U.S. Treasury to Oppose Development Bank Financing for Most Fossil Fuel Projects
WASHINGTON (Reuters) — The U.S. Treasury Department issued new energy financing guidance to multilateral development banks on Monday, saying the United States would oppose their involvement in fossil fuel projects except for some downstream natural gas facilities in poor countries.
The new guidance from the Treasury, the largest shareholder in major development banks including the World Bank Group and the African Development Bank, prioritizes financing for renewable energy options and "to only consider fossil fuels if less carbon-intensive options (are) unfeasible."
The Treasury said it would oppose "upstream" natural gas projects, such as exploration, but could support midstream and downstream natural gas projects in poor countries that meet the World Bank's International Development Association targets if they meet certain other criteria.
These include a credible analysis that there is not an economically or technically feasible renewable energy alternative and that the project has significant positive impact on energy security or development.
Treasury said in the guidance it would "strongly oppose" coal energy projects across the entire coal value chain from mining, transport to power generation.
But the guidance offered an endorsement of the Asian Development Bank's work to organize and develop a plan to acquire coal-fired power plants and shut them down early. The effort, first reported by Reuters, includes British insurer Prudential, lenders Citi and HSBC and BlackRock Real Assets, with ambitions for an initial purchase in 2022.
The Treasury said it would support multilateral development bank support for coal decommissioning projects, adding: "We are encouraging the MDBs to explore potential projects for coal decommissioning."
The new guidance follows a meeting of development bank heads convened by Treasury Secretary Janet Yellen in July, where she asked them to rapidly align MDB portfolios with the 2015 Paris Agreement and develop ambitious plans to mobilize private capital to fight climate change.
The guidance, aimed at helping the banks meet those goals, also said that Treasury will oppose oil energy projects from exploration to the processing of transport fuels. It would make exceptions to this guidance only in "rare circumstances" such as humanitarian crises or as backup generation for clean "off-grid" energy systems.
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