TOKYO: Japan and South Korea are the world’s biggest financiers of coal through export credit agencies, a new report has found, with coal projects in Australia among the major beneficiaries of their support.
WWF said that the three countries are attempting to derail talks that could cut international coal finance from such agencies, which are state-owned mechanisms that fund or underwrite overseas projects that domestic companies are involved in.
Japan’s export credit agency (ECA) gave more than $20bn (£13bn), with South Korea second on $7bn. The data, compiled by WWF, Oil Change International (OCI) and the Natural Resource Defence Council, reveals more than $73bn of international public finance was given to coal between 2007 and 2014. The group said the money “moved through largely unknown and opaque institutions”.
ECAs based in OECD member states were the biggest drivers of coal investment, accounting for nearly half of the total.
The data comes a week before the Organisation for Economic Co-operation and Development’s (OECD’s) export credit group is due to meet in Paris to discuss banning export finance for coal. The US and France have already stopped their ECAs giving money to coal power plants, and are pushing for a global ban on export credit for coal.
Sebastien Godinot, an economist with WWF-Europe, said there was a high risk of the talks foundering on the recalcitrance of Australia, Japan and Korea.
“The OECD countries have to recognise that this policy of supporting coal exports with public money is just completely inconsistent with their climate commitments. You have three countries which are trying to block progress which are Japan, Korea and Australia. This is the dark side. Their intention is clearly to buy time or to block any substantial progress,” he said.
Under current OECD rules, ECA finance gives preferable, long-term conditions to all fossil fuel projects, including coal. Godinot said the loans, guarantees, policy lending and technical assistance often act as seed funding, which draws more investment to projects meaning the $73bn is actually responsible for generating much larger investments in the dirtiest fossil fuel.
The NGOs calculated that the coal power plants supported by international finance would emit 0.5bn tonnes of carbon each year, equal to the annual emissions of Italy. Over their lifetime, supported plants would spew 18bn tonnes into the atmosphere.
Stephen Kretzmann, executive director of OCI, said that by blocking progress and continuing to fund their own coal companies “governments are prioritising the corporate profits of the coal industry over the climate and the interests of the poor”. The coal industry has argued that its product is necessary to bring affordable electricity to the developing world.
But the data revealed that Australia, one of the world’s 10 richest countries , received over $4bn in funding for new coal projects – mostly for mines and mostly from Japan. This makes it one of the biggest beneficiaries of coal export finance in the world and one of eight high income countries in the top 20. Australia has also adopted the strongest opposition to the OECD export credit ban.
Japanese miner Mitsubishi received over $1.4bn worth of credit from the Japan Bank for International Cooperation, one of Japan’s two ECAs, to bolster its stake in the Caval Ridge Coal Mine in the Australian state of Queensland. At the opening, Australian prime minister Tony Abbott declared: “Coal is good for humanity.” Tony Abbott at the opening of the Caval Ridge Coal Mine in Queensland, Australia in October 2014
The total funding for coal from ECAs was $12bn more than the funding from all global development banks. Japan’s finance alone was three times the funding given by the World Bank, whose president has called for an end to subsidies for coal.
No countries defined as ‘low-income’ received finance from ECAs based in OECD countries. Much of the money did end up in emerging economies, such as Vietnam, South Africa and India. But Kretzmann said the money was not targeted at development and that renewable energy was generally the cheapest way to provide electricity to those who lack it.
“An ECA is an agency that is specifically designed to support a country’s own domestic corporate agenda abroad, to open up new markets for companies based in those countries. In the case of Japan, which is by far the largest lender, you have Hitachi, Toshiba and Mitsubishi who are the really big winners,” he said.
Last week Reuters reported that Germany had weakened Europe’s stance on banning coal export finance. The Guardian understands that Germany is supportive of controls on coal finance but not the total ban desired by France and the US. Godinot said this was of particular concern because of Germany’s position in the EU and the EU’s large influence on the OECD two-thirds of OECD countries are in the EU.
Shelagh Whitley, a climate finance expert at the Overseas Development Institute, said Germany’s continued support for coal overseas – it is the fourth largest export financier of coal – was at odds with its domestic phase out of coal subsidies and clean energy growth.
“This dirty money helps German coal companies, now unable to do business at home, export their dead-end technologies to developing countries. This leaves a black mark on the country’s otherwise clean climate record,” she said.
