The World Bank’s President Dr Jim Yong Kim has resigned. Now it is time for the bank to get real on coal power. The new President should use financial carbon metrics to re-assess the bank’s energy funding choices. While Germany’s exit from coal is long overdue, Kosovo desperately needs a new, smokeless baseload power station.
The climate science is pretty clear; to achieve the Paris 1.5°C goal the world’s carbon budget only allows us to emit another 500 gigatonnes of CO2 . While current fossil fuel infrastructure does not commit us to 1.5°C there is little scope for new fossil-fuel power plants. This means that in developed economies coal-fired plants should be shut early, allowing newly developing economies the chance to grow. Sound, financially based metrics can guide and justify such tough decisions.
Germany and Kosovo are very different in terms of development but, today, both countries rely heavily on coal for their electricity. Is this right? Under Dr Jim Yong Kim’s presidency the World Bank Group recently stopped financing all fossil fuel power plants for developing nations. Kosovo’s bid for a high efficiency, low emissions (HELE) coal-fired base load power station will now most likely be met by China, much to the dismay of energy analysts in Washington DC.
The World Bank’s new president should re-assess its energy financing choices. The challenge is to meet two UN Development Goals: #7 (to ensure affordable, reliable, sustainable and modern energy) and #13 (combat climate change). In the case of Kosovo, the status quo is unacceptable: its two lignite-fired plants are among the most polluting and unreliable units in Europe (Figure1).
Figure 1. Two power stations in Pristina, Kosovo: rich in lignite, the dirtiest form of coal, Kosovo urgently needs a reliable, smokeless baseload power plant together with new grid infrastructure. In a country with few hospitals and a shortage of schools, economic development is crucial even though open cast mines can have devastating impacts on local communities. Image credit: Andreas Welch
Two things need to happen. Although it is not directly within the World Bank’s remit, Germany (and the other developed economies) must start exiting from coal power much faster than is currently planned. On the other hand, in developing nations, if coal or lignite is the cheapest form of reliable base load power then – up to a point – that is a viable option. Local emissions (smoke) abatement must be included.
Predict Ability Ltd (PAL) has analysed this kind of problem extensively. Three tools are needed: a real-world and scientifically-based long-term carbon price together with a way of applying it fairly in a local context, while also taking into account the carbon intensity of the energy mix.
The minimum credible carbon price we determine to be PAL’s loss and damage based cumulative carbon price (11.25 US$2015/tonneCO2 in 2017). This is multiplied by an economic development factor, the ratio (GDP/capita of a country)/(GDP/ capita of World). The product is then scaled by the carbon intensity weighting factor (CIW) described in Chapter 10 of Richard Clarke’s book ‘Predicting the Price of Carbon’.
All three tools can readily be used to make forward predictions covering the potential lifetime of proposed or existing power plants. Incorporating these carbon prices will help resolve, in a rational way, the energy investment decisions so urgently needed.
What is the answer? In 2017 the PAL combination for Germany was $59/tonneCO2. For Kosovo it was merely $5.
It is crystal clear. Germany should stop burning coal and lignite immediately. Kosovo should have its new power station.
Author: Richard Clarke
Richard Clarke is Director (Research) and co-founder of PAL. He has authored many academic articles and made keynote presentations at conferences on heat exchangers, helium resources and supply. He has recently published his second book, on climate change and the insurance industry, Predicting The Price of Carbon. Richard developed the science behind PAL Carbon.