FINANCE:

U.S. pressured to block proposed coal-fired power plant for Pakistan

The Obama administration faces the first test of its pledge to oppose funding for overseas coal projects today when the Asian Development Bank (ADB) board decides on $900 million for a coal plant in Pakistan.

Environmentalists have put pressure on the United States to vote against the plant instead of merely abstaining, as countries often do before the multilateral development bank boards when they oppose a project but also don't want to stand in the way of its ultimate approval.

Bank officials and Pakistani leaders say the 600-megawatt Jamshoro thermal power plant near Hyderabad is critical for the energy-starved nation, which contributes 0.5 percent of the world's greenhouse gas emissions. Some also caution that opposing the project could strain the fragile diplomacy between the United States and Pakistan.

The country has a more than 5,000 MW electricity shortfall, resulting in routine blackouts, hobbled industry and a hit on its gross domestic product that economists estimate at between 2 and 5 percent. And while the United States has come down hard on Pakistan for its interest in developing a natural gas pipeline with Iran, it has made energy cooperation a key part of its bilateral efforts.

"The Obama administration has always been very intent on broadening the relationship with Pakistan beyond security ... and energy has always been a pillar," said Michael Kugelman, senior program associate for South and Southeast Asia at the Woodrow Wilson International Center for Scholars.

If the United States were to help approve the plant, Kugelman said, "Pakistan would respect this decision and see it as an indication that the U.S. was engaging Pakistan by recognizing the importance of the energy crisis."

Conflict with new policy?

The result of the vote, set to take place today at the ADB in Manila, was not known by press time in the United States this morning. But it comes at a difficult time for the United States, which is trying to build a better relationship with Pakistan amid tension over drone strikes in the region. At the same time, the Obama administration took a strong stand last month when it announced tough new climate change guidelines that limit what coal projects it will back financially through international financial institutions (ClimateWire, Oct. 30).

Under the new criteria, the United States will insist that agencies give "full consideration" to low-carbon or no-carbon options before moving ahead with a new coal plant. Countries like Pakistan, which are not among the world's very poorest, would have to include carbon capture and sequestration (CCS) technology and meet the same emissions requirements laid out by U.S. EPA domestically in order to meet with U.S. approval. The $1.5 billion Jamshoro plant uses more efficient supercritical technology but does not have CCS capacity.

Justin Guay, associate director of the Sierra Club's international climate program, said environmental groups are not opposing Pakistan's use of coal but rather the use of limited public resources to help pay for it. He argued that the Obama administration, having come to the conclusion that U.S. dollars should not support coal, now must walk the walk.

"This is about holding the U.S. to its policy. This is not about domestic, sovereign decisions that the Pakistan government will make," Guay said. "Any project that comes down the pipeline, there are going to be concerns and ways to justify bending the rules here and bending the rules there. Like any new policy, it's going to be tough at first, and it's going to require standing up for the policy that they put in place."

Jake Schmidt, head of international climate policy at the Natural Resources Defense Council, said it is not enough for the United States to abstain, a common move at board meetings that allows a country to register opposition without actually endangering the project's approval.

"There is a lot of scrambling within the administration to decide what its position is going to be," Schmidt said. "Typically, on controversial projects like this, the United States has abstained. ... That might have been fine [before], but if you're going to take a stand, you've got to vote 'no.'"

Once, Pakistan created about 70 percent of its electricity from hydropower, but now the majority of its fuel mix is thermally generated oil and gas. Meanwhile, in rural parts of the country not connected to any grid, more than 60 million people have no access to energy. Officials estimate that 90 percent of that population uses primitive sources including kerosene, charcoal and dung for lighting, heating and cooking needs.

An energy-hungry region

Samuel Tumiwa, deputy representative of the ADB's North American office, said the new U.S. coal policy -- which was soon followed by the United Kingdom -- took the bank by surprise. The Jamshoro plant is part of a three-stage energy plan for Pakistan, he said, which includes improving efficiency and assisting with capacity building and tax collection. When it comes to energy generation, Tumiwa said, the ADB is focused in the short term on rehabilitating thermal and hydropower plants to promote efficiency; converting oil-fueled power plants to coal; and developing small and micro-power plants. In the medium and long term, he said, the energy plan for Pakistan includes the development of "highly efficient" coal plants as well as large hydropower and "domestic energy sources."

He argued that with feed-in tariffs still nonexistent in Pakistan and laws governing renewable energy needing much work, coal will continue to have a place in the country's energy growth.

"In the developed countries, you can say you're moving away from coal because you have enough electricity, so when you put in a wind farm, you can replace coal or you can replace gas in the market. Nowhere in the developing world is there sufficient energy to meet the demand, so you're not really ever replacing anything," Tumiwa said. "In the case of Pakistan, what we are replacing is heavy fuel with coal, but every additional unit is needed."

In replacing oil with super-efficient coal burning, the ADB argues, the Jamshoro plant will reduce 500,000 tons of carbon dioxide emissions per year.

Rafay Alam, an environmental attorney in Lahore and former chairman of the Lahore Electric Supply Co., said energy was a key election issue for Pakistan and the new government has unveiled a new energy production policy focused on setting up as many power plants as possible.

"I'm not a huge fan of coal. I think you can generate sufficient [megawatts] through solar and wind. But these technologies are by and large alien to Pakistan," Alam said. "Introducing large-scale renewables would have to overcome resistance from the existing system."

The Wilson Center's Kugelman, meanwhile, argued that while coal is certainly a dirty energy option for Pakistan, the country also needs new generation and also needs to diversify both its energy mix as well as international assistance toward energy, most of which goes toward hydropower.

"I think looking to coal would be a wise decision," he said. Of the U.S. decision on Jamshoro, he said, "This would be a good thing to vote on. It probably would make sense to go forward with this."

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