U.S. Treasury Announces Plan to Eliminate Funding for Overseas Coal Plants

October 30, 2013

Taking a step President Obama promised in his Climate Action Plan unveiled last June, the U.S. Treasury Department issued guidance yesterday that will eliminate U.S. funding to multilateral development banks (MDBs) for new coal-fired power plants overseas, except for projects (i) where carbon capture and sequestration technology is employed or (ii) sited in certain least- developed countries using high-efficiency coal combustion technologies.

The United States has the largest share of donor nation votes in the World Bank, which has a long history of providing funds for nations to develop energy generation technologies. Earlier this year, the World Bank signaled its intention to move away from funding coal-fired facilities and promote the elimination of fossil fuel subsidies worldwide.

Treasury’s announcement is yet another negative for the domestic coal industry which – in the wake of low natural gas prices and pending regulations that would appear to limit power plant CO2 emissions below what can be achieved for coal with existing technology – has increasingly looked to foreign markets to make up for declining demand at home. Coal-fired facilities will continue to be developed, however, but may not receive financing or financial risk mitigation support from MDBs in coming years.

Though Treasury’s guidance comes on the heels of September’s proposed EPA rule that would set strict CO2 limits for new coal- and gas-fired power plants, some industry analysts remain optimistic about coal’s future. With the advent of new technologies – including the discovery of new catalysts that expedite the conversion of CO2 to methanol, a potential transportation fuel and important feedstock for the chemical industry – research scientists may soon provide a workable solution for atmospheric carbon.