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Congress could overturn Obama's ban on funding coal plants abroad

An Indian labourer adjusts coal being loaded onto a truck at the Kankaria Railway Yard in Ahmedabad on September 5, 2012.
An Indian labourer adjusts coal being loaded onto a truck at the Kankaria Railway Yard in Ahmedabad on September 5, 2012.
Sam Panthaky/AFP/Getty Images

Back in 2013, the Obama administration announced that it would restrict US financing for coal plants abroad — with exceptions for very poor countries. The move came as part of President Obama's big push to address global warming.

But Congress is now working to overturn that ban and allow the US government to fund coal plants overseas once again.

At issue here is the Export-Import Bank, a government-backed lender that guarantees loans to foreign companies buying American products. The 80-year-old bank is currently up for reauthorization in Congress, and many conservatives would prefer to kill it altogether.

So, in order to rally support from conservatives, the bank's backers are circulating proposals that would allow the Export-Import Bank to fund coal plants overseas once again. If the ban does get lifted, that would mark a rare victory for the coal industry over the Obama administration. The move could also increase the odds that the US helps finance a large coal plant currently being planned in India. Here's a rundown:

Why Obama restricted coal funding overseas in 2013

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U.S. President Barack Obama wipes sweat off his face as he unveils his plan on climate change June 25, 2013 at Georgetown University in Washington, DC. Alex Wong/Getty

Some background here: The US Export-Import Bank currently lends out about $27 billion per year. Roughly one-quarter of that goes to energy projects overseas. And a smaller share has gone to coal in particular.

Since 2007, the bank has loaned out $5.2 billion for coal mining and $2.2 billion for coal power plants. That included $805 million for a 4,800-megawatt plant in South Africa and $917 million for a 4,000-megawatt facility in India. The bank said those deals helped support hundreds of American jobs, from engineers to coal miners.

This support for coal was relatively minor given that hundreds of coal plants were being built around the world in that time frame. Even so, environmentalists argued that subsidizing coal plants overseas made no sense, particularly at a time when the United States was pledging billions in foreign aid to help developing countries deal with climate change.

So, in 2013, Obama announced that he would restrict the practice. "Today, I'm calling for an end to public financing for new coal plants overseas unless they deploy carbon-capture technologies, or there's no other viable way for the poorest countries to generate electricity," Obama said at a speech on climate change at Georgetown University.

(House Republicans later modified Obama's policy by enacting a bill that prevented the ban from being enforced under certain conditions — such as if it prevented access to energy in very poor countries.)

Obama's move was the start of a small trend. In July 2013, the World Bank also said that it would restrict funding for coal plants in developing countries except "in rare circumstances" — i.e., when poor countries had no alternative. (The World Bank is making an exception, for instance, for a new coal plant in Kosovo.) The European Bank for Reconstruction and Development later followed suit.

Those restrictions, by themselves, certainly aren't going to kill off coal power, which is still the largest energy source worldwide (and growing fast). Countries like China don't need outside help to build coal plants. Still, environmentalists argued that the moves set an important precedent for international finance institutions.

Why US financing for coal abroad might come back

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A protestor dressed as a fish isn't a fan of the Export-Import Bank's coal policies. Sierra Club/Flickr

That brings us to the current debate over the Export-Import Bank. Sen. Joe Manchin (D-WV) is now floating a proposal to renew the bank's charter for five years and expand its ability to finance coal plants overseas. The hope is that the latter provision will help win over conservatives skeptical of the bank's existence.

The Wall Street Journal has a rundown of how Manchin's proposal would work: Right now, under Obama's rules, the Export-Import can only provide financing for coal plants abroad if a) the plants can capture and bury their carbon dioxide underground (a still nascent technology) or b) if poor countries have no good alternatives for electricity. Manchin's proposal would expand that latter exception.

"There are seven billion tons of coal being burned outside the U.S. each year. If we are truly committed to cleaning up our global environment, the U.S. should lead the world in clean coal technology and export that technology to the rest of the world," Manchin said in a statement.

It's not clear, however, if Manchin's push will succeed — there are still an awful lot of Republican's opposed to the bank altogether. (See this piece by Ezra Klein for more on the debate within the Republican Party on this topic.) And some outside conservative groups, like the Heritage Action, have argued that all the coal industry lobbying around the Bank just underscores the case for why it should be scrapped altogether.

A large coal plant in India could be at stake

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Coal mine in Jharkand, India. Kjetil/Flickr

In the meantime, the Export-Import Bank is reportedly considering a loan to help support a massive 3,960 megawatt coal plant and mining facility in Jharkand, India.

The plant is part of India's push to add 100,000 megawatts of new generation by 2017. (Remember, this is a country where about 400 million people still lack electricity.) The supercritical plant would be more efficient than many older power plants.

The Export-Import Bank is still debating whether the loan would comply with the various environmental restrictions that have been put in place. If Congress does manage to scrap the ban on coal financing, however, those loans may have a better chance of going forward. It's not yet clear what US companies would benefit if the loan guarantees do get approved.

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