Ex-Im Bank Announces Historic Coal Finance Ban
Since the President announced his plan to restrict U.S. government support for public financing of new coal plants overseas, executive agencies that make these funding decisions have been working to make good on this commitment. Last week, it was the U.S. Export-Import Bank’s turn, as its Board approved historic new guidelines to implement the President’s directive. Ex-Im is the first Export Credit Agency (ECA) to announce such restrictions, a testament to President Obama’s leadership in withdrawing public support for new coal plants overseas.
There is much to like in the new policy, as it will end Ex-Im’s support for new coal plants in all but the most unusual circumstances. As the President directed, Ex-Im support will now only be available for “(a) the most efficient coal technology available in the world’s poorest countries in cases where no other economically feasible alternative exists, or (b) facilities deploying carbon capture and sequestration technologies.”
The best part of Ex-Im’s new policy its common-sense approach to determining whether there are any “economically feasible alternatives” for meeting the energy needs of the poorest countries. Recognizing that saving a unit of energy is generally much cheaper, faster, and cleaner than generating a new one, Ex-Im will now require that the costs of a proposed coal plant be compared with the costs of reducing energy waste, upgrading grids to reduce transmission and distribution losses, and adopting new policies and regulations to catalyze savings. Moreover, sponsors of coal projects will also need to show that despite the plunging costs of renewables, no renewable energy alternatives are feasible. And, most important, they will have to make this case while factoring in the considerable health and environmental costs of coal burning, and the “social cost” of its carbon pollution.
The coal industry’s success has long depended upon its ability to keep these costs off the ledger. The truth is, coal simply can’t survive a rigorous assessment of its costs and impacts—its costs are too high and unpredictable, its health and environmental impacts are too grim, and the alternatives are too attractive. We don’t expect to see any new coal projects approved under this analysis.
But while Ex-Im’s new policy is clearly an important step forward, much work remains to be done to transform Ex-Im into an effective player in the President’s fight against climate change. The new policy does little to limit support for overseas coal mining, and does nothing to address Ex-Im’s massive support for other fossil fuel investments besides coal plants. In FY 2012, Ex-Im provided over $10.4 billion in credits to fossil fuel related exports. Much of this went to support investments in new oil and gas exploration, even though the carbon contained in existing fossil fuel reserves already far exceeds the amount of carbon that can be safely burned under any scientifically defensible scenario.
Moreover, Ex-Im provides only paltry support for renewable energy and other climate friendly technologies. In FY 2012, it provided just $301 million in climate-related export credits, less than 1 percent of its total financing. This despite the fact that Congress has directed Ex-Im to allocate at least 10 percent of its aggregate financing to renewable energy or end-use energy efficiency technologies. Had EXIM simply followed this instruction in FY2012, it would have provided over $3.5 billion to support clean energy exports.
Rebalancing Ex-Im’s portfolio to drastically reduce fossil fuel investment and ramp up support for clean technologies would have a number of benefits, both for climate and for the U.S. economy. First, it would advance Ex-Im’s job creation mandate, as clean energy exports create far more jobs than fossil fuel related exports. Studies by the Center for American Progress and WWF have estimated that clean energy exports generate about three times more American jobs per dollar spent than fossil fuel related exports.
Second, expanded support for clean energy exports is essential for American competitiveness in this fast growing, strategically important sector. By 2020, clean energy will be one of the world’s biggest industries, totaling as much as $2.3 trillion. The vast majority of this investment will take place outside of the United States. However, many observers have noted that American companies are in danger of being left behind by companies from countries such as Germany, China and Spain, whose governments have done much more to advance their clean technology sectors.
Third, increased exports of clean energy technologies will help drive down their domestic costs. One of the key determinants of how fast the costs of an emerging technology fall is how quickly it is deployed. For this reason, former Energy Secretary Chu emphasized the importance of exporting U.S. solar technology to achieving the goals of the SunShot Initiative to reduce the costs of solar power 75 percent by 2020.
In light of all this, the message to Ex-Im and the administration is clear -- nice job on the coal policy; now it’s time to get to work on the rest of the energy portfolio.
--Steve Herz, Sierra Club International Climate Program