Stop Japanese Coal Finance !

Issue on Coal

POINT
  • 1.Urgent need to shift from coal-fired power generation
  • 2.Even with state-of-the-art technology, coal is dirty
  • 3.Japanese Public Financial Institutions (JBIC, NEXI, JICA) and Coal Financing
  • 4.Japan advocates coal energy while the rest of the world moves on

1.Urgent need to shift from coal-fired power generation

Since the Industrial Revolution, average global temperatures have risen by 0.85°C compared with pre-industrial temperatures. It is expected that by 2100, temperatures will rise by 1.15-5.56°C. On January 15, 2020, the United Nations (UN) announced that the average temperature for the past 10 years was the highest in the observed history. Also, the World Meteorological Organization (WMO) analyzed principle data sets from around the world and found that rising global temperatures have already made disastrous consequences.

Such extreme changes in temperature bring heat waves, melt glaciers, lead to extreme weather events like drought and floods, as well as endanger the economic foundation that we depend on for our livelihoods. Those living in poverty are particularly affected by these extreme events. To promote measures against climate change, we have to break away from fossil fuels as soon as possible. At the 2015 Conference of the Parties to the United Nations Framework Convention on Climate Change (COP24), the “Paris Agreement” was adopted to “keep the average temperature rise well below 2℃ and 1.5℃ compared to before the Industrial Revolution”. Given that the agreement has been concluded in 2020, shifting from coal-fired power generation and “coal exit (decoalization)” is increasingly urgent.

2.Even with state-of-the-art technology, coal is dirty

(1)Problems of CO2 emissions

Coal-fired power plants emit a large amount of CO2 and run counter to the move to counter climate change. For this reason, criticism of Japan and other countries that continue to promote coal-fired power generation is increasing. Fossil fuels such as oil, coal, and natural gas, all produce high amounts of CO2 when burned, but coal emits by far the greatest amount of CO2.

Although the Japanese government insists on using high-efficiency coal-fired power generation technology as best practice, claiming that this has the capacity to reduce CO2 emissions, ultimately even this technology still emits huge amounts of CO2. Even with new technology, coal-fired power generation emits the highest amounts of CO2. Even in the case of Integrated coal Gasification Combined Cycle (IGCC)technology, a new technology currently under development, emits more than twice the amount of CO2 than natural gas. In recent years, the “coal exit” movement has accelerated in order to control the temperature rise below 2℃. In order to make this goal a reality, there is no other choice but to control the use of coal-fired power generation, which is one of the major causes of climate change. This calls into question the position of the Japanese government, which actively exports coal-fired power generation technology to developing countries as a central strategy of economic growth.

(2)Problem of air pollution

One other problem is that Japan’s “Best Available Technology” (BAT) is ultimately not used in the countries they export coal power plants.

We examined pollution control measures and emission concentrations related to sulfur dioxide (SO2), nitrogen oxides (NOx), and dust for 18 projects for which we could get related documents such as environmental impact assessments out of the coal-fired power projects supported by the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA). These 18 projects include 1 case expected for JICA’s support and 2 cases expected for JBIC’s support. And we compared them to the data of 5 coal-fired power plants in Japan for which we were able to obtain similar related information. The result was clear that emission concentrations in overseas projects tend to be much higher than that of domestic power plants (see attached table).

There are cases where JBIC and JICA are not taking necessary measures, such as requesting or asserting influence on local developers/business operators to maintain and improve the surrounding environment and local residents’ livelihood. In addition, the fact that local residents at the project site and in surrounding area are exposed to pollutants at levels significantly higher than Japanese pollution standards is proof that Japanese export (by both public and private sectors) is content with the double standard of pollution measures between domestic and overseas projects.

After coal-fired power plants start operations, this locks in recipient countries to the imported coal technology. Additionally it also causes various environmental and social problems for many years in those countries. To avoid these problems, the construction of coal-fired power plants must stop.

3.Japanese Public Financial Institutions (JBIC, NEXI, JICA) and Coal Financing

(1)Overview of Japanese Public Financial Institutions

There are three Japanese public financial institutions that support overseas coal-fired power plants.

