This project no longer makes any sense. In fact, it is obsolete by the IFC’s own standards. Here’s the rationale provided by the IFC, along with the current reality.

1. Claim: The IFC should use scarce international resources for the Mundra project because its efficient, supercritical coal-combustion technology will provide a model for India. According to the IFC: “The project is the first private sector power project in India to be based on the energy efficient supercritical technology.”

Reality: Wrong on both counts. No model is needed, because several other private- and public-sector supercritical plants are already under construction or planned. These include Sipat and Akaltara (Chattisgarh State), Sasan (Madhya Pradesh), and Shahapur (Maharashtra). Figure 1, drawn from our CARMA database, shows the percentage of planned Indian power capacity other than Mundra that will employ supercritical technology during the next five years. For the public and private sectors combined, supercritical capacity without Mundra will be around 60% of new capacity in 2013. For the private sector, it will be over 70%.

Conclusion: The rationale for Mundra is obsolete. India’s public and private sectors are moving to supercritical technology anyway, without IFC subsidies. A big driver is the rapidly-rising price of coal, which puts a premium on combustion efficiency.

2. Claim: The IFC must support Mundra, because India has no scalable, economically-feasible alternative for baseload power. And in any case, India has a lot of cheap coal and should exploit it.

Reality: Wrong again. India does have a scalable, economically feasible alternative to coal. As Figure 2 shows, the region near Mundra has huge solar potential and is one of the most sparsely-settled areas in India. Baseload solar power with thermal storage for 24-hour operation is now technically feasible, as I have noted in a recent paper and blog. As for exploiting Indian coal, Mundra will use coal imported from Indonesia and other countries at rapidly-rising cost.

For the IFC, solar thermal power is also financially feasible for two major reasons.

• Coal’s previous cost advantage has largely vanished. Fuel and construction costs for supercritical coal-fired power plants have been escalating rapidly. Both costs have at least doubled since 2005, nearly eliminating coal’s cost advantage over solar thermal power. Since completing my previously-cited paper, I have incorporated these changes into new production cost estimates for supercritical coal and solar thermal power. The gap is now less than one penny per kilowatt hour (8.23 cents for solar thermal vs. 7.65 cents for supercritical coal (up from 4.20 cents two years ago). Power from Mundra will never be sold at the rate advertised on IFC’s website (5.6 cents/kWh), because this would guarantee bankruptcy in short order.
• Financing from international clean technology funds can fill the remaining cost gap. Since a solar thermal plant emits no carbon, it qualifies for European Union offset payments under the Clean Development Mechanism (CDM). The current CDM payment rate is about $15 per ton of CO2 averted, and solar thermal capacity equivalent to Mundra’s (4,000 MW) would annually avert 29.7 million tons of CO2 produced by the CDM’s “baseline case” (a low-efficiency subcritical plant). This would qualify the solar thermal plant for $445 million/year in CDM payments — enough to recover most of the total cost difference between solar thermal and supercritical coal before the current CDM arrangement expires in 2012. The rest can easily be covered by the World Bank Group’s new Clean Technology Fund, financed by donor-country taxpayers.

In short, IFC’s proposed Tata Ultra Mega project is obsolete, unnecessary, ultra-dangerous for the planet, and mega-dangerous for the environmental reputations of the IFC and the World Bank Group. Does anyone really believe that donor-country taxpayers will continue supporting the Bank Group if it takes billions for the Clean Technology Fund with one hand and invests billions in coal-fired monsters with the other? Let’s get serious here. The IFC’s Board should take Ban Ki-Moon’s Bali declaration of a planetary emergency seriously, vote no on Tata Ultra Mega, leave coal-fired power behind, and commit to renewable power. They will find a willing partner in the Indian Government, which has already begun piloting solar thermal power and would undoubtedly welcome a big push on renewables.

Figure 1: Planned Supercritical Coal Capacity in India Without Tata Mundra

(% of Total Planned Annual Capacity Installation, Private and Total)
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Figure 2: Solar Power Potential in the Region Near Mundra

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Such plans confound the rhetoric at the UN’s December climate change conference in Bali, Indonesia, where Secretary General Ban Ki-Moon declared a planetary emergency: “The situation is so desperately serious that any delay could push us past the tipping point, beyond which the ecological, financial and human costs would increase dramatically.” The science supports the Secretary General’s assertion. In a December address to the American Geophysical Union, James Hansen, Director of NASA’s Goddard Institute for Space Studies, summarized recent findings and suggested that the critical tipping point may be at an atmospheric CO2 concentration around 350 parts per million volume (ppm). The news is doubly alarming because we are already beyond this limit: The current atmospheric CO2 concentration is around 386 ppm, and rising fast.

