Rising concerns about a warming planet are sustaining support for the financing of nuclear power projects, despite cost concerns about building large plants in economically developed nations. The European Union, United States, and Canada have all recently taken steps to preserve space on the zero-carbon agenda for existing and next generation reactors. The ability of these key countries to effectively compete with the state-backed financing of Russia and China for nuclear exports is critical for supporting geopolitical goals and global security.
In a somewhat contentious decision, the European Investment Bank’s (EIB) board of directors agreed to cease funding for fossil fuel projects by the end of 2021. Taking aim at coal, oil, and natural gas, the EIB’s energy funds now will be directed at “clean energy innovation, energy efficiency, and renewables.” EIB’s board agreed to include funding for new nuclear power projects in Europe as part of the suite of clean energy technologies. This reinforced a decision that it made years earlier. But the bank indicated that it would take a “cautious approach” to these projects.
Still, the EIB decision is significant and could set a precedent for other national export credit agencies and international finance banks.
One impact could be on the future lending mandate of the new U.S.
International Development Finance Corporation (DFC). It is the successor to the Overseas Private Investment Corporation (OPIC). Six U.S. Senators recently wrote to the head of DFC asking that the new agency not replicate OPIC’s “categorical prohibition” against supporting civil nuclear energy projects. To underscore their concern the Senators noted that, “Russia and China are increasingly using nuclear reactors as a tool for geopolitical purposes” and noted the importance of American “technologies and safeguards.” U.S. military, policy and business leaders also urged Congress to support the long-term reauthorization of the Export-Import Bank as part of a strategy to counter the geopolitical influence of Russia and China, noting the vital importance of exerting U.S. influence on global nuclear safety, security, and non-proliferation.
In a highly divided U.S. political landscape, the future of nuclear power and its financing has been one notable area of bipartisan agreement. Two important pieces of legislation have already been signed into law that support the development of next generation reactors. Other legislation that would move the process further, faster is still pending but supported by both sides of the aisle. Developing advanced nuclear reactors is a priority in the U.S. energy department budget.
In the meantime, Canada is forging ahead with the implementation of its SMR roadmap which is designed to make Canada a hub of small modular reactor research. Canadian Nuclear Laboratories (CNL) recently announced that it has selected four recipients of the Canadian Nuclear Research Initiative (CNRI). This initiative allows CNL to co-fund research and development on the selected technologies. The CNRI is in addition to CNL’s process of preparing for small modular and advanced reactor demonstrations at one of its sites.
The continued global increase of greenhouse gasses has also provoked the U.S. Federal Reserve into considering the impact of climate change on its mission to ensure stability in the U.S. economy. The Federal Reserve Bank of San Francisco hosted a first-ever conference on the need for climate related research under its mandate. Speakers at the conference noted the impact of severe weather events on bank stability, power production, and economic growth.
In considering this new research, the Fed is already well behind some of its global counterparts. The Bank of England is stress testing its financial system against different climate scenarios. The European Central Bank is considering using environmental stability as a criterion for bond purchases. There also is already a Central Banks and Supervisors Network for Greening the Financial System. Global Green Bonds, which raise capital for projects with environmental benefits, have already exceeded $100 billion. However, none of those bonds have yet been used for nuclear projects. This is consistent with World Bank policy not to fund nuclear projects despite its objective of providing complete global access to electricity by 2030.
Export credit agency and World Bank prohibitions on nuclear project financing may historically have been easy to defend as the technology is undeniably controversial. But climate and geopolitical realities are beginning to overtake past rationales. The potential climate-induced destabilization of national economies and the global economy is a risk that central banks have embraced as a significant danger. Key countries including the U.S. and Canada, and the EU are defining nuclear power as part of a green response to the global zero-carbon objective. The government-financed nuclear industries of Russia and China are rapidly expanding their reach into all developing regions and nations, undercutting democratic country influence.
In the current international environment, placing the entire burden of nuclear financing on the private sector is a prescription for failure for the individual projects and for achieving global climate and security objectives. There must be government support paired with private sector funding if these technologies are, along with renewable energy, going to form the core of the green energy future. Some governments seem to finally be waking up to this reality.
Ken Luongo, President, Partnership for Global Security