The Intergovernmental Panel on Climate Change’s (IPCC) has just launched its 5th assessment report on climate change mitigation in Berlin, the most comprehensive assessment of potential solutions to the climate crisis yet seen. It clearly shows that we can stop the worst of climate change by transforming our energy systems, and that for this we must shift the patterns of investments in the energy sector now.
Tata Mundra: the perfect example of “what not to do”
A perfect example of what needs to be changed is the massive Tata Mundra coal project, in the Kutch district of Gujarat, India. Tata Mundra, the first of the Indian government’s Ultra Mega Power Projects (UMPPs), is a newly built four gigawatt coal fired power station that emits more than 30 million tonnes of carbon dioxide each year, well over half of the annual emissions of Bangladesh, a country of 155 million people.
This project is emblematic of much of what is wrong with coal as a power source in the 21st century, causing devastating social, health and local environmental impacts as well as pumping all that carbon into our already overheating atmosphere. Yet BNP Paribas, the French banking giant for whom “combatting climate change” is one of the four pillars of its “responsible banking” approach, has put its reputation on the line as the only international private sector bank prepared to finance this dodgy deal. In 2008, alongside local Indian banks and international financial institutions including the World Bank and Asian Development Bank, they participated in a billion dollar syndicated loan deal to finance the project through to 2027.
The power plant became fully operational just last year, yet its impacts are already visible on the ground. A fact-finding mission has demonstrated that construction of the plant has already led to dredging and destruction of large stretches of mangroves and creeks, as well as has causing drastic reductions in fish catches, destroying the livelihoods of local fishermen situated close to the site of the power plant. These impacts are compounded by the sharp rise in breathing problems and respiratory illnesses suffered in villages near the plant – another curse for local people who the fact-finding mission showed were not meaningfully consulted before the project started.
As well as being a climate disaster, Tata Mundra turned into an economic disaster, as the sub-bituminous coal used by the plant, imported primarily from Indonesia, has risen sharply in price over the past few years. Recently, the plant’s backers had to obtain permission to charge electricity customers more to cover their losses, putting the price of electricity beyond the reach of the people it is supposed to help.
World Bank reacts to Fishermen
In response to the World Bank’s ongoing finance for this project, many fishermen – through their organization Machhimar Adhikar Sangharsh Sangathan (MASS – Association for the Struggle for Fishworkers’ Rights ), have banded together with groups around the world to put pressure on World Bank President, Mr. Jim Yong Kim, to withdraw funding for the plant and refuse to finance any expansion. They launched a formal complaint which led to a full scientific investigation of the project by the International Finance Corporation (IFC), the World Bank’s private sector arm.
The investigation concluded that the project has not complied with several of the IFC’s own policies, and identified sever problems from the project’s planning through every stage of its execution. The findings of the report makes it very clear that continued engagement with the project by the IFC and other financiers will negatively impact the people and environment. However, despite these finding upholding the local fishing communities ‘complaints, the World Bank rejected the expert findings and is not taking action to hold the IFC accountable, thwarting further action.
Earlier this year, the Board of Directors of the Asian Development Bank, another co-financier of the project, followed suit and also approved the recommendation of its accountability mechanism, the Compliance Review Panel, for a full investigation, after finding prima facie evidence of non-compliance with its policies and procedures.
In contrast, so far BNP Paribas has incredibly made no reaction at all to the problems with the project. Like the rest of the private banking sector, BNP Paribas has no accountability mechanism like those of the World Bank or the Asian Development Bank – a long-standing demand of the BankTrack network. BNP Paribas has not even answered a letter from MASS, sent to the bank in 2012.
BNP Paribas and coal: a long story
Unfortunately Tata Mundra is no anomaly in BNP Paribas’ loan portfolio. The bank is also involved in the financing of many other dodgy coal projects around the world, including the huge Medupi and Kusile coal fired power plants in South Africa, and the Tufanbeyli lignite power plant in Turkey.
BNP Paribas is also among the banks most involved in the financing of the coal sector as a whole. Our Banking on Coal report, published last November in Warsaw, revealed that BNP Paribas has poured more than 4 billion euros into the coal mining industry between 2005 and 2013, making it the tenth biggest coal mining bank in the world. It is among the top financiers of coal mining companies in five of the nine main coal mining hotspots we looked at around the world.
These facts come in stark contrast to BNP Paribas’ claims of being a “Responsible Bank”. In fact one of the “four pillars” of its CSR Policy is “combatting climate change”. The bank also provides financial support to research aimed at combating climate change, which they advertise on large posters in all their French branches. They are fuelling the climate threat with billions on one hand, and on the other, spending token amounts by comparison on research to confront its impacts on the other.
It will come as no surprise, then, that BNP Paribas was nominated for the Sustainable Development Pinocchio Award last year by Friends of the Earth France. While it uses the slogan “the bank for a changing world”, it could be more accurately be rebranded “the bank for a changing climate”.
Less investments in coal needed, more in renewables – IPCC
For the first time, the new IPCC report points out that to keep warming below two degrees, substantial shifts in annual investment flows between 2010 and 2029 will be required. Specifically, investment in both fossil fuel extraction and power plants would need to decline by USD 30 billion per year between 2010 and 2029 (median: -20% compared to 2010), while investment in low carbon electricity supply would need to rise by USD 147 billion (median: +100% increase compared to 2010).
To live up to its stated environmental responsibility to combat climate change, BNP Paribas must follow this path and stop financing the coal industry now, starting by withdrawing its funding immediately from the Tata Mundra project, avoid funding climate ‘false solutions‘ and increase its finance rapidly towards energy efficiency and renewables.