The coal dilemma

In 1998, New York Times war correspondent Chris Hedges found respite from the interethnic violence that raged across the small European state of Kosovo in an unlikely place: deep underground, among the country’s “glittering” mineral deposits.

Deep inside the Stari Tng mine, Hedges found “veins of lead, zinc, cadmium, gold and silver,” and he heard about Kosovo’s billions of tons of coal reserves.

“The war in Kosovo is about the mines, nothing else,” Stari Tng’s director told Hedges at the time.

A decade and a half later, another war is waging over Kosovo’s underground resources. This time, the battles are taking place not with guns and mortars but protest signs and media coverage.

This battle is about coal and whether or not it should be burned for electricity.

Kosovo is one of the poorest countries in Europe; foreign direct investment is weak. How can economic growth be boosted in a place where power demand vastly outpaces supply, and where citizens struggle to heat their homes in the winter?

Cheap power comes with a cost, and the choice is not Kosovo’s alone. The country cannot afford to build its own coal-fired plant and has reached out to the World Bank for financing. Civil society and environmental groups have banded together to protest the coal plant’s construction and any foreign financing to achieve it.

The debate over public financing for coal has raged from Capitol Hill in Washington to a plethora of board rooms, government offices and dusty villages from South Africa to China, India and Vietnam. Coal currently fuels 40 percent of the world’s energy, according to the International Energy Agency. It is the highest carbon-emitting fuel source, and the cheapest, in a world where 1.5 billion people still lack access to power.

Kosovo’s lignite is among the least-efficient varieties of coal, and so it is both relatively dirty and effectively worthless as an export commodity. The country’s existing coal plants are nearing retirement and are already overpolluting and underperforming. If Kosovo doesn’t burn its lignite for power, it will remain buried in the ground, which is exactly where most environmental groups want it to stay.

The World Bank’s decision to move forward with necessary preparations and assessments that will allow it to provide a $58 million partial risk guarantee for Kosovo’s lignite plant — “Kosovo C” — has riled those climate advocates and environmental groups. A bank review of the project determined that non-fossil energy sources are too limited and too expensive to overcome an energy deficit that is crippling the country’s economic growth. The project is currently slated to undergo a social and environmental impact assessment that could pave the way to its initiation.

In a Huffington Post blog titled, “Dr. Kim's World Bank Legacy Hinges on Kosovo Climate Test,” Justin Guay, associate director of the Sierra Club’s International Climate Program, wrote that the proposed project flies in the face of World Bank President Jim Yong Kim’s vocal leadership on climate change.

“When it comes to making decisions that test their willingness to build climate legacies,” Guay wrote, “President Obama has the Keystone XL tar sands pipeline, and Dr. Kim has a massive coal plant in Kosovo.”

Facing down the coal dilemma

Development institutions like the World Bank are caught up in competing visions of an energized future, and financing for coal power has become a galvanizing issue in the debate. When these institutions finance coal plants instead of renewables, environmental groups accuse them of abdicating leadership in the transition towards a post-carbon global economy. When they refuse to finance coal plants and insist on noncarbon fuels, other critics allege they are returning to a paternalistic view of development by imposing conditions and insisting developing countries accept restrictions developed countries never have.

Groups like the World Bank find themselves torn between constituencies and seemingly competing mandates, with energy poverty on one side of the equation, and climate change and the environment on the other.

“Climate change and the coal issue is one thing, but the humanitarian issue is another, and we cannot turn our backs on the people of Kosovo who face freezing to death if we don’t move in,” Kim said in a teleconference last year.

The bank chief has put himself out on a limb, somewhat, through his unprecedented willingness to elevate climate change as an institutional focus. Kim sees climate change as exactly the type of supranational challenge for which the World Bank’s global reach is suited, particularly now that the institution has restructured around sectoral departments that span all of the bank’s regions of work. Leadership on climate change offers the bank — and its ambitious president — an opportunity to show relevancy in global financing discussions at a time when private sector dollars far outpace official development assistance.

“There clearly are tensions within development institutions depending on where people sit and what their mandates are within the institution,” Scott Morris, senior associate at the Center for Global Development, told Devex.

“If your mandate is explicitly energy and energy access, you’re going to have the one predictable viewpoint. If you have a climate mandate, you’re going to have the other one,” he added.