Japan Bank for International Cooperation (JBIC) JBIC is a 100% government-funded financial institution established with the aim of acquiring foreign resources and strengthening the international competitiveness of Japanese companies by financing those that trade and operate overseas.
The Ministry of Finance (MoF)’s International Bureau manages its affairs.
Nippon Export and Investment Insurance (NEXI) NEXI is an insurance corporation fully funded by the government of Japan, providing Japanese companies with insurance that covers risks associated with imports and exports, overseas investments and loans.
Japan International Cooperation Agency (JICA) As an executing agency of official development assistance (ODA) of the government of Japan, JICA is an administrative institution under the Ministry of Foreign Affairs (MoFA) conducting international cooperation with developing countries.

Since 2003, JBIC, NEXI and JICA have financed 29, 20 and 7 coal-fired power generation projects respectively. Additionally, JBIC and JICA have invested and loaned a total of 14.6 billion USD and 5.5 billion USD respectively, while NEXI has insured a total of 5.9 billion USD.

Table 1. Number of projects approved for financing and the total amount loaned or insured by JBIC, NEXI and JICA (between 2003 and 2019).(PDF)
Number of projects approved for financing Total amount loaned or insured amount (USD)
JBIC 29 $14.6 billion
NEXI 20 $5.5 billion
JICA 7 $5.9 billion

In Table 1, there is some overlap of projects approved for financing between financial institutions so the total number of projects approved between all three institutions is actually 36 projects: 12 in Vietnam, 9 in Indonesia, 8 in India, 2 in Morocco, and the remainder in various other countries. The total energy generation is approximately 37.74 GW, with estimated annual CO2 emissions of approximately 230 million tons [1], equivalent to 20% of the CO2 emissions in Japan [2].

Japanese public financial institutions are responsible for some of the worlds largest investments and loans in overseas coal-fired power projects. According to “Power Shift: Shifting G20 International Public Finance from Coal to Renewables” [3], presented by the Natural Resources Defense Council (NRDC) on 3 December 2017, China had the greatest total amount of coal-related financing between the 2013 and 2016 with 15 billion USD, followed by Japan with 10 billion USD (Fig 1). However, in China, public financial institutions sometimes take up the roles of major Japanese private banks, so we cannot simply say that Japan’s amount is smaller than China’s.

(2)Efficiency of overseas coal-fired power plants funded by Japanese public financial institutions

Are coal-fired power plants funded by Japan really as efficient as the government claims? Comparing the combustion technology in coal-fired power plants funded by JBIC, and other power plants constructed at the same time clearly shows that those funded by JBIC are of a lower efficiency than the global average.

Table 2. Comparison of combustion technology between coal-fired power plants funded by JBIC and other electricity generating facilities around the world (all facilities were either planned or constructed after 2010). [4]
Facilities funded by JBIC Facilities around the world
Subcritical 31% 29%
Supercritical (SC) 62% 36%
Ultra-supercritical (USC) 7% 29%
Other or Unknown 0% 6%

Additionally, Table 3 shows a comparison of plant capacity as provided by Japan, China, Korea, India and Russia from SC and USC boilers that are either operating, being constructed or being planned in South Asia and South East Asia. Although there is debate that if Japan does not provide support, other countries will then support building low-efficiency plants, it is clear that Japan is not the only country providing highly efficient facilities.

Table 3. A comparison of plant capacity (MW) provided by Japan, China, Korea, India and Russia from SC and USC boilers that are either running, being constructed or being planned in South Asia and South East Asia.[5]
Japan China Korea India Russia
Supercritical              10,090 55,650 11,300 40,320 1,980
Ultra-Supercritical 2,000 2,680 2,680 1,320 0

(3)Pollution control for overseas coal-fired power plants

As we mentioned in (2) Section 2, the emission concentration of pollutants in export projects is high, but it is clear that fundamental measures have not been processed. According to the survey of the SO2 and particulate (PM) removal technologies of coal-fired power plants funded by JBIC, half of the JBIC projects did not have any desulphurisation equipments installed, and approximately 80% of the projects did not use appropriate particulate removal technologies such as fiber filters and low temperature electrostatic precipitators (ESPs). [6] It is clear that the concentration of emitted pollutants is much higher in exported coal-fired power plants than what takes place or would be considered acceptable domestically in Japan.

