US senators press Biden officials on overseas fossil finance, China climate goals

US senators July 21 encouraged the Biden administration to do more to shift financing support in the Indo-Pacific region away from fossil fuel energy projects, to hold China to account for its stated climate targets, and to consider supporting a border adjustment on carbon-intensive imports.

During a hearing of the Senate Foreign Relations Subcommittee on East Asia, the Pacific and International Cyber Security, officials from the State Department, White House and Defense Department testified on US government efforts on climate in the Indo-Pacific region.

Richard Buangan, deputy assistant secretary, State Department Bureau of East Asian and Pacific Affairs, said the administration has made the region, which has the fastest-growing energy use in the world, a top priority. To help meet growing demands there while also supporting climate goals, he said the State Department, in coordination with interagency partners, is sharpening its focus on foreign assistance programs. For instance, it is adjusting its Asia Enhancing Development and Growth through Energy (Asia EDGE) program to support renewable energy development, energy efficiency and advanced energy technology and policy.

One closely watched topic for the LNG sector is the degree to which the US will continue to support development of natural gas infrastructure and markets in the region, even as it encourages a pivot away from fossil fuels.

Senator Jeff Merkley, Democrat-Oregon, pressed the officials about US International Development Finance Corp. statements that it will continue to finance a small number of fossil fuel plants in limited circumstances.

"It seems to me that's the sort of place where we could set a better example by saying we will double down on renewable energy solutions in place after place. It's time to stop financing these projects," Merkley said, suggesting the administration might want to consider an announcement later this year.

Working along those lines

Jonathan Pershing, senior advisor to the special presidential envoy for climate, John Kerry, appeared receptive to that view, but stopped short of a commitment.

"I think there's a lot in that. We are working exactly along those lines," he said. "The question is, how can you both do big new investments in the alternative and scale back the first. We have to be there for countries on their energy supply side. We could do that exactly as you laid it out."

Merkley also questioned continued US support at the World Bank for natural gas, suggesting the US could have more moral sway if it recognized a need to pivot on all forms of fossil fuels.

Pershing in response pointed to a recent International Energy Agency report suggesting a need to invest in alternatives and help countries build their grids to facilitate renewable capacity growth. "That's the place the bank can go, and we're trying to work on that," he said.

Senator Mitt Romney, Republican-Utah, got a mixed response when he pressed officials about how China's carbon reduction goals mesh with its support for building new coal-fired plants in third countries, without the kind of pollution controls common in the US.

"In reality, they don't seem to have much intent to make the kind of changes that would result in a reduction in CO2 growth or CO2 emissions," Romney said.

To that, Buangan concurred and said "I think the responsibility is on us to ensure that as the [People's Republic of China] has pledged that they follow through on their commitments, and as I've said that they don't' get a pass, which I they've certainly expected."

Pershing, however, chimed in that "there is some history where China has, in fact, met its commitments." He added, "There's no way they get there if they keep investing in overseas coal, but historically they' done more than they've said they would do, and they're on a trajectory that would suggest they could still meet this commitment."

Considering border adjustment

Separately, senators asked administration officials where a carbon border adjustment fits into the US climate strategy, particularly if the US partners with Europeans to send a signal to China and others.

Pershing replied that it's "worth considering," though there is more work to be done to assess how to assign the price and value for commodities in the US context, without a national carbon price or cap-and-trade structure.

"We are not looking to disadvantage American companies as we develop a domestic program. So I think that's the balance we have to seek and there's work to be done to evaluate it," he said.

Democrats are considering including a border carbon adjustment in a key budget reconciliation bill in which they will seek to advance climate policies. Pershing called legislation on a border adjustment proposed by Senators Chris Coons, Democrat-Delaware and Representative Scott Peters, Democrat-California, "aligned with the thinking we've been doing."

"The president has asked Special Envoy Kerry to lead part of that assessment" of such proposals, Pershing said.