Standard Bank has announced a new financing policy for coal-fired power plants to help reduce emissions and fight climate change as set out in the Paris Agreement.
To be eligible for direct finance, coal-fired power plants must meet maximum emission and plant size parameters that are linked to the level of development of the country in question, the bank said in its Coal-Fired Power Finance Policy released last week.
According to the policy only plants with emissions lower than 750 g CO2/kWh is eligible for finance, while plants, among others, with a generating capacity of over 500 MW and emissions between 750 g and over 850 g CO2/kWh will not get funding.
Acknowledging that energy is a key driver of economic growth in emerging markets, particularly in Africa where access to affordable and reliable energy is crucial, the bank said its decision is guided by the Paris Agreement.
Standard Bank has a presence in all 20 African countries that are signatories to the Paris Agreement, a global agreement to combat climate change signed by 195 nations in 2015.
The commercial bank said its finance policy applies across the consolidated banking operations of the Group, excluding Liberty.
“Consistent with the OECD Standards, the policy applies to direct finance of new coal-fired electricity generation plants without operational carbon capture and storage or carbon capture and utilisation technology,” Standard bank said in the policy statement.
Maximum emission and plant size parameters to qualify for funding. Source: Standard Bank
In addition to the minimum eligibility requirements, direct finance of new coal-fired power generation in African economies requires enhanced due diligence including an assessment of among others technology choice, regulatory drivers and emission performance; analysis of cost-effective power generation alternatives that are available in the same industry and country; and current and future energy demand in relation to government energy strategy, carbon commitments and adaptation plans.
“Coal-fired power has historically been an important source of energy supply in several countries in Africa including South Africa, and the Paris Agreement recognises that emission reduction will take longer for developing countries.
“There is therefore a clear requirement for the bank in its financing of power projects, to balance the need for broad access to electricity, with the choice of technology used to mitigate the risks of climate change as embodied in the Paris Agreement,” Standard Bank said.