Coal Industry Seeks Unusual Partner in UN Green Climate Fund

  • World coal body approaches World Bank, UN Climate Framework
  • `Tough' for industry to fund cleaner-coal technology alone

The coal industry, viewed as a key contributor to global warming, is seeking a once-improbable collaborator: a fund set up under United Nations climate negotiations.

With more than 2,000 new coal power stations planned or being built in Asia to Africa, the UN Green Climate Fund should help finance making the plants more efficient, according to Mick Buffier, the chairman of the World Coal Association. New coal technology can cut climate-warming gases by about a third per unit of power, though it adds about 50 percent to the $315 million cost of a 500-megawatt plant in China, the group said.

The Green Climate Fund is meant to channel climate-related aid from industrial nations to developing countries. Bangladesh alone said it needs $16.5 billion in the 20 years through 2030 to ensure its plants will use so-called “super-critical” clean technology. Citigroup Inc. said Monday it will cut back on financing for coal projects, adding pressure to an industry where prices have slumped 77 percent from a high in 2008.

“We’re looking to mobilize funding, either under the Green Climate Fund or something that sits outside that, because it is a genuine, low-emission funding proposal,” Buffier said from Sydney. He is also a sustainable-development executive at Glencore Plc’s coal unit. 

Glencore, the worlds’ biggest exporter of thermal coal, has plowed at least $300 million into cleaner coal technology and the industry can’t finance it alone, he said, speaking on behalf of the industry. “We’re at a stage where, quite frankly, we are finding it tough.”

Michel Smitall, a spokesman for the Green Climate Fund in Songdo, South Korea, declined to comment on the coal group’s proposal. The fund, set up to receive a portion of $100 billion a year of climate finance starting in 2020, plans to decide on its first projects at a November board meeting in Livingstone, Zambia.

Global Glut

China’s reduced demand for coal has created a worldwide glut. In the U.S., cheap natural gas is taking a bigger share of the power generation market, while Britain is said to be considering closing all of its 12 coal-fired power plants by 2023 to help combat global warming. The Stowe Global Coal Index, a measure of industry stock-price performance, has fallen 50 percent this year and is heading for its fifth consecutive yearly drop.

Stowe index of 26 coal stocks

Cutting coal plant emissions by boosting efficiency or upgrading existing facilities costs about $10-$20 per metric ton of carbon dioxide reduced, Buffier said. That’s less than half the $41.81-a-ton cost of European Union emission allowances that would make utilities switch to natural gas from coal in Germany, according to spread data on Bloomberg.

The London-based WCA is also examining the creation of a finance structure similar to that used for the Montreal Protocol, an international agreement using $3.3 billion from 45 nations designed to phase out ozone depleting substances, Buffier said.

“We’ve had discussions at a high level with quite a number of governments and some other stakeholders including the World Bank and the UN Framework Convention on Climate Change,” he said. “It will need government, it will need industry, it will need multilateral development banks and national development banks.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE