Why are overseas development advocates pushing us down the greenhouse gangplank?

by Charlie Cray

February 21, 2014

Gas flares from a well in the Bradford County countryside. "Flaring" is a term used to describe the burning of natural gas from a well that has not yet been linked to a pipeline. When a well is flared, a huge flame lights up the sky, reaching higher than tree tops, accompanied by a noise similar to a 757 jet engine.

© Les Stone / Greenpeace

One of the Obama administrations better climate-related actions has been the Overseas Private Investment Corporations (OPIC), financing of renewable energy projects overseas. OPICs support for renewable energy projects has increased to over $1 billion a year (about 30% of its overall portfolio) nearly ten times the amount committed in 2009.

Great strides are being made with the costs of solar and wind rapidly declining each year, in concert with continuously improving efficiencies. The result is that it is now becoming much cheaper to provide energy access to remote communities and avoid the expense of extending a countrys electricity grid to more remote regions. The process is similar to the diffusion of cellular telecommunications, which obviated the need for prohibitively expensive land-lines.

Despite the good news, rumors are circulating that some members of Congress are pushing OPIC to shift directions and finance more polluting gas projects in regions like Sub-Saharan Africa. The pro-gas members are poised to do this by inserting a provision that would lift a cap on greenhouse gas-intensive projects in OPICs portfolio for the Electrify Africa Act. That act was introduced in the House Foreign Affairs Committee following the administrations announcement of the Power Africa program, whose goal is to provide electricity to tens of millions of poor Africans.

Support for the shift from renewable to gas comes from the Center for Global Development (CGD), a beltway development group with ties to the gas industry and big finance institutions like the World Bank, which has a long history of supporting destructive and carbon-intensive oil, mining, and gas projects.

CGD recently stepped up to provide cover for the congressional greenhouse gangbangers working the behind-the-scenes legislative play with a white paper authored by policy analyst Todd Moss. Moss argues that weakening OPICs greenhouse emissions cap in order to ease up restrictions on gas plants will deliver electricity to tens of millions more impoverished Africans. OPIC financing for natural gas plants, Moss concludes, would provide 60 million more people access to electricity than renewable energy.

The core argument Moss makes is that OPIC support for gas projects will leverage 3-4 times more capital investment from other sources than the agencys support for solar power would.

Many people who know a thing or two about energy development policies have begun to take issue with CGDs analysis. Pacific Environments Doug Norlen and Prof. Dan Kammen of the University of California, for instance, recently posted a critique describing many of the papers methodological flaws and omissions.

Several of those strike me as fairly obvious. For one, CGDs paper suggests (see Appendix B, table 1) that, leaving their dubious financial leverage ratios out, a nearly equal capital investment in renewables vs. gas results in the same additional power generated by each, with gas having a slight edge. However, if CGD had bothered to bring their cost assumptions up to date and then projected out just a few years (a fraction of the life of any capital-intensive gas power plant), they might have noticed that the costs of solar are coming down every year. As the International Energy Agency and others including a growing number of public and private banks have found, for the majority of people without energy access, off-grid and mini-grid renewable energy solutions are now cheaper than fossil fuel energy generation, even without counting externalities.

What that means is that before long solar will likely leverage as much or more private-sector financial support as natural gas. Therefore, OPIC financing for natural gas power plants could end up saddling whoever ends up owning them with a stranded asset, and commit countries to sunken investments and technological models that obstruct the smooth transition to cheaper, cleaner alternatives.

Lets play devils advocate for a minute and assume its true that OPIC financing for gas projects is currently able to leverage about 3-4 times more capital investment than for solar or other renewable energy projects. With renewable energy technologies reaching price parity and a competitive advantage in many areas of the world, why should taxpayer funds be used at all to support an entrenched industry that doesnt need so much help attracting investors?

Sure, many countries without electricity have gas that could be converted into electricity. But if thats so attractive, why should OPIC be the one to provide the money. There are many other countries without gas that would welcome the help in developing its renewable power infrastructure (I suspect that gas-rich countries would welcome such investments, too). Funding an entrenched industry is sheer corporate welfare when the alternative is to seed new, more environmentally sustainable technologies that are on the cusp of commercial maturity. And OPIC seems to get that.

