OECD Agrees to Restrict Subsidies for Development of Coal Power Technology
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On Tuesday, November 17, Members of the Organization for Economic Cooperation and Development (OECD) struck a deal to restrict financial subsidies used to support the export of technology related to coal-fired power plants in developing countries. The deal came after months of difficult, sometimes contentious, negotiations.
On Tuesday, November 17, Members of the Organization for Economic Cooperation and Development (OECD) struck a deal to restrict financial subsidies used to support the export of technology related to coal-fired power plants in developing countries. The deal came after months of difficult, sometimes contentious, negotiations.
Representatives of the world’s wealthiest nations met this week in Paris to discuss, among other things, reforms designed to improve the environment using economic incentives. As part of those meetings, the OECD members reached the deal to end export credits for inefficient coal plant technology. Under the agreement, subsidies would end on January 1, 2017, and the effects of these measures would undergo review in 2019 to determine whether they have been effective and if it would be appropriate to further strengthen them.
According to a report by Reuters, many viewed this week’s talks as a final chance to end export credits for coal (the most polluting fossil fuel) before the two-week United Nations climate summit begins on November 30. The UN meeting also intends to discuss means of reducing and reversing climate change.
A senior Obama administration official close to the negotiations said Tuesday that OECD countries have financed over $35 billion worth of coal plants over the past seven years. The official noted that, “This is a landmark agreement that’s the culmination of a long process.”
While the United States already restricts coal technology exports, the OECD agreement will coax other nations like Japan and South Korea to enact similar restrictions. Similarly, the European Union already had plans to end domestic coal subsidies by 2018.
Negotiations over the OECD coal restrictions faced vehement opposition from Japan, who was wary of handicapping itself in competition with China. However, Japan finally agreed after a compromise proposal from the United States helped to sweeten the deal. Tuesday’s deal limits lending for coal plants to only the most efficient coal-fired power plants using ultra-supercritical technology.
The agreement does allow a few exemptions for emerging economies, recognizing the need for a balance between cheap power and clean technology. The exemptions would apply to nations where up to 90 percent of the country has electricity access. These include India, Indonesia, the Philippines, and South Africa.
According to the Sierra Club, the deal may take about 850 coal plant projects off the list for OECD subsidies. The coal industry responded to the news of the agreement by arguing that coal remains a necessary energy source, particularly for poorer nations that cannot afford more expensive, less polluting options.
