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Public Financing of Coal Plants Overseas

Volume 570: debated on Thursday 21 November 2013

Today, along with my right hon. Friend the Secretary of State for International Development, I am announcing that the Government of the UK is joining the United States in agreeing to end support for public financing of new coal-fired power plants overseas, except in rare circumstances. We will work together to secure the support of other countries and multilateral development banks (MDBs) to adopt similar policies.

The UK Government recognise that energy infrastructure investment is critical to economic growth and poverty reduction in many developing countries, and that MDBs have an important role in financing energy investment. However, investments in new coal-fired energy production risk locking countries in to higher levels of carbon emissions over the coming decades. In order to avoid dangerous climate change, it is estimated that global coal demand will need to fall by 45% from 2009 levels by 20501. Globally we need to rapidly move away from unabated coal power generation. That is why we are calling for an end to supporting public financing of new coal-fired power plants overseas, except in rare circumstances.

Our position brings the UK in line with the significant international actions already taken by others including:

The US: in June 2013, President Obama called for an end to US support for public financing of new coal plants overseas except for the most efficient coal technology available in the world’s poorest countries in cases where no other economically feasible alternative exists or facilities deploying carbon capture and sequestration technologies.

The World Bank: in July 2013, the World Bank’s board agreed to a new energy strategy to limit the financing of coal-fired power plants to rare circumstances.

The European Investment Bank: in July 2013, the European Investment Bank announced an end to funding coal power plants unless they can meet a new emissions performance standard.

Denmark, Sweden. Norway, Finland and Iceland: in September 2013, the leaders of these countries issued a joint announcement with the US that included a commitment to end public finance for new coal-fired power plants overseas, except in rare circumstances.

The UK Government will only consider MDB proposals for financing coal-fired power plants in the world’s poorest countries where no other economically feasible alternative exists. We will consider these on a case-by-case basis, and only when all of the following conditions are met:

The country is an IDA-only eligible country, where gross national income per capita is below $1,945.

There is a compelling poverty reduction case.

Full consideration has been given to the economic feasibility of low-carbon alternatives.

It is part of a credible low-carbon development pathway, and meets environmental and social standards.

There is a risk assessment of long-term financial viability.

The investment will use best available technology.

An assessment has been carried out of the technical, economic and financial feasibility of building the coal-fired power plant as CCS ready.

We would also be prepared to support MDB proposals for financing the additional costs of facilities fully deploying carbon capture and storage technologies.

These conditions will be used to guide UK assessment of coal-fired power projects developed by the MDBs. They will therefore inform UK views on board-level decision making at the MDBs, including where we are part of a constituency with other countries. They will guide the UK Government’s future interactions with MDB staff on project development. We will also promote these criteria with other countries, as the basis for decision making.

This statement applies to all UK official development assistance. CDC will also not finance any unabated coal plants overseas.

UK Export Finance (UKEF) is not presently legally able to discriminate between classes or types of exports, but as announced by my right hon. Friend the Secretary of State for Business, Innovation and Skills on 17 July 2012, UKEF will normally refuse support for projects that do not meet international environmental standards, principally those of the World Bank Group (International Finance Corporation “performance standards”). UKEF has not supported a coal-fired power station overseas since 2002.

1 EA, Energy Technology Perspectives 2012.