Jan 292015

By Yann Louvel and Greig Aitken, BankTrack, 29 January 2015.

A flurry of coal news and statistics in the first weeks of 2015 have been catching our eye at BankTrack, confirming as they do that around the world the industry is in deep trouble. Nagging away at the back of the mind however, and based on our specific lens through which we assess the coal sector’s prospects, are a few enduring concerns.

Will the trend for rising coal finance extended by commercial banks – which we identified in our Banking on Coal 2014 report back in October – turn around any time soon, in line with now increasingly emphatic calls and tangible moves to divest from fossil fuels? Or will the banks, lead by the Top 20 coal banks, continue to provide financial life support to coal mining companies and coal-dependent energy utilities?

And will several egregious dodgy coal deals that we and other organisations closely monitor in tandem with local communities and activists snap up bank support in defiance of climate, health, environmental and human rights concerns?


The writing’s on the wall for coal

Before turning to things to watch in 2015 at the project level, first some of the positive developments that have been helping to build up a head of steam for this year’s challenges across global coal campaigner networks.

The latest data is revealing that coal consumption is declining in many developed world economies, including across Europe as a whole and in the United States – the retirement of dirty coal plants in both is set to cement this trend in the coming few years.

The most significant coal consumption decline news, though, comes from China, with consumption dropping for the first time this century. This was reflected by China’s coal imports in 2014 falling 10.9 percent against 2013 import volumes. Cuts in consumption, then, in three of the top global coal consumers are noteworthy and will have major impacts on global coal markets.

The anti-climate logic of coal extraction was also laid out starkly earlier this month with the publication in the scientific journal Nature of new research by University College London (UCL) revealing that global fossil fuel reserves are approximately three times higher than the amount that can be safely burned by 2050. The coal numbers not surprisingly lie at the sharp end: the UCL research identifies that, globally, 88 percent of coal reserves need to stay in the ground, with 95 percent of Australia’s coal reserves being unburnable, the US matching Australia at 95 percent and Europe also above the average at 89 percent.

Bank actions need to speak louder than words

In the lead up to November’s UN climate negotiations in Paris, a string of dodgy coal deals will be test cases for international banks to prove they really are “combating climate change” or “transitioning to a low carbon economy”, as their sustainability reports and corporate PR never tires of telling us .

The first of these are the deals linked to the as-yet unexploited mega coal mines in Australia’s Galilee Basin in Australia, a huge carbon bomb that the UCL research shows is way beyond the carbon budget. The associated coal and gas export projects on the coast of Queensland would heavily impact the Great Barrier Reef, a UNESCO World Heritage site, and thus in 2014 we’ve already seen an impressive raising of the alarm from Australian campaigners in tandem with groups around the world.

Nine major international banks have been pressured into steering clear of the key Abbot Point coal export terminal expansion plans. With public pressure mounting in Australia, the campaign focus is now full square on getting the big four Australian banks – ANZ, Commonwealth Bank, NAB and Westpac – to follow the example of the international banks.

Another UNESCO site in the coal firing line is the Sundarbans in Bangladesh, the world’s largest mangrove forest. Yet the Bangladeshi government, as part of a joint venture with the Indian government, is pushing forward with development of the Rampal coal power plant, a 1,320 MW power plant planned to be located a mere nine kilometres from the Sundarbans. UNESCO concerns about the Rampal development – already underway – have already been lodged, and a catastrophic oil spill in the Sundarbans region at the end of 2014 has underscored the region’s vulnerability to fossil fuel transportation and the weakness of the national authorities’ disaster response capabilities.

It’s estimated that, on top of state financing from the governments of Bangladesh and India, commercial bank financing in the region of USD 1.2 billion is required for Rampal. If oil and the Sundarbans has already been shown to be a disastrous mix, a UNESCO site mixed with coal and vigorous local opposition to the project can only be a reputational minefield for any bank intent on getting involved in Rampal.

The Batang project in Indonesia, potentially one of the biggest coal fired power plants in Asia, is another highly controversial project. The project has already been faced with intense opposition from potentially affected communities, with local farmers and fishermen voicing their concerns about the negative health effects the project will bring as well as the impact it will have on their livelihoods, which are heavily dependent on the surrounding fertile agricultural land and fishing area.

The role of the Japanese export credit agency JBIC in supporting the Japanese companies Itochu and Jpower – major players in the Batang project – continues to be targeted by campaigners. While the project has already been delayed several times because of land rights issues, it remains one to watch in the coming months in 2015 to ensure that banks remain outside this dodgy deal.

Investment decision timings for dodgy deals are of course crucial, yet often remain elusive for a number of reasons, as is proving to be the case with the Plomin C coal power plant in Croatia. 2015 could well be a red letter year for the 500 MW project slated for development on the Croatian coast in the popular tourist destination of Istria, though dates for the investment decision have been variously described as ‘first quarter 2015’, ‘the first half of 2015’ and by the end of the current Croatian government’s term, namely the end of 2015.

A string of environmental and social concerns clouding the government’s plans at Plomin have resulted in campaigner calls for commercial and public banks to refuse to finance the new plant. Adding to the concerns are the troubling corruption records of the ‘preferred bidder’ consortium companies Alstom and Marubeni, as revealed by CEE Bankwatch in October. It’s little wonder then that as the list of problematic project aspects grows at Plomin C, potential finance institutions are for now keeping their cards very close to their chests.

Beyond these simmering dodgy coal deals, there are also ongoing cases involving destructive mountaintop removal (MTR) coal mining in the Appalachians in the US. As a result of years of campaigning by Rainforest Action Network and other international NGOs, BNP Paribas, RBS and Société Générale in Europe recently adopted policies excluding finance for major MTR producers, while JPMorgan Chase and Wells Fargo too have adopted phase-out policies in the US. Which banks will follow suit is now a burning question.

Look out finally for certain vulnerable, financially-stricken coal companies that can be expected to reach out for financial support from the banks this year, in spite of their disastrous social and environmental records. Bumi Resources in Indonesia, Coal India and Drummond in Columbia – we’re talking about you.

A call to action for the first ever Global Divestment Day on February 13-14

The next opportunity for campaigners and the public at large to target coal banks around the world is Global Divestment Day on February 13/14, convened by 350.org and set to be the biggest such event to date.

The rapidly growing divestment movement, both at the institutional investor and individual customer levels, is spreading globally and will soon reach out to the boards of the big coal banks to force them to divest from fossil fuels, starting with coal. To help ensure banks get the message and steer clear of these dodgy deals, join us and target your national coal banks two weeks from now.

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