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Why Are Leading Overseas Development Advocates Pushing Us Down the Greenhouse Gangplank?

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One of the Obama administration's better climate-related actions has been the Overseas Private Investment Corporation's (OPIC) financing of renewable energy projects overseas. OPIC's support for renewable energy projects has increased to over $1 billion a year (about 30 percent 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 country's electricity grid to more remote regions. The process is similar to the diffusion of cellular telecommunications, which made it possible to obviate the need for prohibitively expensive landlines.

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 OPIC's portfolio into the Electrify Africa Act, which was introduced in the House Foreign Affairs Committee following the administration's 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, who argues that by weakening OPIC's 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 three-to-four times more capital investment from other sources than the agency's support for solar power would.

Many people who know a thing or two about energy development policies have begun to take issue with CGD's analysis. Pacific Environment's Doug Norlen and Prof. Dan Kammen of the U. of California, for instance, recently posted this critique on HuffPost, which describes many of the paper's methodological flaws and omissions.

Several of which strike me as fairly obvious. For one, CGD's 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, and as the International Energy Agency and others have found -- including a growing number of public and private banks -- for the majority of people without energy access, off-grid and mini-grid renewable energy solutions are now cheaper that 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.

Let's play devil's advocate for a minute and assume it's true that OPIC financing for gas projects is currently able to leverage about three-to-four 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 doesn't need so much help attracting investors? Sure, many countries without electricity have gas that could be converted into electricity. But if that's so attractive, why should OPIC be the one to provide the money when 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/Kammenater go into greater detail on a number of related points, so I'll just make a few points about CGD's 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 plant's 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 OPIC's 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 world -- 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 world's 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.

Assessing which type of energy projects we should support abroad without considering these and other questions seems to me to be a myopic exercise in technocratic analysis.

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 that's 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 10-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 CGD's push for natural gas is driven by donations from gas companies like Chevron. Yet it's hard to imagine that any objections to CGD's pro-gas stance have been raised at the board level -- where many directors have a vested interest in the industry -- including Henrietta Holsman Fore (who also sits on Exxon's board), Thomas R. Gibian (whose Emerging Capital Partners funds have invested in various African gas projects), Bob Mosbacher (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 coal (which isn't really that impressive a reduction when you think of the alternatives) at the point of combustion, that still doesn't 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, let's be clear. Despite the widespread assumption that gas is a "bridge fuel" to a greener planet, in fact it's 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 CGD's professed commitment to low-carbon alternatives will shift the group's 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 it's actually a bad idea to make OPIC lift its greenhouse gas cap.

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