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Despite Protests, Japan Diverts Funds Earmarked To Fight  Climate Change
To Finance Coal  Plants In India, Bangladesh

By Countercurrents.org

26 March, 2015
Countercurrents.org

Despite mounting protests, Japan continues to finance the building of coal-fired power plants with money earmarked for fighting climate change, with two new projects underway in India and Bangladesh, reported the Associated Press.

An article by Karl Ritter and Aijaz Rahi (AP) said:

The AP reported in December that Japan had counted $1 billion in loans for coal plants in Indonesia as climate finance, angering critics who say such financing should be going to clean energy like solar and wind power.

Japanese officials now say they are also counting $630 million in loans for coal plants in Kudgi, India, and Matarbari, Bangladesh, as climate finance. The Kudgi project has been marred by violent clashes between police and local farmers who fear the plant will pollute the environment.

The Muttagi, India, March 25, 2015 datelined article said:

Tokyo argues that the projects are climate-friendly because the plants use technology that burns coal more efficiently, reducing their carbon emissions compared to older coal plants. Also, Japanese officials stress that developing countries need coal power to grow their economies and expand access to electricity.

"Japan is of the view that the promotion of high-efficiency coal-fired power plants is one of the realistic, pragmatic and effective approaches to cope with the issue of climate change," said Takako Ito, a spokeswoman for the Japan foreign ministry.

Climate finance is money promised by rich countries in U.N. climate talks to help poor countries limit their carbon emissions. Japan announced at a U.N. climate conference in Peru in December that it has provided $16 billion in climate finance since 2013. Yet the U.N. has no rules defining climate finance, meaning governments decide for themselves what projects to include in their accounting.

The article said:

Environmental activists are demanding that at the very least, climate finance should exclude coal and other fossil fuels that scientists blame for warming the planet.

"Japan's support for new coal-fired power plants not only destroys the climate — it also displaces communities, is likely to cause untold local environmental damage, and primarily benefits Japanese companies instead of recipient countries," said Brandon Wu of ActionAid.

"This is unacceptable on its own, and the fact that it is being done in the name of 'climate finance' makes a farce of the entire concept," he said.

Climate activists are now urging the recently created Green Climate Fund, which is supposed to become a key channel of climate finance, to explicitly ban funding for fossil fuel projects. The issue is likely to be discussed at the GCF's board meeting this week in South Korea.

It added:

The Matarbari plant in Bangladesh is financed with a Japanese development loan agreed with the government of Bangladesh last June.

The Kudgi project in India is partially financed by the Japan Bank for International Cooperation, which supports Japanese companies abroad through export credits. JBIC agreed in January 2014 to provide $210 million in loans to Indian power company NTPC Ltd. to finance the purchase of steam turbine generators and boiler feed water pumps to be used in the coal plant from a local subsidiary of Toshiba, a major Japanese company.

Citing protests the AP article said:

Construction there has resumed after coming to a standstill following violent protests last July when police opened fire on angry demonstrators. Two farmers were wounded in the shootings.

One of them, Chandappa Holleppa, said he was shot in the stomach and left hand.

"I fell on the road and was bleeding badly," he told the AP. "Policemen picked me up and took me to a hospital," where he remained for two months, he said.

The protesters have set up a makeshift shed of bamboo sticks and tin sheets and plastic in the nearby village of Muttagi. They are focused on the plant's local environmental impact, such as potential air pollution, rather than its contribution to global carbon emissions.

"We want more power but not this one," said Sidramappa Ranjanagi, who leads a local farmers' organization. "In America they have stopped coal-based plants because it affects people's health. Why can't the government come up with solar power plants? We use solar power units at home here and they're good."

A. Sathyabhama, a technical services manager at the plant, said NTPC is trying to assure the villagers that the plant is environmentally safe.

Japanese environmental activist Yuki Tanabe has met with JBIC officials several times to urge them to withdraw funding for the Kudgi plant, citing concerns over human rights violations and environmental damage.

"JBIC responded that the human rights situation has been improved, and environmental concerns have been addressed," Tanabe said. "The project was approved, and no possibility to stop it now."

