US extends crackdown on coal overseas

President Obama has long made cleaner energy a priority of his domestic agenda. Increasingly, it's playing out in his foreign policy.

The US will end financial support for new coal projects overseas, except in narrowly defined circumstances, the Department of Treasury announced Tuesday. The policy is an extension of the climate plan Mr. Obama introduced in June, and builds on the Treasury Department's previous efforts to curb global investment in coal by the World Bank and other development organizations.

It's aim is to address the global threat of rising emissions with global action, recognizing that the emissions reductions made in Western economies are more than offset by huge gains in the developing world.

Widespread poverty complicates such an effort, given that more than 1.3 billion people are without access to electricity. In many parts of the world, coal offers a cheap and reliable solution, but there's hope the developing world could "leapfrog" such carbon heavy fuels with solar, wind, and other renewable fuels.   

"As developing economies embark on a journey towards a clean energy future, today's announcement marks an important step in helping them reach this goal," Treasury Under Secretary for International Affairs Lael Brainard said in a statement. "By encouraging the use of clean energy in multilateral development bank projects, we are furthering U.S. efforts to address the urgent challenges of climate change." 

Despite progress in clean energy, coal remains the world's most dominant fuel, providing more than 40 percent of the world's electricity. That's especially true in places like China and India, where widening middle classes are driving up demand for cheap, stable electricity. China consumed 47 percent of the world's coal in 2010, according to the US Energy Information Administration. 

Widespread use of coal has propped up emissions in developing countries, offsetting reductions made in the US and parts of Europe. Global energy consumption is projected to grow by 56 percent between 2010 and 2040, according to EIA, helping to increase carbon-dioxide emissions by 46 percent over the next 30 years.

With few exceptions, the US Treasury will now stop funneling money to coal projects by the World Bank and other development institutions. In fiscal year 2012, the World Bank spent $8.2 billion on energy projects across the globe, the majority of which were in Europe, Central Asia, and sub-Saharan Africa. More than two-thirds of that financing went to low-carbon projects including energy efficiency and renewable energy. The US is the largest shareholder in the World Bank and is the only country that retains veto power over changes in the Bank’s structure.

Critics of the plan say it conflicts with the administration's plan to simultaneously improve access to electricity across sub-Saharan Africa where more than 85 percent of the rural population lacks access. In June, the US pledged more than $7 billion over the next five years to support investment in Africa’s energy sector, adding more than 10,000 megawatts of cleaner, more efficient electricity generation capacity in its first phase, according to the Obama administration.

Coal advocates say the push for renewable fuels will only make the situation worse for the poorest parts of the world, and do little to combat the effects of climate change.

“The Obama Administration’s unrelenting regulatory assault on America’s coal communities will now be executed on a global scale, jeopardizing electrification and infrastructure growth, especially in developing nations," Laura Sheehan, spokeswoman at the American Coalition for Clean Coal Electricity, said in an e-mailed statement. “Much like the Administration has done at home, the President’s most recent action will force the poorest countries to face crippling electricity bills at the cost of political legacy.”

Separate from the Treasury Department, the Export-Import Bank of the United States also finances overseas energy projects. In the past five years, it has financed two coal projects, one in India and the other in South Africa for a total investment of $1.4 billion. In July, the Bank’s board voted to withhold financing for a 1,200-megawatt coal-fired power plant in Vietnam.