As the U.S. and Europe withdraw support for overseas coal projects, Japan is eager to pick up the slack.
On July 23, Japanese officials laid out a plan to step up support for coal-fired power plants in developing countries, according to The Wall Street Journal. According to the plan, Japan will offer favorable financing terms for customers overseas to purchase Japanese coal technology. In total, the government hopes to do $4 billion in coal business each year.
One example of this policy came on July 17, when state-owned Japan Bank for International Cooperation approved $202 million in loans to Vietnam Electricity to help it purchase Japanese coal equipment.
Japan’s decision flies in the face of what much of the industrialized world has been trying to do over the last year. In an effort to slow the growth of greenhouse gas emissions, U.S. President Barack Obama in 2013 announced the permanent halt of American financial assistance for coal plants abroad.
Several European countries followed suit, including Sweden, Denmark, Finland, Norway, and Iceland. Perhaps more importantly, several major multilateral financing institutions – the World Bank, the U.S. Trade and Development Agency, the European Investment Bank, and the European Bank for Reconstruction and Development – all put an end to coal finance as part of their climate change efforts.
In contrast, Japan has argued that it can actually achieve reductions in greenhouse gas emissions by exporting its highly efficient coal technology. Takafumi Kakudo, the coal director at Japan’s Ministry of Economy, Trade and Industry (METI) argues that developing countries are going to build coal plants regardless, so Japan might as well give them the most efficient technology.
Indeed, Japan does burn coal at a more efficient rate than most other countries. “In theory, replacing all coal power capacity in China, India and the U.S. with the Japanese up-to-date technology would bring about a cut of 1.5 billion tons a year of CO2 emissions, more than Japan's total,” a Japanese government report said.
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Still, the argument is shaky at best. There is nothing inevitable about developing countries burning coal. More to the point, by providing financing on attractive terms, Japan will reduce the cost of coal relative to other, cleaner forms of energy. Also, Japan may contribute to the construction of a significant volume of coal capacity overseas, most of which will then be locked-in for decades to come. Scaling up renewable energy later on will be more difficult.
And the United States might soon lose the moral high ground. Japan’s export assistance is the same thing as loans from the U.S. Export-Import Bank (Ex-Im), which until last year, provided favorable financing terms to companies and countries abroad for the purchase of American-made coal technology.
President Obama promised to put an end to that practice, but several members of Congress, led by senators Joe Manchin (D-WV) and Mark Kirk (R-IL), are pushing for a return to coal plant financing.
They hope to build support around the reauthorization of the Ex-Im Bank’s charter, which expires in September, by including a provision that rolls back the White House plan to end coal financing overseas.
The addition of the coal-funding provision might sway enough Republicans to vote to keep Ex-Im alive. But if Congress votes to resume support for coal as a condition for renewing the Ex-Im Bank’s charter, the U.S. would find itself alongside Japan, underwriting the expansion of coal around the world.
By Nick Cunningham of Oilprice.com