JP Morgan’s announcement that it’s pulling out of coal is purest doublespeak, writes Assaad Razzouk. But it’s not the only financier to engage in climate hypocrisy, as banks prepare to lend $5 trillion to build 2,440 new coal power stations. To deliver the Paris Agreement they – and the loans that would finance them – must be cancelled.
Worldwide, 2,440 new coal-fired power plants are planned, with a potential financial investment of over $5 trillion. Even if only half of these are built, we will exceed the 1.5C warming limit agreed at the Paris climate talks by 200% or more.
In an inspired take on the forked tongue of American Indian lore, JP Morgan has just announced that it will stop direct financing of all new coal mines and new coal power plants in rich countries.
There are at least three major holes in that plan.
What JP Morgan really means is that it will not stop ‘indirectly’ funding coal – the bulk of what it and every other bank does – through, for instance, intermediation in capital markets.
Neither will it stop funding existing coal mines and power plants around the globe. The world’s entire existing coal infrastructure can take a deep breath because it may still benefit from JP Morgan’s largesse.
And it will not stop funding coal in developing countries where as it happens pretty much all new coal plants are being built.
One wonders what it is that JP Morgan is in fact stopping. Funding new coal mines in the UK? There aren’t any. Funding new coal-fired power plants in France? There aren’t any either.
As luck would have it though, the JP Morgan bankers are by no means alone.
They’re all at it!
Delegates from a European development bank (which must remain nameless to protect sources) were recently visiting the Philippines, excited to back its clean energy sector.
The South East Asian country is endowed with lots of free sun and free wind as well as large water resources. With its over 7,000 islands, it is the perfect setting for a decentralized energy system built around clean energy and reaching every one of its rich and poor.
Furthermore, it is on the frontlines of suffering from climate change, which Filipinos know of first-hand and experience year-round.
Imagine the surprise of the European bankers when they heard from their Filipino counterparts how much the latter were excited about backing, you guessed it … coal-fired power plants. Their excitement extended to recompensing projects destroying the Filipinos’ health, and contributing to dangerous climate change, with cheaper money than what they were prepared to provide to new solar or wind power plants.
And the same holds true in all corners of the world. Earlier this year, Korea’s green growth strategy was downgraded while the country increases its new coal capacity 65%.
Australia’s biggest banks are cheering coal by pumping billions into it, having signed off on $5.5bn worth of dirty energy deals in 2015.
China has 210 coal power projects in the pipeline, despite its battle against pollution, and seems to be accelerating net increases in coal-fired generating capacity.
In Indonesia, the Japanese are having a coal-fest with Sumitomo Corp alone sponsoring an additional 2,000MW of coal capacity, aided and abetted by French and local banks.
Bangladesh, sinking because of rising sea levels, is increasing the share of coal in its energy generation (with the help of international donors) from 2% to 50% by 2030. The generously named Bangladesh-India Friendship Company is building a 1,320 megawatt coal plant close to a UNESCO heritage site, the Sundarbans mangrove forest, at incalculable risks to a world biodiversity treasure and the health of everyone worldwide.
The situation is much the same everywhere one bothers to look.
Cancel plans for all new coal power
Worldwide, 2,440 new coal-fired power plants are planned. That’s a staggeringly large number and a potential financial investment of over $5 trillion.
Even if only half of these planned plants are built, we will exceed the 1.5C warming limit the world agreed only three months ago at the Paris climate talks by 200% or more – bringing us closer to an extinction level event. The entire world – even JP Morgan – knows that holding warming below 2C, or below 1.5C by 2100, requires a rapid decarbonisation of the global power sector, and much else besides.
Among other requirements, this means that emissions from coal should be phased out by 2050. It is, however, hard to escape the impression that the climate commitments of 195 nations at the November Paris UN meet weren’t but a choreographed sham.
If the world is serious about combating climate change, planned new coal power plants should be simply cancelled. This happens to be good for the climate and our health but also good finance: Renewable energy and heightened pollution standards in countries such as India and China are stranding coal assets. The sooner existing coal plants are closed and plans for new coal are scrapped, the less money we will collectively lose and the fewer lives will be destroyed.
Banks in particular must play their part in a forthright manner. JP Morgan could opt to show some leadership by issuing a correction to its announcement – clarifying that it will stop financing all new or old coal mines and coal power plants, wherever they may be.