Coal is a dirty fossil fuel that is responsible for a big portion of carbon emissions. The Institute for Energy Economics and Financial Analysis predicts a bleak future for coal. It sees declining demand and the increasing use of renewables as accelerating the trend of using less fossil fuels like coal.
Clearly, some banks are getting the memo that coal is a thing of the past as two big banks recently updated their coal policies. One of them is JPMorgan Chase, which released new commitments to stop financing for the coal industry. The other is Deutsche Bank which released a new corporate responsibility policy that explains the bank’s decision to phase out funding mountaintop removal coal mining.
JPMorgan’s new coal policies prohibit financing new coal mines or a new coal-fired power plant in developed countries. The policies specifically prohibit “project financing or other forms of asset-specific financing where the proceeds will be used to develop a new greenfield coal mine.” A greenfield mine is an uncharted one, where coal deposits were not known to previously exist.
JPMorgan’s new policies also include the following:
- It will reduce its “credit exposure” to companies that derive most of their revenues from extracting and selling coal.
- It will apply “enhanced due diligence” to transactions with diversified mining and industrial companies whose proceeds will be used to finance new coal production capacity.
- It will not provide financing for companies that will developed a new coal-fired power plant outside of developed countries unless ultra-supercritical steam generation technology, a method that experts say is cleaner and more efficient, is used.
Last summer, the Rainforest Action Network launched a campaign that called for U.S. banks to stop financing the coal industry. The campaign has been a successful one as five of the largest U.S. investment banks have committed to phase out their financing of coal mining, including Bank of America, Citigroup, Morgan Stanley and Wells Fargo.
“In order to have a chance at stabilizing the climate, we need financial institutions to follow these commitments on coal mining with further steps to end coal financing altogether,” said Ben Collins, senior campaigner at RAN, in a statement. “It’s time for the financial sector to step up and lead the just transition we need to a clean, renewable future.”
RAN characterizes Deutsche Bank’s new policy on mountaintop removal as being a “positive move for the bank” but says it remains “incremental in nature” and relies on the trend of decreasing the practice’s overall production. However, RAN points out that Deutsche Bank is the “biggest banker of [mountaintop removal].” The bank finances the coal company Blackhawk that has increased production over the last year at mountaintop removal mines. “Deutsche Bank remains badly out of step on the issue of coal financing, as most of its U.S. and European peers are ending financing for the entire coal mining sector, not just for [mountaintop removal] producers,” according to RAN.
“Deutsche Bank continues to lag behind other banks by taking baby steps on [mountaintop removal] — while others, having left behind this horrific practice years ago, are now cutting out coal mining altogether,” said Amanda Starbuck, program director with RAN. “We need an immediate and comprehensive end to the disastrous practice of mountaintop removal mining and real commitment to a carbon-free economy.”
Last year before the Paris climate talks, in a letter the president of the Republic of Kiribati, Anote Tong called for world leaders to back a global moratorium on new coal mines and expansion of coal mines. “What we are talking about is survival; it’s not about economic development … it’s not politics; it’s survival,” President Tong wrote. Kiribati is on the frontlines of climate change as the Pacific island nation is sinking.
Clearly, some banks are starting to understand what environmentalists have long known: coal is a fossil fuel that should stay in the ground if we are to keep temperature rise to the two degrees Celsius level that scientists say is needed to prevent the worst impacts of climate change. The faster banks back away from financing the coal industry, the better off we all will be.
Image credit: Flickr/Steve Nelson