Developed countries seek to end export financing for coal

What is the News?

The US, European Union, South Korea and other countries are planning to forbid their export-financing agencies from supporting coal-fired power projects overseas.

What is the issue?

The US, EU and other countries are planning to put a proposal at the Organization for Economic Cooperation and Development(OECD) to take a tough position against coal.

These countries have proposed to end export credit financing for the construction of coal-fired power plants that aren’t equipped with technology to capture and store the plant’s carbon dioxide emissions. 

However, Australia, Turkey, Japan and New Zealand have yet to support the proposal. This is because Australia is one of the world’s biggest coal miners while Turkey has never signed the Paris climate agreement of 2015.

Note: OECD oversees an agreement governing export-credit agencies which provide financing for overseas customers of the countries’ domestic firms. The US, the 27 nations of the EU, the UK, Norway, Switzerland, Japan, Australia, South Korea, New Zealand and Turkey are signatories of the deal.

Impact of this Proposed Ban

The proposal would have limited practical impact as financing for coal-fired power by the parties of the OECD countries has reduced in recent years. 

Moreover, Cheap natural gas and the falling cost of renewables in recent years made other kinds of electricity generation more attractive.

Note: At the recent G20 meeting, China, India and a few other developing countries have refused to back a deadline for ending international financing of coal-power plants or a phaseout of subsidies for fossil fuels. Both countries rely heavily on coal-fired electricity.

Source: This post is based on the article “Developed countries seek to end export financing for coal” published in Livemint on 15th September 2021.