Since India remains poor, perhaps the concern about the Mundra power plant is misplaced? After all, in 1997 the Kyoto Protocol specified binding emissions limits only for rich countries, leaving poor countries free to overcome poverty without worrying about such matters. At the time, the prevailing view held that rich countries had caused the climate problem and rich countries would have to solve it. Unfortunately, that view has now been rendered obsolete by the rapid growth of developing-country emissions. In a recent paper, Kevin Ummel and I show that emissions growth from developing countries would have propelled the atmospheric concentration to 350 ppm by 2025, even if the rich countries had never emitted a ton of CO2. The stark reality is that uncontrolled emissions from either the North or the South will be enough to sink us.

So the crisis is clear, the UN Secretary General has spoken, and the UN agencies have responded with full commitment to promoting zero-emissions power production, right? Wrong. Part of the financing for India’s giant Mundra plant will come from the World Bank Group’s International Finance Corporation, if the IFC’s Board approves the project. What’s more, according to the IFC’s environmental and social review summary for the project, “Due to [Mundra's] high energy efficiency of supercritical technology, the Clean Development Mechanism (CDM) Executive Board meeting (under UNFCCC’s Kyoto Protocol) of September 2007 approved the eligibility of supercritical coal-fired plants for carbon credit in developing countries, and the company is exploring an opportunity for the Project to be registered under CDM.”*

To the “untutored reader,” this must seem crazy. Just as the UN Secretary General declares an international emergency created by carbon emissions, a UN-affiliated agency (the IFC) announces that it will use scarce development-lending resources to help finance an enormous coal-fired plant in India. At the same time, another UN-affiliated group (the CDM Executive Board) announces that the plant is actually eligible to provide carbon credits for rich-country power plants that are emitting more CO2 than their Kyoto permits allow.

What possible rationale could there be for this seeming contradiction between UN rhetoric and UN practice? In fact, it simply reflects the now-obsolete thinking behind the Kyoto Protocol. Tata’s Mundra plant qualifies for IFC funding and CDM eligibility because carbon emissions would be even greater if Tata installed the same power generation capacity in several smaller, lower-efficiency coal-fired plants without supercritical combustion technology. And Tata is free to do so because, as Kyoto specifies, India is under no obligation to control carbon emissions. So the international community, via the IFC and CDM, is subsidizing Tata to pollute less than it would otherwise. Instead of supporting critical zero-emissions energy investments, scarce international resources are sweetening a private-sector project that will emit over 700 million tons of CO2 during its operating life. And the Tata case is by no means unique, either in India or the developing world more generally. I will return to this in my next blog, with a look at a huge coal-fired facility in Botswana that may get financial backing from the World Bank Group.

This obsolete approach has to be shelved because coal-fired power in any form is extremely dirty and we’ve run out of time. The only hope for coal is elimination of emissions via carbon capture and storage (CCS), and this technology remains unproven at large scale. There is no chance — let me repeat this: zero chance — of holding global carbon emissions within safe limits if the UN continues subsidizing coal-fired power expansion on a massive scale without CCS. Our only chance at this point lies in immediately hiking the price of carbon, lowering the price of zero-emissions energy technologies (including CCS, if it proves feasible), and subsidizing the rapid adoption of these technologies by India and other developing countries.

There are plentiful opportunities for clean power investment, as the World Bank Group itself has noted in a report just released by its Energy Sector Management Assistance Program (ESMAP). Even with a much larger budget to support zero-emissions power expansion in developing countries, the World Bank Group could find ample project opportunities. And the same reasoning applies to clean-power opportunities for Clean Development Mechanism support.

This fatally-dangerous schizophrenia has to end. The UN cannot declare that carbon emissions are creating a planetary emergency and identify myriad clean-power options, while UN-affiliated institutions such as the World Bank Group and the Clean Development Mechanism continue to subsidize coal-fired power generation without CCS. The message for these agencies (as well as other multilateral and bilateral lending institutions) is clear: Stop this practice, now. Build your future on expanding clean power as rapidly as possible, or you won’t have a future.

*The IFC estimates Mundra’s future emissions at 24 million tons, lower than CARMA’s estimate of 27.8 million tons. Obviously, the difference is inconsequential for this discussion. Either way, Mundra will rank with the largest coal-fired carbon-emitters in the world.

In the same press release, the Minister responds to a query from India’s Parliament about CARMA’s report that carbon dioxide emissions from India’s National Thermal Power Corporation (NTPC) rank third globally among power companies. While stating that CARMA’s report “has not been validated or authenticated by the Power Companies,” the Minister draws on CARMA itself to note that NTPC has a much better global ranking on another CARMA measure: CO2 intensity (emissions per unit of electricity produced).

