WASHINGTON - The world's richest nations, moving to combat global warming, are cutting government support for new coal-burning power plants in developing countries, dealing a blow to the world's dominant source of electricity.
First it was President Obama pledging in June that the government would no longer finance overseas coal plants through the U.S. Export-Import Bank. Next it was the World Bank, then the European Investment Bank, dropping support for coal projects. Those banks have pumped more than $10 billion into such initiatives in the past five years.
"Drawing back means there is less capital for these projects," Richard Caperton, managing director for energy at the Center for American Progress in Washington, said in an interview. "I don't expect private capital to move in and fill the void, either, because there is a real risk that these plants will be turned off early."
Demand for coal in developing nations has taken on increasing importance as the combination of stricter environmental regulations in the U.S., increasing deployment of renewable resources and a drop in the price of natural gas have pushed utilities to shutter coal plants.
Among the three government-backed lenders, the World Bank has provided $6.26 billion for coal-related projects over the past five years, according to data from Oil Change International. The Ex-Im bank provided more than $1.4 billion to two coal projects, one in South Africa and another in India.
While the pull back is unlikely to have a direct impact on China, the world's top user of coal, it could curb construction of new plants in countries such as South Africa and Vietnam and dampen new export markets for coal mined in the U.S., Indonesia or Australia by companies such as Peabody Energy and Alpha Natural Resources.
"We've never seen a cascading sentiment that coal is not acceptable like we're seeing happen right now," Justin Guay, the head of the Sierra Club's international climate program, said in an interview. "It's a snowball running downhill."
Environmental groups such as the Sierra Club are fighting coal plants and coal mines, because coal releases the most carbon dioxide per unit of energy of any major fuel source. Scientists say carbon emissions are to blame for warming Earth's temperatures, increasing the number and severity of storms and melting polar ice.
Supporters of the fuel source say it's a low-cost way for poor nations to provide light, refrigeration and air conditioning to their people.
The move by lenders against coal turns "our backs on millions without electricity and chooses not to help them achieve a better standard of living," said Nancy Gravatt, a spokeswoman for the National Mining Association in Washington, which represents producers such as Alpha and Arch Coal Inc.
Analysts are divided about long-term global coal demand.
In a July 25 report, the U.S. Energy Information Administration projected world coal use would increase by a third to more than 200 quadrillion British thermal units a year by 2040 as developing nations boost its use.
The cut-back in the financing isn't causing a reassessment of that outlook, said Greg Adams, the team leader for coal at EIA. "The capacity that is going to be affected is going to be limited," he said.
Gregory Boyce, chief executive officer of Peabody, the largest U.S. coal producer, noted that German and Japanese coal use is climbing as they cut nuclear-power generation.