still be possible to build new coal power plants that will accelerate climate change with their emissions for decades to come.

Germany was not a driving force in this process – on the contrary: Despite numerous demands to follow up the end of fossil fuel finance by the KfW development bank in January by putting a stop to export finance, the German Ministry for Economic Affairs and Energy came down more on the side of the coal industry’s interests. Germany is also far from a national decision to stop financing coal, as reached by France in October. The contradiction to German climate finance thus still stands – as well as the question of Germany’s credibility in climate policy matters.

Christine Lottje