A World Bank representative told Devex that the bank considers both goals to be achievable.

"We don’t see energy access and greenhouse gas emissions as an either-or equation,” the representative said in an email. “Rather our approach is that we must reduce energy poverty while supporting countries to increase the share of low carbon energy in the overall mix and reduce energy intensity."

Environmental groups argue that the bank is undermining that very vision with projects like Kosovo C. Every investment international financing institutions make in coal prolongs global dependence on the dirtiest of fossil fuels and misses an opportunity to direct that funding towards cleaner sources, they argue.

But not everyone agrees the battle lines that have been drawn — with coal on one side and renewables on the other — amount to a substantive conversation about the future of energy access, energy poverty and what it all means for global climate change.

Taking a closer look

Armond Cohen is the co-founder and executive director of the Clean Air Task Force, a research and advocacy organization that works to advance the development of “climate protecting technologies.” Recently, Cohen has made it his mission to look harder at the claim that the world can achieve universal energy access and at the same time mitigate effects of climate change.

The Lima climate talks that concluded in December — and last year’s climate agreement between the U.S. and China — enlivened the conversation about how to increase global energy access while ensuring the planet remains hospitable.

But, according to Cohen, much of that optimism — as well as much of the uproar about whether or not the World Bank and others should fund individual coal plants or instead restrict themselves to renewables — appears out of touch with the paired realities of real energy demand and future carbon emissions.

What the world seems to lack, Cohen said, is a realistic vision for a high-energy future where electricity access does more than power a few lightbulbs, and where increased energy consumption does not produce runaway climate change. This is not the conversation that’s happening now, Cohen argued.

He points to a few assumptions that underlie the coal versus renewables battle as indications that many of the institutions involved are simply talking past one another.

“You start out with that basic problem, which is that people are not even in the same ballpark as far as what the global energy demand growth curve looks like, and then it’s kind of all downhill from there,” Cohen told Devex.

What we talk about when we talk about energy poverty

The International Energy Agency defines “energy access” as “a household having reliable and affordable access to clean cooking facilities, a first connection to electricity and then an increasing level of electricity consumption over time to reach the regional average.” That initial measure of “access” equates to a minimum of 500 kilowatt-hours per urban household per year and 250 kwh per rural household per year. That is enough electricity to power a couple of lightbulbs, a mobile phone and a fan for several hours a day.

Most of the international organizations that talk about achieving universal energy access are talking about this level, and while the importance of first-time access should not be disregarded for the over 1 billion people currently without electricity, as an endpoint for planning discussions, it still looks an awful lot like living in poverty.

This level of energy access should not be confused with the real aspirations that poor people have, said Cohen, or that we should hope they will achieve, since the ultimate goal of broadening access to power is for that access to help lift people out of poverty.

As Morgan Bazilian and Roger Pielke write in their summer 2013 article “Making Energy Access Meaningful,” published in Issues in Science and Technology, the concept of energy access, as often defined, “leads to projections of future energy consumption that are not only potentially far too low, but therefore imply, even if unintentionally, that those billions [who lack modern energy services] will remain deeply impoverished.”

What is concerning, the authors note, is that these are the numbers that inform discussions of what a global energy mix to achieve universal access should look like. In other words, the strategic visions we have to alleviate energy poverty — the United Nations' Sustainable Energy for All initiative, for example — don't describe a future that has eradicated economic poverty and where people are consuming an amount of energy that is anywhere close to the global average, which is roughly 3,000 kwh per capita and characterized by huge disparities between countries.

The World Bank employs a tiered system to describe energy access levels, with 1 being the lowest and 5 being the highest. But still, tier 5 corresponds to roughly 420 kwh per capita per year, according to Bazilian and Pielke, which, they note, “at less than 10 percent of Bulgarian consumption, is still much lower that what typical energy services would imply in even the least energy-consumptive wealthy countries.”

“There’s a certain aspect of this that’s a little disconnected from what the aspirations of people really are,” Cohen told Devex.

The 1,000-year overhang

The win-win scenario, in which the world achieves universal access through greater energy efficiency and a larger share of renewables, while avoiding dangerous climate change, ignores another reality: Asia.

China is the largest solar and wind market in the world. It also added 40 gigawatts of coal power in 2013.

