By Charlie Wilson
Xi Jinping’s pledge at the UN summit last week comes in the middle of a speech that is worth reading in full to get a sense of the way China’s approach to global crisis differs from that of the West. The contrast with Boris Johnson’s calculated buffoonery is about more than style. Seeking the defeat of the covid virus, global co-operation on climate change and to eliminate poverty through viable international structures is a serious agenda for humanity for this decade. The pledge not to build new coal fired power stations abroad grabbed the headlines, but it went along with an accompanying pledge to “step up support for other developing countries in developing green and low-carbon energy”, that is just as significant.
Support for other developing countries to “leap frog” over fossil fuel dependent development recognises not only that the carbon hungry, inequitable and careless Western economic model is unviable for the majority world, but so is the reliance on coal that has fuelled a lot of China’s rapid development to date; and from which they will begin weaning themselves by the end of the decade.
Jumping straight to wind, tidal and solar power, connecting cities in Africa, Asia and Latin America with high-speed rail, not medium haul air flights, requires significant investment, but follows the pattern whereby developing countries have moved straight to mobile phones and avoided the heavy costs of landline infrastructure and would give a “win, win” of increased wellbeing and lowered levels of carbon in the parts of the world where the majority of humanity lives.
Chinese banks at present underwrite domestic companies that are making coal investments internationally, and this is big money. While pulling the plug on this will have a significant impact and knock on effect, most of the global investment in coal does not come from China. Far from it.
A Report earlier this year from Urgewald on behalf of 29 NGOs showed that “with shares and bonds in value of US$ 602 billion, US investors collectively account for 58% of institutional investments in the global coal industry.” Investors in Japan and the UK hold the next largest shares.
So, when the US or UK want to point the finger at coal, they need to point it at their own investors and financial institutions and put their own house in order.
When it comes to commercial lending, Banks from Japan, the US and UK accounted for 52% of total lending to companies on the Global Coal Exit List between October 1st 2018 and October 31st 2020.
The Reclaim Finance online “Coal Policy Tool” tracks and ranks all coal policies announced by financial institutions shows that 88 commercial banks have now adopted a “coal policy”, but out of this total only 4 of them have adopted “robust” coal exclusion policies.
The private financial sector is not meeting the challenge, and the way they are failing shows that they are structurally incapable of doing so if left to regulate themselves.
As the Reclaim Finance report puts it. “The vast majority of banks’ coal policies have so many loopholes that their impact is almost meaningless,” In the case of Citigroup’s announcement in April 2020 that it would phase out investment in coal mining by 2030. “This policy has zero impact on Citigroup’s enormous support for coal power producers and coal plant developers. And if you read the small print, the phase-out only applies to companies that generate at least 25% of their revenues from thermal coal mining, thus letting large diversified coal miners slip out of the net. Sadly, this kind of evasion is par for the course.”
And its not just coal. The same banks are busily financing Arctic Oil and Gas exploration; seeing the melting ice sheets and thawing permafrost as a wonderful opportunity to find and burn more of the fossil fuels that are causing just that. The “Drill Baby Drill” report from Reclaim Finance shows that:
- “From 2016 to 2020, commercial banks have channelled more than $314 bn to the leading companies developing new oil and gas projects in the Arctic*.
- Top backers of Arctic expansionists include … JPMorgan Chase (top globally with $18.6bn between 2016-2020), Barclays (4th largest, $13.2bn) Citigroup (6th, $12.2bn) and BNP Paribas (7th, $11.8bn).
- European banks account for more than 1/4th of global underwriting and loans to Arctic developers, with increasing support from 2016 ($16.6bn) to 2020 ($28.4bn).
- Two European banks – HSBC and BNP Paribas – were top bankers of Arctic expansionists in 2020.
- Investors hold roughly $272 bn in the top companies developing new oil and gas projects in the Arctic region (as per March 2021).
- The biggest investors supporting Arctic expansionists include BlackRock, Vanguard and Amundi.”
This should be categorised as criminal activity.
As a result of state direction, China’s domestic coal consumption is declining as a proportion of the total. In 2018, 58% of its electricity came from coal, down a peak of from 80.95% in 2007. A peak of absolute consumption – as a steadily wealthier society uses more even as the proportion decreases – is set for 2025, to plateau up to 2030 and get to net zero in the 30 years after that. There is an urgent debate in China about speeding this up. A lot rests on this. But it is clear that direction from the state makes this level of movement possible. In the West we have smoke and mirrors, pledges without adequate plans, and windy rhetoric designed to disguise backsliding; because private capital drives the policy.
* That’s an annual amount greater than the GDP of the poorest 132 countries in the world.