It is very gratifying to see that CARMA has provided useful information for a public dialogue between India’s Parliament and Ministry of Environment and Forests. Doubly so because much of CARMA’s information cited by the Minister comes from the Indian Government itself. The Power Ministry’s website (cited above) provides CARMA with over 200 plant-level reports on CO2 emissions and power production. These official reports include many plants operated by India’s National Thermal Power Corporation (NTPC). In this important sense, much of CARMA’s information on Indian plants has indeed been officially confirmed. CARMA’s contribution has been to map the facilities, link them to their parent companies (including NTPC), merge them with comparable data on power plants in other countries, and make all the information available to web visitors with a few keystrokes.

In the global movement to promote transparency about carbon sources, India has clearly established its leadership among developing countries. We can only hope that China will soon join India in this effort. With a few admirable exceptions (particularly the CLP group, as we have reported in a recent blog, China’s power companies have not disclosed their enormous, rapidly-growing carbon emissions.

Less-appreciated, perhaps, is the fact that China, India and other developing nations also blinked. For the first time, they accepted the principle that verified reduction of their emissions should be considered in a future agreement. From a global perspective, this was a victory for common sense. As Kevin Ummel and I note in a recent paper, unrestricted emissions from developing countries are growing so rapidly that they will create a climate crisis in this generation, even if developed-country emissions fall to zero immediately.

And the Europeans blinked as well, although their rhetoric remained aggressive to the end. After insisting on quantitative targets throughout the conference, they grudgingly accepted a non-specific commitment to future emissions reductions, and abandoned their threat to boycott US-sponsored talks among major carbon emitters. This was simply realistic, because the deal that must be struck will include many more elements than emissions targets.

Everyone ultimately blinked on Bali because they recognized several uncomfortable truths: The global stakes are mortal; time is short; success depends on universal participation; and getting everyone onboard will be impossible if negotiations focus only on emissions reduction targets. A sustainable global compact to halt global warming will also require provisions for clean technology development, accelerating global adoption of clean technology; and assisting poor countries that will be hard-hit by inevitable climate change.

Negotiating the global compact will not be simple, because each country faces different opportunities, risks and costs (For a comprehensive look, see “Country stakes in climate change negotiations : two dimensions of vulnerability“). To cite a few examples among many: Some countries (most notably the US and China) are so dependent on coal-fired power that a very rapid transition to clean energy will be wrenching and costly. They will not join a compact that threatens their economic and political stability. Many developing countries have huge renewable-energy potential, but it can only be tapped with developed-country support. This should include relaxing intellectual property laws to permit low-cost deployment of innovative technologies, but too much relaxation will eliminate the profit incentive that drives innovation in the first place. And for developed countries, the cost of supporting clean technology development will have to be weighed against their own transition costs, as well as the costs of assisting developing countries with adaptation to climate change.

Everyone blinked at the Bali Conference, opening the way for serious work on the global compact. The North and South are now fully aware of their interdependency. Each side emits enough carbon to create a climate catastrophe, and each faces such heavy transition costs that accepting them will require a new vision of global development. The North has the financial and scientific resources to support the compact, but carbon mitigation by the South is the key to making it work in the long run. The compact will have to reflect a host of country-specific benefits and costs associated with emissions reduction, accelerating the transition to clean technology, and financing adaptation to climate change.

While many uncertainties remain, one thing is certain: In forging the compact, this generation will shoulder a huge cost to protect future generations. And the sacrifice will only be acceptable if the global compact respects strict principles of accountability and transparency. To forge a meaningful compact, the international community has to know where carbon emissions are coming from; who is accountable for them; and what concrete steps are being taken to reduce emissions.

The demand for accountability and transparency defines an action plan that we can start implementing now. To establish accountability, the UN should immediately develop a global inventory of emissions from all critical sources, including deforestation. This inventory should identify specific sources (e.g. power plants, cement mills, motor vehicle fleets, land-clearing operations), and the organizations that are accountable for them. To ensure transparency, the emissions inventory should be disclosed to the global community on an accessible, easy-to-use, constantly-updated website.

At the Center for Global Development, we have attempted to catalyze this international effort by launching CARMA (Carbon Monitoring for Action) at www.carma.org. CARMA is the first global carbon disclosure site for the power sector, which produces over 25% of all carbon emissions. It provides easily-accessible emissions and power data for 50,000+ power plants, 20,000+ power companies, and 200,000 locales. With very limited resources, we have established an initial benchmark for global accountability and transparency. Now we believe that the international community should step up. The United Nations, or a consortium of donor nations, should immediately apply the same principles to building a comprehensive public emissions inventory that will provide a key foundation for negotiating the global compact. It’s the first step on a long road, and time is short. Let’s get started.