Norlen/Kammengo into greater detail on a number of related points, so Ill just make a few points about CGDs paper:

  • Comparing solar installations to big generating plants without factoring in the cost of distributing the electricity ignores the design advantages of solar and the much larger costs that are inherent to centrally generated electricity. If the cost advantages of renewable technologies did not exist already (which they do even in places like Minnesota), then why do monopoly utilities here in the U.S. feel so threatened by distributed generation technologies such as rooftop solar?
  • Without conditionalities that would require developers to deliver an OPIC-funded power plants electricity to poor communities what will stop them from avoiding the grid costs by selling that juice to energy-intensive industrial and commercial customers? They are usually much easier to reach, and their owners are more politically connected. Absent OPICs climate policy, there is nothing to prevent this from occurring.
  • It makes little sense to support capital-intensive projects in conflict-ridden regions where industrial infrastructure is often targeted by insurgents and terrorists. Moreover, as numerous national security leaders from both parties have repeatedly warned, financing greenhouse gas-intensive projects anywhere in the worlds especially in regions most vulnerable to drought and other climate-related impacts risks causing significant national security blowbacks: [T]he effects of climate change in the worlds most vulnerable regions present a serious threat to American national security interests. Without precautionary measures, climate change impacts abroad could spur mass migrations, influence civil conflict, and ultimately lead to a more unpredictable world.In fact, we may already be seeing signs of this as vulnerable communities in some of the most fragile and conflict-ridden states are increasingly displaced by floods, droughts and other natural disasters.Protecting U.S. interests under these conditions would progressively exhaust American military, diplomatic and development resources as we struggle to meet growing demands for emergency international engagement.

Ultimately, the idea of assessing what kinds of projects to support abroad is a myopic exercise in technocratically-driven analysis if it ignores these and other questions.

Climate change is already making extreme weather events more disastrous around the world, and they will get worse and more frequent in years to come. The catastrophe that many thought was decades away is already unfolding. A couple of years ago a group of nations created the Climate Vulnerability Monitor, which issued a report that concluded that climate change has already held back global development and inaction is a leading global cause of death, and estimating that 100 million people could die as a result of climate change by 2030. They also estimated that 400,000 people are already dying each year from climate-related impacts such as hunger and communicable diseases that affect above all children in developing countries.”

How does locking-in huge investments in methane-intensive technologies really help a region thats already devastated by these problems?

All of this brings a key question into full relief: Why is CGD so bent on promoting gas?

In its 2010 ten-year anniversary report CGD described how its own commitment to addressing climate change includes the development of its own comparative vulnerability index for 233 countries, and how it will use its understanding of global aid architecture and problems of the traditional donor system to help poor countries become more climate resilient.

One of the ways it anticipates doing so is by helping to devise practical policy ideas for financing and deploying low-carbon alternatives in poor countries.

So, again, why is CGD pushing gas? It would be unfair to suggest (without direct evidence) that CGDs push for natural gas is driven by donations from gas companies like Chevron. Yet its hard to imagine that any objections to CGDs pro-gas stance have been raised at the board level where so many Directors have a vested interest in the industry — including Henrietta Holsman Fore (who also sits on Exxons board), Thomas R. Gibian (whose Emerging Capital Partners funds have invested in various African gas projects), Bob Mosbacher, Jr. (the Houston oiligarch also sits on the board of Devon Energy, one of the biggest gas production companies in the U.S.), David F. Gordon (of the Eurasia Group, whose clients include major oil, mining, utility and power companies) , Tim Adams (former policy advisory coordinator for Dick Cheney), and C. Boyden Gray (whose firm lobbies on behalf of energy companies).

Maybe the answer is that CGD has, like many, been convinced that gas is clean and a better alternative to coal, which of course, assumes there are no other alternatives. Even if the gas industry was right that gas emits half as much carbon dioxide as coalat the point of combustion (which isnt really that impressive a reduction when you think of the alternatives), that still doesnt get us very far. Moreover, it ignores the many points where methane emissions occur along the way from its extraction to its delivery to those power plants. And pretending that we can fix the problem by plugging all the leaks ignores the fact that methane is a short-lived climate forcer that traps at least 85 times the amount of heat that carbon dioxide does during the first 20 years after it is released.

So, lets be clear. Despite the widespread assumption that gas is a bridge fuel to a greener planet, its actually a forced walk on a greenhouse gangplank. Those who profit off gas development projects are like pirates pushing us towards the edge of the plank so that they can pilfer the public purse. Those who push poor countries towards the edge can hardly claim to be concerned about their welfare.

One can only hope that CGDs professed commitment to low-carbon alternatives will shift the groups position from supporting natural gas projects and undermining the progress made at OPIC and elsewhere to a harder push for solar and other renewable energy projects. They could start by telling their friends in Congress that its actually a bad idea to make OPIC lift its greenhouse gas cap.

Charlie Cray

By Charlie Cray

Charlie Cray is a senior research specialist at Greenpeace USA. He specializes in corporations & democracy, GMOs, toxics and fracking.

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