Rich Nations in Stalemate over Coal Subsidy Phase-out

Further talks planned for September; no deal would be an embarrassment ahead of U.N. climate talks.

Talks on phasing out a form of coal subsidies ended in stalemate as Japan, the biggest user of the aid, led calls for more time in defiance of this week's G7 pledge on fossil fuel subsidies, sources said.

The Paris-based Organisation for Economic Cooperation and Development has been trying for a year to get an agreement from its 34 member nations on phasing out export credits for coal, the most polluting of the fossil fuels.

Sources close to talks in Paris on Wednesday and Thursday, speaking on condition of anonymity, said nations would review the situation over the summer ahead of further talks in September.

An OECD spokesman, who asked not to be identified, confirmed the OECD's export credit committee planned to meet in September to debate further how "export credits can contribute to our common goal to address climate change".

The pressure for a deal is strong, but so is opposition, especially from Japan, the biggest user of the credits that help companies such as Toshiba Corp to sell coal plant and mining technology abroad.

France, which late this year hosts U.N. climate talks, is pushing for strict criteria, while G7 leaders of the world's major industrial democracies on Monday backed a target to limit the average rise in global temperatures to 2 degrees Celsius (3.6 degrees Fahrenheit).

The G7 leaders pledged to eliminate "inefficient fossil fuel subsidies" and to "continued progress in the OECD discussions on how export credits can contribute to our common goal to address climate change".

But that can be interpreted to allow export credits to continue in some form.

Industry argues they ensure only the most efficient coal-fired generation is used and that can cut emissions in nations that might otherwise use more polluting technology.

Environment campaigners dispute that.

"The main beneficiaries are OECD dirty industry, not energy poor nations or the planet," Sebastien Godinot, an economist at WWF, said.

As other subsidies have disappeared, OECD export credits have increased in significance, according to research by environmental campaigners, including WWF.

Their analysis of the numbers available found Japan provided around $20 billion in public money to export of coal technology between 2007 to 2014. In the European Union, Germany is the largest user.

A German economy ministry spokeswoman said Germany supported the OECD's efforts to agree unified standards for export credits in line with the 2 degree Celsius limit.

"Export credit guarantees should only be available for new, highly-efficient coal powered stations and only then if the power stations are embedded in and coherent with the importing country's climate protection strategy," she said.

By Barbara Lewis