“We’re not displacing coal with wind and solar. We’re adding to the coal, since the demand is so great,” Cohen told attendees at a National Bureau of Asian Research panel in Washington last year.

If China completely stopped building coal plants in 2030, according to Cohen, the country’s existing plants would still produce 250 billion tons of carbon dioxide, which equates to one-third or all of the planet’s remaining carbon budget, depending on whether you choose the more or less conservative estimates of how close we are to “dangerous climate change.”

“It means that if we don’t deal with that embedded base of coal energy that’s already been built and is going to be built in Asia … You can build all the new clean energy you want but you’re going to have that overhang, and that overhang lasts for 1,000 years,” Cohen said.

For Cohen, who works to promote decarbonizing technologies, that adds up to one big conclusion, and it isn’t that development institutions will make or break the global climate with their decisions to support or prohibit individual coal projects overseas.

“You’re digging a hole you can’t get out of, except if you have carbon capture and storage,” Cohen said, describing CCS as, “the only practical way to meet climate targets.”

International financial institutions have waded into CCS, and U.S. President Barack Obama’s pledge to restrict coal financing overseas gave a strong nod to promoting the technology.

“Today, I'm calling for an end to public financing for new coal plants overseas unless they deploy carbon-capture technologies or there's no other viable way for the poorest countries to generate electricity,” Obama said in a speech outlining the administration’s broader efforts on climate change at Georgetown University in June 2013.

Five days later, Obama launched Power Africa, a whole-of-government effort to facilitate private investment in Africa’s power sector and double access to energy in sub-Saharan Africa, and the initiative’s leaders have been riddled with questions about how it will balance energy and climate concerns, and whether it will invest heavily enough in renewable energy.

The U.S. position on coal has grown murkier, and a few U.S. agencies have found themselves caught in the political crossfire. Both the Overseas Private Investment Corp., which provides risk mitigation for investments in developing countries, and the U.S. Export-Import Bank have been prohibited from supporting coal projects by Obama’s pledge, and have had their budgets threatened by lawmakers from coal states if they follow through on Obama’s Climate Action Plan. The result seems to be a return to a polarized argument, with no room for fossil fuel promotion on one side, and with no tolerance for restricting energy investments on the other.

Cohen sees the current level of discourse — or lack thereof — as a missed opportunity to have a conversation about the role that bilateral donors and multilateral institutions could play in deploying and commercializing technologies like CCS, which he thinks have the potential to bridge the distance between climate concerns and real energy aspirations.

“The discussion of renewables has been privileged and I don’t think that’s out of ill will or ideology. I think it’s largely out of the fact that the conversation hasn’t really been happening, and there has not been a good, factual dialogue around this," Cohen told Devex.

The World Bank shared an overview of its work on carbon capture and storage with Devex, and while it notes that the International Energy Agency expects CCS will account for 14 percent of emissions reductions, it also says that World Bank funding for CCS is around $57 million, compared to about $5 billion for renewables between the bank and the International Finance Corp.

“It’s not a sexy topic,” Cohen said. “Everyone likes solar panels, and everyone likes wind, and everyone likes thinking about distributed appropriate technology, so that has been the discussion. There just hasn’t been as much reality check based on the size of the energy demand.”

Cohen is encouraged that the recent U.S.-China climate agreement did include carbon capture and storage as a central pillar, but, he said, those kinds of agreements need to be built out at a global level, and they need to look at “modern energy access.”

“That’s what’s going to really lift people out of poverty and make life more materially manageable … and that’s where we need to be,” Cohen said.

“Now let’s talk about how we get there, and let’s talk about the role of renewables, and let’s talk about the role of central station, and let’s talk about the role of energy efficiency. But let’s come up with a realistic package and roadmap. No one has done that work … at a global level. No one.”

2015 will be a pivotal year for global climate change planning and financing. In Paris, the 21st Conference of Parties will convene in July to agree on a legally binding global agreement on curbing carbon emissions that world leaders hope to sign in December. It will likely include technology transfer to developing countries, new commitments that will alter the landscape of coal and renewables, and funding commitments to help developing countries “leapfrog” older, dirtier technologies.

With less than a year remaining to negotiate, whether the Paris agreement will include a roadmap to balance climate goals with the level of energy access that people want remains an open question.

Check out more insights and analysis for global development leaders like you, and sign up as an Executive Member to receive the information you need for your organization to thrive.