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01/10/2016

EU tries again for compromise on deal to phase out coal aid

Energy

EU tries again for compromise on deal to phase out coal aid

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[oatsy40/Flickr]

EU bosses are pushing to resolve a clash between industry and environmental policy with a new strategy to phase out funding to export coal technology to developing nations, ahead of a meeting of leading economic powers on the issue.

The European Commission, the EU executive, urges tougher rules on when subsidies, known as coal export credits, can be used in a paper seen by Reuters, ahead of interim talks this week.

Political pressure is growing to reach agreement on restricting the coal subsidies before United Nations climate change talks in Paris at the end of the year. But opposition is also strong.

Negotiations at the Paris-based Organisation for Economic Cooperation and Development (OECD) in June ended in statemate as Japan, the biggest user of export credits that help companies such as Toshiba Corp to sell coal plant and mining technology abroad, led resistance.

Another OECD meeting on the issue is scheduled for September.

Experts from EU member states will meanwhile meet in Brussels on Wednesday to debate their position to take to the OECD talks, EU sources said.

An unpublished paper from the European Commission says the proposal from the chairman of the OECD export committee, which failed to produce a deal in June, was “in principle” balanced, but the EU should strengthen it.

Changes could include shortening the time period to repay coal export credit preferential loans and reducing the number of countries that could benefit.

The World Bank, for instance, says there is an argument for exporting coal technology to the very poorest countries that have no other fuel options, while the coal industry says export credits ensure cleaner, more efficient technology is used than would otherwise be the case.

Environment campaigners disagree and want an early end to all fossil fuel subsidies, especially for coal.

The European Union, which accounts for around two-thirds of the OECD grouping of major economies, could have a big impact on negotiations. Environment campaigners, however, have voiced concern it might fail to agree a stronger position.

Despite EU aspirations to be at the helm of any UN deal on limiting global warming, some in European industry also oppose an abrupt end to coal export credits and say proposed requirements on carbon capture and storage (CCS) to neutralise emissions have to be realistic as the technology is still in its infancy.

The Commission paper raises the possibility of allowing coal export credits for plants suitable for CCS, a step back from a previous suggestion they can only be permitted for plants with operational CCS.

No-one from the Commission, the EU executive, or the OECD was immediately available for comment.