19 November 2015
by Adam Morton
Australia backs down on coal stand-off
Prime Minister Malcolm Turnbull, left, with Indonesian President Joko Widodo. The two countries are the world's biggest coal exporters.
Australia has backed down from a climate change stand-off with the US and Japan, agreeing to a deal to cut funding for dirty coal-fired electricity by billions of dollars a year.
The agreement, backed by 34 wealthy countries, is expected to give a boost to the United Nations climate summit starting in Paris in 12 days.
Loaders fill railcars with coal at a depot in Jharkhand, India.
The compromise deal was reached at a meeting of the Organisation for Economic Co-operation and Development (OECD) in the terror-ravaged French capital overnight on Tuesday.
A senior White House administration official said it was a "landmark" – the first deal to include standards to reduce public financing for the dirtiest coal-fired power plants.
"If you look at plants ... funded in the last 10 years, this agreement would make 80 per cent of them ineligible," the official said.
"And if you look at the forward pipeline of coal plants on the drawing board today globally, we estimate that this agreement will render more than 85 per cent of those plants ineligible."
Rich countries' export credit agencies have funded about $35 billion worth of coal over the past seven years.
Leaked documents seen by Fairfax Media last week showed Australia had opposed a US-Japan deal that effectively would have limited public financing of coal plants by OECD countries to only the "cleanest" available – mostly those classed as "ultra-supercritical" generators.
The US and Japan also wanted a clause that a coal plant could win public funding only if cleaner alternatives, such as renewables, were not viable.
Australia wanted the deal to still allow the funding of large "supercritical" coal plants, which have higher emissions, and to avoid the requirement that cleaner alternatives be considered.
The US official said under the compromise deal large plants can be funded only if they were ultra-supercritical – that is, if they have the latest technology and the lowest emissions possible.
Dirtier plants could be funded only if they were small and in the poorest countries.
All plants would need to be assessed on whether they were the cleanest alternative available, and if they were consistent with the country's climate change plan before winning funding. The deal will take effect in 2017.
"This is a big step forward," the official said. "It puts clean energy technology, like renewable energy, on a stronger footing."
The deal addressed concerns that cutting emissions would prevent people in the poorest countries getting access to electricity by still allowing small plants using older coal technology to be built in those cases, he said.
The deal includes an Australian proposal that eight countries in which fewer than 90 per cent of people have access to electricity still be allowed to build older coal technology if cleaner alternatives were not available.
The US official said it did not consider this clause significant, estimating it would affect less than 1 per cent of planned coal plants.
Trade and Investment Minister Andrew Robb said he welcomed the deal. He said it struck the right balance between reducing global emissions, and providing countries, particularly in Australia's region, with access to adequate power supplies to support development.
"The new arrangements will encourage the use of higher efficiency coal plants while addressing the energy requirements of countries like India, Indonesia and the Philippines as they continue to bring millions out of poverty," Mr Robb said.
Based on Australian Treasury modelling, it is likely Australia's coal exports will fare better than those from competitor countries as the market tightens. Australia's coal is generally considered to be of better quality, and more suitable for use in lower-emission power plants.
Jake Schmidt, of the US-based Natural Resources Defence Council, said Australia had watered the deal down, but it would still send "a powerful signal to the private sector that unfettered public financing of overseas coal power plants is coming to an end".
Greens climate change spokeswoman Larissa Waters accused the government of "browning down" the deal at the last minute.
"Right until the last moment, Australia was threatening to block the historic deal ... This cynical strategy is driven by the Coalition government's desire to please its big mining donors at the expense of the world's poorest people and Australia's safe climate future."
The Climate Institute said while it welcomed the government moving from its initial outright opposition, it was disappointed Canberra had helped weaken the deal. But deputy chief executive Erwin Jackson said the final agreement set "an important new benchmark where investors and countries would need to look at more modern, cleaner alternatives first before jumping to older, dirtier technologies".
But the Minerals Council of Australia said the deal underlined the "fundamental role" coal would play in a low-emissions global economy.
Greg Evans, the council's executive director for coal, said the deal was good news for Australia, in part because the allowed plants required high quality coal.
"This is why the 2015 International Energy Agency World Energy Outlook released earlier this month predicted that Australian coal exports would grow by 37 per cent by 2040," he said.
"The reported improvements to the agreement secured by the Turnbull government and South Korea ensure that the new arrangements will not have perverse outcomes, including by pushing poor nations to seek alternative financing arrangements and higher emitting plants."
Institute of Public Affairs energy director Brett Hogan said governments should not be declaring which energy technologies were socially acceptable.
"While there is a strong economic and energy security case for the rollout of supercritical and ultra-supercritical power stations, the decision as to what type of power station will suit a particular market should rest solely with that market," he said.
But Julien Vincent, of campaign group Market Forces, said the agreement was a "huge relief", though expressed concern about Australia's positioning in the negotiations.
"Prime Minister [Malcolm] Turnbull said just a few weeks ago that we need to take the ideology out of the climate change debate. For Australia to take a modest proposal ... and only agree to it after kicking holes in it is a sign that we haven't yet shaken off the 'climate change is absolute crap' ideology of Tony Abbott," he said.
Japan backed the deal despite being responsible for more than half of OECD export credit financing of coal. South Korea had also opposed the US-Japan deal, but agreed to the compromise.
The deal covers coal plants funded by public export credit agencies only. Australia's export credit agency, the Export Finance and Insurance Corporation, does not fund coal.