Climate funds financed coal power plants in Indonesia

Environmentalists are demanding much stronger rules for what “climate finance” can be used for after discovering that $1 billion in funding from Japan went towards the construction of new coal-fired power plants in Indonesia.

The campaign, which involves some 250 NGOs from mainly developing countries, is calling for an “exclusion list” of projects that can’t qualify for financial aid because they don’t “align” with climate objectives.

The European Commission has joined the Organisation for Economic Co-operation and Development in pledging no more funding for coal-fired power plants, while the World Bank has said it would only provide finance in exceptional circumstances.

The UN conference in Lima, Peru, is considering general rules for climate finance reporting and giving direction to the new Green Climate Fund to ensure its money is not spent on projects that cause more pollution – such as coal-fired power plants.

There was genuine shock over an Associated Press report earlier this week that Japan had given $1 billion in loans to help some of its biggest firms build three such plants in Indonesia, on the basis that they would be “cleaner” than older coal-fired plants.

No rules

As the AP report noted, this highlighted “the lack of rules to steer the flow of climate finance from rich to poor countries” and the absence of any definition of what constitutes “climate finance”, as well as a watchdog agency to oversee how the money is spent.

The report quoted the UN's climate chief, Christiana Figueres, who was unaware that the Japanese-funded coal plants were labelled as climate finance, saying that there is no argument for supporting such projects with climate money.

At the Copenhagen climate summit in 2009, rich countries pledged to “ramp up” climate finance to $100 billion a year by 2020. While this figure remains a distant dream, pledges to capitalise the Green Climate Fund are expected to reach €10 billion in Lima.

“It would be such a shame if those resources went to fossil fuel-based technologies. It would be counterproductive,” said Karen Orenstein, international policy analyst for Friends of the Earth.

“Climate finance is such a mess. It needs to get straightened out.”

Japanese Friends of the Earth campaigner Yuri Onodera, called on his government to stop financing coal and help some of the poorest developing countries by increasing finance for renewable energy. “This would be a win for both people and the planet,” he said.

Said Lidy Nacpil of Jubilee South: “Financing any fossil fuels . . . is unacceptable. It is fundamentally in conflict with the mandate provided by the governing instrument for the Green Climate Fund and the principles of the UN Framework Convention on Climate Change.”

Brandon Wu, policy analyst with Action Aid USA, said the fund’s next board meeting in South Korea “must take up the exclusion list proposal to ensure that it never has to deal with embarrassing revelations of climate finance supporting coal-fired power plants”.

Samantha Smith, leader of the World Wildlife Fund’s global climate and energy initiative, said it was clear that renewable energy “must be prioritised in the distribution of climate funding and fossil fuels excluded.

“It defies reason that we have to raise this issue at all.”