US treasury supports international financing of gas-fired power plants despite government restrictions

A new report has identified four gas power plants that directly contradict the United States’ directive on ending international financing for new fossil fuel projects by Multinational Development Banks, where it exerts power and influence.

The investigation by Friends of the Earth US, an American environmental non-profit, found that two of the plants in Mozambique, one in Bangladesh, and one in Uzbekistan at a cost of $400 million do not align with the goals of the Paris Agreement as they emit an estimated combined total of over 6,000,000 tonnes of carbon dioxide equivalent (tCO2e).

On January 27th, 2021, President Biden issued an Executive Order directing the US Treasury to use the US government’s “voice and vote” at International Financial Institutions to promote ending international financing of carbon-intensive fossil fuel projects.

After the Treasury’s Guidance was issued on August 16, 2021, the US  still voted to support $236.8 million in Multilateral Investment Guarantee Agency (MIGA) guarantees for the three fossil gas power plants in Mozambique and Bangladesh, as well as $160 million in IFC financing for the same in Uzbekistan. 

The treasury’s guidance released criteria for the notable exceptions under which the US government can support midstream and downstream, excluding upstream, natural gas projects, financed by MDBs which include:

1. The project supports International Development Association-eligible countries, fragile and conflict-affected states, or small-island developing states;
2. There is a credible alternatives analysis that demonstrates that there is no economically and technically feasible clean energy alternative; 
3. The project has a significant positive impact on energy security, energy access, and development
4. The project is aligned with and supports the goals of the Paris Agreement as outlined by the joint MDB Paris-alignment methodology, which factors in a country’s decarbonization pathway, greenhouse gas reduction strategies, and avoiding carbon lock-in

“The provisions that exist for fossil gas are vaguely defined, making the task of determining how projects align with the Guidance subjective and discretionary,” the report said.

“The lack of clear definitions and metrics does not hold decision-makers accountable to clearly defined parameters projects must meet, thus enabling fossil fuel projects at MDBs to continue to receive US support,” the report added.

For all power plants highlighted in this report, an analysis for credible alternatives is not publicly available.

Plants approved despite treasury’s guidance

The four power plants will emit an estimated combined total of 6,191,150 tCO2e / year at their lowest estimates and 6,587,803 tCO2e / year at their highest estimates, the analysis found.

For the Central Térmica de Temane (CTT), a proposed 450 megawatts (MW) capacity fossil gas-fired power plant, in Inhambane Province, Mozambique, operations are expected to start in November 2024. 

This plant violates the guidance that opposes upstream gas projects because it relies on exploring and producing fossil gas. It does not just include transporting, storing and converting fossil gas, which is characteristic of midstream and downstream projects.

The Central Térmica de Ressano Garcia (CTRG) is an existing 175 MW fossil gas-fired power plant occupying six hectares in the Moamba district of Mozambique, which has been operational since 2015. The CTRG emitted 535,575 to 567,976 tCO2e/year from 2018 to 2020. 

Given its long power-purchase agreement and 15-year support extended by the MIGA, CTRG emissions will continue to peak well past 2025. Therefore, the plan does not fall in line with the decarbonization pathway listed by the guidance as an exception to setting up a natural gas plant.

In another example, the Syrdarya Combined Cycle Gas Turbine, or CCGT, is a proposed 1600 MW fossil gas-fired power plant in Uzbekistan. The Syrdarya CCGT does not support the 1.5°C goal of the Paris Agreement because it will emit 4,000,000 tCO2e / year for the duration of the 25-year Power Purchase Agreement (PPA), the report added.

The Bhola-2 Dual-Fuel comprising fossil gas and high-speed diesel is an existing 220MW located along a bank of the Dehular Khal canal on Bhola island in Bangladesh. Natural gas is the primary fuel and diesel will be used only in case of failure, the US treasury said.

However, relying on natural gas as the primary fuel will require upstream drilling since the current gas field is expected to run out of gas before the PPA is over. This would not align with Treasury’s Guidance which opposes upstream fossil gas, the report analysed.

Both the Bangladesh and Uzbekistan plants are dual fuel plants, which rely on fossil gas and diesel. The plants will operate on diesel only in emergencies, which the Treasury makes an exception for in its Guidance. It is not clear to the researchers whether gas supply failure refers to a short-term emergency incident or a long-term situation due to natural gas supply running out.

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