The Obama administration has crafted a deal with Japan to restrict financing for overseas coal projects, several sources told ClimateWire.
The agreement is aimed at influencing other members of the Organisation for Economic Co-operation and Development (OECD), which will meet next month in Paris for a contentious decision over setting common rules to phase out coal financing for export credit agencies.
Yet other OECD countries have not yet signed onto the deal, which could curtail 80 percent of coal projects in the export credit agency pipeline. Sources say the talks are in a sensitive phase and the administration wants to bring in other countries before making an announcement.
"They have struck a deal between the U.S. and Japan. It's a big deal. But they have to get other countries on board. The E.U. is getting there, but it's Australia and South Korea that are holding back," said one person familiar with the talks. A White House spokesman did not respond to requests for comment.
Two years ago, President Obama called for an end to coal financing overseas as part of his climate change action plan. Since then, the United States has pushed the issue with dozens of countries.
The United Kingdom, several Nordic countries and the Netherlands, as well as the World Bank, have since enacted rules allowing coal financing only in certain circumstances. Most measures call for coal financing only for the world's poorest countries, or demand carbon capture and storage or ultra-supercritical technology for somewhat wealthier nations.
Japan, the largest provider of overseas coal technology, has been one of the most resistant countries to curtailing that spending. A recent study by the Natural Resources Defense Council, Oil Change International and the World Wildlife Fund found Japan and Japanese companies spent more than $20 billion over the past seven years sending coal plant technology overseas.
Pressure to focus on low-carbon investment
"They actually believe that it is a legitimate commitment to the effort on climate change to put forward more efficient coal technology. I think they've convinced themselves that what is in their country's companies' commercial interest is in the global interest," said Steve Herz, a senior attorney with the Sierra Club.
Competition from China has also been a top concern for Japan. But last month, the United States and China issued a sweeping agreement on climate change that put new pressure on Japan. In a joint statement, the United States and China vowed to strengthen low-carbon development "with a view to strictly controlling public investment flowing into projects with high pollution and carbon emissions both domestically and internationally."
Maria Athena Ronquillo-Ballesteros, director of the World Resources Institute's Sustainable Finance Program, said a deal between the United States and Japan could have broad implications for investment.
"If the U.S. and Japan agree on language that will ultimately restrict export credit agency financing of carbon-intensive projects ... then that sends a powerful signal to other OECD countries," she said.
Jamie Henn, a spokesman for 350.org, said with a global deal in Paris expected in December, cutting coal financing overseas through the OECD will be key to reaching the global goal of keeping temperatures from rising more than 2 degrees Celsius above preindustrial levels.
"Investing in coal today is like doubling down on typewriters at the dawn of computers. It's bad for the planet and even worse for your bank account," he said.
Like what you see?
We thought you might.
Start a free trial now.