Japan’s plan to curb coal plant lending has major “loopholes”

The Japanese government has tightened its lending criteria for overseas coal-fired power plants, including that it will not provide financial support for any host country that does not have a decarbonisation policy. However, it will continue supporting coal projects if they use highly efficient technologies, and plants that it has already committed to will still go ahead, locking in fossil fuel-based energy for decades.

In a press conference on July 9, environment minister Shinjiro Koizumi reportedly stated that the revisions will make it difficult for the Japanese government to support overseas coal-fired power projects in the future.

While Japan has taken a step in the right direction, funding coal-fired power plants, high tech or otherwise, does not align with the 2015 Paris agreement, a deal now backed by Japan and most other countries to keep greenhouse gas emissions below 2°C above pre-industrial levels, argues the Japan Center for a Sustainable Environment and Society (JCSES) and five other NGOs in a joint statement.

Coal generates nearly 40% of the world’s electricity, with 80 countries using coal power, a figure up from 66 in 2000, according to an investigation by Carbon Brief, a UK-based research and media company. CO2 emissions from existing plants are enough to breach the carbon budget of 2°C.

 

Skirting around an outright ban

A spokesperson for JCSES tells GTR that the Japanese government is making progress but not quickly enough and that the revised policy has “loopholes” in it. For example, it does not apply to projects that are in the planning stage, meaning that fossil fuel-based energy could be a reality for decades as the lifespan of a coal-fired plant is 30 years or longer.

“We believe the Japanese government is now, or will soon be, considering three overseas coal power projects: Vung Ang 2 in Vietnam, which the Japan Bank for International Cooperation (JBIC) and the Nippon Export and Investment Insurance (Nexi) are considering financing/insuring, and Indramayu in Indonesia and Matarbari Phase 2 in Bangladesh, both for which the Japan International Cooperation Agency (JICA) is expected to receive requests for support. The fact that the principles will not be applied to these three projects undermines the very meaning of this policy review,” reads the statement by the group of NGOs.

It adds that these projects are already facing “serious” problems, including inconsistency with the Paris agreement’s long-term goals, an excess supply of electricity in the host countries, a lack of economic justification due to the falling costs of renewable energy, environmental pollution at the proposed sites, and human rights violations affecting local residents.

Government-owned export credit and insurance providers JBIC, Nexi and JICA were unavailable to comment when contacted by GTR. In a recent conversation with a spokesperson for JBIC, GTR was told the export credit agency will consider projects on a “case-by-case basis”, despite its governor Tadashi Maeda reportedly saying at the end of April that it will no longer accept loan applications for coal-fired power generation projects.

When it comes to issuing official export credit support for coal-fired projects as well as fossil fuels more generally, Japan is the worst offender, finds a report published earlier this year by Oil Change International, a US-based research organisation. Japan provided US$7.8bn annually to fossil fuels, followed by China, Korea and Canada with US$7.7bn, US$5.3bn and US$4.3bn respectively.

 

Private sector lending accused of “stalling tactic”

A softer approach to coal financing is also reflected in the private sector as it continues to fund projects. Since January 2017, 307 commercial banks across the world have provided US$159bn in direct loans to coal plant developers. The top three lenders are the Japanese banks Mizuho (US$16.8bn), MUFG Group (US$14.6bn) and SMBC (US$7.9bn), reveals research published at the end of last year by Urgewald, BankTrack and 30 partner NGOs.

For its part, MUFG Bank revealed it will no longer provide financing for new coal-fired power generation projects after July 1, 2020, in a revised environmental and social policy framework published on May 13.

However, it adds: “The exceptions of this policy may be considered where we will take into consideration the energy policies and circumstances of the related countries, international standards such as the OECD arrangement on officially supported export credits, and the use of other available technologies when deciding whether to provide financing.”

Mizuho has said it will stop financing new coal power projects and end all loans for coal by 2050, giving the bank exactly three decades to halt all its lending activities. On April 15, the bank said in a statement that it would cut its outstanding balance of ¥300bn in loans to coal power projects as of March in half by 2030 and reduce it to zero by 2050.

However, the policy also states that Mizuho may consider financing for coal-fired power plants that are “essential to the relevant country’s stable energy supply and will contribute to reduction of greenhouse gas emissions by replacing an existing power plant”, adding that it will continue to support the development of innovative, clean and efficient next-generation technology.

One day later, SMBC published its policy revision, which stated that it may finance coal-fired plants that use “environmentally friendly” technologies and those which it has already committed to. No Coal Japan, a Japan-based NGO, called out SMBC in a statement for using a “stalling tactic” as it does not impose any deadlines for the phase-out of coal financing.

The post Japan’s plan to curb coal plant lending has major “loopholes” appeared first on Global Trade Review (GTR).

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