WASHINGTON (Reuters) – The U.S. Treasury’s top climate official on Thursday said programs to accelerate the closure of coal-fired power plants are an “absolutely critical part” of fighting climate change but carry some risks.
In an interview with Reuters, Treasury Climate Counselor John Morton endorsed a scheme being developed by the Asian Development Bank (ADB) and private investors to buy up and retire coal plants early as a more difficult but necessary companion to “sexier” efforts to boost direct investments in clean energy projects and stop the financing of high carbon-emitting energy sources.
The emission reduction goals set by the Paris Agreement are impossible to achieve without early retirements of coal plants, he said.
“Financing the closure of something is not in the DNA of most development finance institutions or governments, but it is an absolutely critical piece of solving the climate problem,” Morton said.
Reuters first reported the ADB’s effort https://www.reuters.com/world/uk/exclusive-citi-hsbc-prudential-hatch-plan-asian-coal-fired-closures-sources-2021-08-03 with British insurer Prudential, Citi and BlackRock Real Assets to conduct a feasibility study to begin acquiring coal plants to wind them down 10-15 years before the end of their useful lives. The group has set a goal of financing their first plant purchase in 2022.
The United States, Canada, Britain and Germany agreed https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/12/fact-sheet-g7-to-announce-joint-actions-to-end-public-support-for-overseas-unabated-coal-generation-by-end-of-2021 at a G7 summit in June to provide up to $2 billion to support the Climate Investment Funds’ Accelerating Coal Transition program, which seeks to transition developing countries away from coal power.
Morton, a former partner at climate change advisory and investment firm Pollination Group who also served in Obama administration climate roles, said there were still many details to work out in making such schemes viable.
These include avoiding overpaying for assets and ensuring that public money does not crowd out changes that private sector will make on its own, especially with renewable energy becoming the low-cost power source.
“The key question is how do you avoid paying for something that would happen anyway,” Morton said. “There’s lots of debate around how best to do that right, so that you’re not getting gamed in the process.”
Policymakers will have to figure out ways to do that, he said.
“If you can move forward the closure of a coal plant by five years with a bit of creative financing, that is a massive, massive contribution — at usually a relatively low cost — to the global economy.”
(Additional reporting by Trevor Hunnicutt; Editing by Aurora Ellis)