"Carbon Trap" Report: Limiting International Coal Finance

Over the last nine years, the G20 countries—led by China, Japan, Germany, South Korea and the United States— have financed $76 billion of coal development in countries such as Vietnam, South Africa, Australia and Indonesia. This figure comes from our new report: Carbon Trap: How International Coal Finance Undermines the Paris Agreement, which details the billions in financing provided to coal plants overseas. More importantly, it tracks the new coal projects that G20 countries are planning to finance abroad.

Finance for coal overseas supports coal power plants, coal mining and coal infrastructure. Even worse, it traps the world into decades of dangerous carbon emissions that will worsen climate change. To meet the Paris agreement’s goal of limiting that temperature rise to less than 2 degrees Celsius—and avoid major climate disruption—the world must transition to cleaner energy and phase out fossil fuels.

Unfortunately, key governments continue to invest in projects that further the world’s dependence on coal, making climate change worse.

Our key findings in the Carbon Trap report:

  • Between 2007 and 2015, G20 nations financed $76 billion worth of international coal projects. China, Japan, Germany, and South Korea accounted for four-fifths of this financing.
  • China financed $25 billion
  • Japan financed $21 billion
  • Germany financed $9 billion
  • South Korea financed $7 billion

  • G20 nations are considering financing new coal projects worth more than $24 billion.
  • Japan plans to finance $10 billion
  • China plans to finance $8 billion
  • South Korea plans to finance $2 billion

  • The top three recipient countries for G20 coal project financing are Indonesia ($11 billion), Vietnam ($10 billion), and South Africa ($7 billion). Indonesia and South Africa are G20 members.
  • Low-income countries received less than 2 percent of G20 international coal financing. Instead, most of the money went to middle- and high-income countries, contrary to frequent claims that public finance for coal is intended to help the poorest countries expand access to energy.

China has mechanisms in place that could limit its future coal finance. But Japan plans to greatly expand its financing of coal power plants and coal development abroad.

The report may underestimate the extent of overseas coal finance because it moves through opaque institutions, such as export credit agencies, which have hidden their support for fossil fuel development. The report compiled findings from export credit agency and public finance reporting, news articles, an international infrastructure journal and data from the Organisation for Economic Co-operation and Development.

The report makes these recommendations:

  • G20 nations that are members of the OECD should better restrict coal finance so they apply not only to coal plants but to all coal activities, such as exploration and mining.
  • Policymakers should develop clear guidelines for limiting coal finance—in line with their national circumstances, with clear criteria for ensuring that future energy financing is consistent with the Paris Agreement, and with appropriate accounting for the cost of externalities.
  • Governments and multilateral organizations should disclose coal financing from all public institutions, such as export credit agencies, development banks, majority state-owned banks, and others.

Coal infrastructure that will be around for decades is a carbon trap, locking countries into many years of harmful greenhouse gas emissions. Given the severe climate impacts of coal, it is time to end the irrational public support for coal projects overseas.

The Carbon Trap report and database of coal projects overseas is here:  https://www.nrdc.org/resources/carbon-trap-how-international-coal-finance-undermines-paris-agreement