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IDB launches process to limit climate impact of projects it finances

The Inter-American Development Bank has begun an unprecedented process to limit the greenhouse gas emissions of projects it finances by issuing a set of guidelines for coal-fired power plants.

The new guidelines are the first in a series that will set clear limits to allowable climate impacts of IDB-financed projects in areas including manufacturing, agriculture, oil and gas industries. 

“Instead of simply compensating for projects that have high emissions by funding renewable energy projects, our goal is to systematically reduce the climate impacts of all our projects,” said IDB President Luis Alberto Moreno.

In the case of coal-fired power plants, the IDB will only finance projects that use among the best available technology to reduce their emissions of greenhouse gases (GHG) and other pollutants. These technologies are ultimately more efficient in converting coal to energy, so that over the life of a plant they yield both economic and environmental benefits.

Specifically, the IDB will not finance what are known as “sub-critical pulverized coal” power plants, due to the lower efficiency of this technology and its resulting higher CO2 emissions. The new guidelines also rule out Bank financing for plants using a technology known as “circulating fluidized bed combustion,”” unless these plants meet a threshold of at least 36 percent net efficiency in converting fuel to energy.

“Our goal is to help our member countries to avoid ‘locking-in’ inefficient technologies that will raise the cost of generating power over the life of the project and needlessly increase GHG emissions,” said Janine Ferretti, chief of the IDB’s Environmental Safeguards Unit. “We think the IDB is an ideal partner in helping governments to find ways to finance the costs of cleaner technology.” 

The Bank chose to adopt specific emission thresholds—instead of a more general parameter—in order to provide clarity and offer transparent criteria to governments and investors who seek IDB financing. According to Ferretti, these thresholds are likely to be raised as new technology becomes available that enables all kinds of power plants to operate with lower climate impacts.

“We want to apply consistent standards and criteria when we assess climate impacts of projects financed by the Bank, to make IDB projects climate responsible,” she said, adding that the Bank will complete a review of the climate risk of its operations and develop guidelines for key sectors over the near term.

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