G20 Countries Financed $8 Billion of Coal Overseas in 2016

In 2016, G20 governments financed at least $8 billion in overseas coal projects through their policy and development banks and export credit agencies. G20 support for foreign coal projects contradicts their commitments for a low-carbon future as outlined in the Paris Agreement and the 2030 UN Sustainable Development Goals.

Governments provide loans or loan guarantees to build a coal plant overseas through export credit agencies like the Japan Bank for International Cooperation, development institutions like the China Development Bank or the Asian Development Bank, or entities like the Korea Trade Insurance Corporation.

The chart below shows the biggest financers of coal projects last year, all institutions from Japan, China and Korea:

Unfortunately, since not all of these public institutions disclose their financing, it is likely that additional projects were financed without public knowledge.

Governments fund these projects because their domestic companies benefit from coal deals. For instance, Japan’s ITOCHU and J-Power are part of a new $4 billion coal plant deal in Indonesia. Japanese companies will profit because they own two-thirds of the equity in the coal plant. Over $2 billion in loans for the project come from the Japan Bank for International Cooperation, the government’s export credit agency. JBIC’s own website says that “[t]he loan thereby contributes to maintaining and strengthening the international competitiveness of Japanese industries.”

Indonesia, Bangladesh, and Vietnam were the main recipient countries

The biggest recipients of funding were countries with ambitious energy expansion plans, such as Indonesia (63 percent of financing), Bangladesh (21 percent) and Vietnam (11 percent).

Funders are supporting some of the largest coal plants in the world

Public resources are supporting large coal-fired power plants that will impact the environment for decades to come. In 2016, public financers supported at least 10 coal-fired power plants—with a cumulative installed capacity of over 8,000 MW—as well as several coal mining projects (see table below for the list of projects). This is equivalent to the total installed capacity for all of Nepal. These investments will have a lasting impact as coal power plants typically last 40 or more years. As a result, the amount installed just in 2016 will result in 370 million tons of CO2 over their lifetime—more than the CO2 emissions for all of Turkey in 2015. They will also contribute to local air pollution and water consumption, adding pressure on local environments and negatively impacting public health.

Given the competitive prices for renewable energy, G20 countries should be seeking to address energy poverty in developing countries by directing their public resources towards clean renewables projects, not coal. Subsidizing coal projects that produce heavy pollution and high carbon emissions exacerbates the impacts of climate change and worsens air quality. These coal projects also risk becoming stranded assets as renewables continue to drop in price and regulations pricing carbon emissions become stricter in the future.

Scarce public resources shouldn’t subsidize coal projects

There are several reasons why scarce public resources should not be used to build coal projects, and why future projects should be cancelled:

Coal projects damage human health, the environment, and livelihoods.

Dirty investments are damaging the air, water, public health, and environment of developing nations. Sulfur emissions and particulate matter from coal plants worsen respiratory problems and cause smog—choking many rapidly growing cities around the world. Waste ash toxins like arsenic pollute the environment and contaminate the water supply, poisoning fish and ruining the local fishing economy. Recent projects in South Africa, Myanmar and elsewhere have been delayed due to resistance.

Funding coal guarantees decades of pollution.

The costs and life spans of coal projects stretch for decades, trapping developing nations in a system of incredibly carbon-intensive energy use. Instead of propping up their outdated technology manufacturers, foreign financers should be shifting investments away from fossil fuels towards low-carbon energy sources. Less coal means that local communities are not stuck with the negative impacts to their health, environment or livelihoods. There can be a role for foreign governments to help secure public and private funds for projects, and to assume some risks for endeavors, but these investments need to prioritize clean renewable energy projects.

Foreign-funded coal plants are exporting emissions.

For example, JBIC calls their coal technology environmentally friendly, but Japanese NGOs and international NGOs have refuted this claim, noting that the coal plants are still highly polluting and incompatible with the goals of the Paris Agreement. In a sense, Japan is using public funds to subsidize Japanese companies overseas and therefore subsidizing the construction of coal plants and very high carbon emissions and pollution for decades to come.

Overseas coal projects are poor investments.

Investments in coal plants only “make sense” because companies ignore or are not required to assume responsibility for their carbon emissions, toxins dumped into the water, air pollution costs, and other negative impacts. The true cost of a coal plant is much higher than the subsidized loans and guarantees these coal companies receive. It’s the public that gets stuck with the rest of the costs.

There are enormous opportunities for investment in renewable power generation projects.

Export credit agencies and development institutions argue that developing countries are demanding coal projects to meet their energy needs. In reality, countries with rapidly growing energy demand like Vietnam, Indonesia or Pakistan have huge opportunities to generate their power through renewable energy, rather than highly polluting coal projects.

For example, Pakistan currently gets 3 percent of power from renewables, but is considering a target of 15-20 percent. Perhaps that is why China intends to invest about $500 million in renewable energy projects in Pakistan. Indonesia has over 200 GW of renewable energy potential, while Vietnam has 50 GW of untapped renewable potential. And the Asian Infrastructure Investment Bank is considering financing a 40 MW solar power plant in Kazakhstan with the European Bank for Reconstruction and Development to help reduce the country’s dependence on coal, in line with its goal of being a “lean, clean and green” bank.

Rather than financing more coal projects, G20 governments could help support clean energy investments. The world’s energy future is in clean energy, with forecasted energy investments through 2040 reaching $7.2 trillion for renewables as opposed to $3.2 trillion for fossil and nuclear generation. It’s time for G20 governments to embrace this trend and prioritize financing clean, renewables projects.

For additional information, see our November 2016 report, Carbon Trap: How International Coal Finance Undermines the Paris Agreement - Report (PDF).

The updated database of publicly funded coal projects can be downloaded here.

About the Authors

Han Chen

Manager, Energy Policy, International Program

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