Footnotes

  1. Based on calculated data in the Massachusetts Institute of Technology Report “The Future of Coal” (annual CO2 equivalent emissions for a 500 MV coal-fired power plant are approximately 300 million tons). http://web.mit.edu/coal/
  2. Based on data in the Ministry of Environment Report “Estimated Green House Gas Emissions of 2016” (1370 million tons). https://www.env.go.jp/earth/ondanka/ghg-mrv/emissions/results/index.html
  3. Natural Resources Defense Council: NRDC “Power Shift: Shifting G20 International Public Finance from Coal to Renewables.”  https://www.nrdc.org/resources/power-shift-g20-international-public-finance-from-coal-to-renewables
  4. Kiko Network, Japan Center for a Sustainable Environment and Society (JACSES), FoE Japan, CoalSwarm, Friends of the Earth US, Sierra Club “Dirty Coal” (24 April 2015; link to the Survey Report)  https://sekitan.jp/jbic/2015/04/24/968
  5. Refer to “Coal finance: will the OECD lag behind emerging countries because of Japan?” (Link to press release on 15 October 2015)  https://sekitan.jp/jbic/2015/10/15/1333
  6. Data from “Dirty Coal” Same as 4. 

4.Japan advocates coal energy while the rest of the world moves on

Japanese trend

Japan has been reducing its dependence on nuclear power since the Fukushima nuclear accident in 2011, but at the same time has also been increasing its dependence on fossil fuels such as coal and natural gas. In addition to constructing new coal-fired power plants in Japan, the Japanese government and the private sector also still provide a large amount of support for coal-fired power plant projects in overseas countries. Japan provides the second-largest amount of public investment in overseas coal-fired power plants in the world. Private banks Mizuho Financial Group, MUFG, and SMBC Financial Group lead the world in providing loans to coal-fired power plants as 1st and 3rd. (Refer to the Global Coal Exit List (GCEL) published by Urgewald et al.[1]) Furthermore, the Japanese pension fund, Government Pension Investment Fund (GPIF), is ranked second largest in the world as an investor in coal-fired power projects. Of the G7 countries, Japan is the only country that is still promoting coal-fired power projects and spending such vast amounts on coal. This policy of increasing coal power puts Japan in a position to be the subject of global criticism.

On July 9, 2020, the Japanese Government decided on the principles for the next Infrastructure System Export Strategy[2]. They stated that “in principle,” the government will not provide official financial support for any host country that does not have a confirmed policy for transition to decarbonization. While the principles are recognized as one step forward as it will make it difficult to support overseas coal-fired power projects in the future, as they do not stop all support for coal-fired power projects overseas and leave space for projects that are in the planning stage, the impact of this policy review is questionable.

International trend

In order to reduce emissions from coal-fired power plants, many countries are introducing new policies that set CO2 emissions standards and taxes on coal-fired power generation emissions. Major developed countries such as the US and EU member states have expressed that newly constructed domestic coal-fired power plants must utilize carbon capture and storage (CCS). In addition, banks in the US, Nordic countries, the EU etc. are setting policies to stop financing for coal-fired power generation in developing countries.

Japan is lagging behind the world. To move away from being the target of criticism and to shift toward a decarbonized society in line with the Paris Agreement, the Japanese government, public financial institutions, private banks and companies should dramatically shift from coal promotion immediately and should support the future development of developing countries by switching from large-scale intensive power generation such as coal and nuclear to regionally distributed power generation such as renewables.

Footnote

  1. Banks and Investors Against Future: NGO Research Reveals Top Financiers of New Coal Power Development
    https://coalexit.org/sites/default/files/download_public/COP25_PR_Logos.pdf
  2. http://www.kantei.go.jp/jp/singi/keikyou/dai47/kettei.html (in Japanese)