U.S. Toughens Conditions to Back Development Coal Loans

Development banks such as the World Bank or the African Development Bank will need to meet more stringent criteria to obtain U.S. support for coal-fired power plants abroad under new guidelines released today.

Only projects in very poor nations that have no economically feasible alternatives, or in emerging markets that use carbon capture technologies, will get U.S. backing under the new criteria. The conditions aim to implement an aspect of President Barack Obama’s climate action plan released in June.

“By encouraging the use of clean energy in multilateral development bank projects, we are furthering U.S. efforts to address the urgent challenges of climate change,” Treasury Undersecretary for International Affairs Lael Brainard said in a statement released today.

While the U.S. can’t stop such projects on its own, it vowed in the statement to work on getting allies among other development banks’ member countries. A first test may come in Kosovo, where the World Bank is studying whether to offer partial guarantees for a lignite-fired plant.

The Kosovo plant would be the first major coal project to receive World Bank support since 2010. The Washington-based lender has also decided to restrict coal-fired power plants to “rare circumstances.”

Awaiting Evaluation

The U.S. isn’t in a position to evaluate the proposal yet because the bank’s management hasn’t presented all documentation to the board of directors, according to a Treasury official who spoke on condition of anonymity to discuss specifics of the policy.

The Treasury uses as a guide to determine a country’s poverty level the list of borrowers from the International Development Association, or IDA, the World Bank unit that lends at zero to very low interest rates.

Kosovo, the Balkan country that declared its independence from Serbia in 2008, straddles that line between a very poor and emerging nation: according to the bank’s website, it can access financing from IDA, though on different borrowing terms that others.

“Kosovo doesn’t meet the test of the president’s action plan,” said Nezir Sinani, a climate change coordinator at the Bank Information Center, a Washington-based non-profit group that advocates for economic justice and ecological sustainability at development banks. “This is the test case and all eyes are on the U.S. government to see if they are serious.”

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