Japan's Foreign Ministry, which compiles the list of projects that get the climate finance label, said there was no change in policy regarding Kudgi.

"We are aware that the project mentioned was temporarily halted due to the protests by local residents," Ito said. "But we also understand that the project company responded to them properly and the project is being continued with appropriate monitoring in line with JBIC guidelines" for environmental and social considerations.

No such protest on the planned Matarbari plant was reported by AP.

US coal sector in decline

Coal sector in the U.S. is in structural decline. A report by Carbon Tracker Initiative says:

According to financial analysts over 200 coal mines in the U.S. faced shut down, and the industry lost 76% of its value in five years. The “structural decline” has sent 26 companies bust in the last three years.

The report found that in the past five years at least 264 mines were closed between 2011 and 2013. The world's largest private coal company, Peabody Energy, lost 80% of its share price.

These declines were in spite of the Dow Jones industrial average increasing by 69% during the same period.

Of the report Authors said this indicated a decoupling of US economic growth from coal.

Co-author Luke Sussams said the coal industry had been pummelled by cheap shale gas and a series of Environmental Protection Agency (EPA) regulations.

The Carbon Tracker report said:

Squeezed out by an abundance of cheap shale gas and ever tightening pollution laws, it may be a harbinger of things to come for other fossil fuel markets globally.

This report paints a bleak picture and makes grim reading for investors.

It finds that in the last few years U.S. coal markets have been pounded by a combination of cheaper renewables, energy efficiency measures, rising construction costs and a rash of legal challenges as well as the shale gas revolution.

Figure: Exploring coal industry index responses to different demand factors (01/01/07 – 20/01/15)

chart luke 17 coal

The reports key takeaways and recommendations include:

# Whilst historically economic growth in the U.S. has consistently driven increased coal use, there is now clear evidence of a decoupling of the two. In fact, despite GDP continuing to rise, domestic coal use peaked in 2007 and has been on a declining trend since.

# Cheap shale gas has flooded the market in the U.S., causing the price of natural gas to fall by 80% since 2008 while renewable energy costs have also continued to fall. These two drivers served to reduce coal's share of electricity supply by approximately 10% over the same period.

# Simultaneously, the U.S. EPA has issued seven environmental, air pollution and climate regulations. These have been significant in continuing to reduce U.S. demand for coal even when the U.S. natural gas price has risen, such as between the start of 2012 and mid-2014.

# These drivers have been the primary reasons behind the stranding of over 14GW of coal-fired power plants between 2010 and 2012 – US thermal coal prices have fallen drastically as a result. The evolution of the U.S. energy sector is far from over, however, as retirements are forecast to rise to 60GW by 2020 and 92GW by 2030, which is equal to 27% of the total U.S. coal generation fleet in 2012.

# This has had a huge impact on the companies engaged in mining it, with over two dozen going bankrupt and many others losing over 80% of their share value over the past three years, including Peabody Energy Corp, the largest producer in the U.S.

# Albeit localized in this case, this example of a fossil fuel becoming stranded by lower-cost, lower-carbon alternatives and increasing regulations provides an excellent example of how the future may pan out globally and with other fuels as the world moves to a low-carbon economy. Companies and investors by and large underestimated the risks in U.S. coal and did not see the way the wind was blowing until it was too late, and suffered very material losses because of it.

# All of this has occurred without a global climate deal or U.S. federal measures labeled “carbon” or “climate”. Global climate negotiations remain important, of course, and a global deal towards a good climate outcome has never been more desirable, but the changing costs of technologies, and domestic measures on air quality show the building and varied negative pressures on fossil fuel industries.

# Coal's problems appear to be structural rather than cyclical; accordingly, rather than betting on a cyclical upturn, investors should resist the urge to get back into the U.S. coal sector. We doubt that “business as usual” (as it has previously been understood) will ever return, so investors should seek capital discipline from management and challenge capital expenditure on high-cost projects.

# International investors should also take heed, as the same patterns may play out elsewhere. Timing of fossil fuels being superceded across the various markets will be uncertain, but investors should be cognizant of the dangers and consider their portfolios accordingly – the risk premium of fossil fuel project development has been raised.

 

 

 

 





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