Banks Keep Financing Coal Despite Their Net-Zero Pledges
In recent years, world leaders and leading environmentalists have predicted “the end of coal,” with charts showing how the world’s most polluting fossil fuel has plummeted in use and production in the U.S. and Europe over the last few decades.
Yet coal remains the world’s single largest power source, generating 36% of global power in 2022. And its use has actually increased in Europe and the U.S. in recent years, with U.S. coal production rising almost 8% from 2020 to 2021 and almost 3% from 2021 to 2022. U.S. coal consumption increased 14.5% from 2020 to 2021. Carbon dioxide from coal use is responsible for about 40% of global greenhouse gas emissions from fossil fuels.
That surge in activity would not be possible without financing by banks and other financial institutions. Six global banks — Barclays PLC, JPMorgan Chase & Co., Bank of America Corp., Citibank, Wells Fargo & Co. and Mitsubishi UFJ Financial Group Inc. — have plowed $83.8 billion into 10 parent companies that operate coal plants since 2016. Overall, financial institutions have injected $166 billion into that coal network since 2016, according to the Sierra Club’s Fossil-Free Finance Campaign.
Most of the banks have made high-profile net-zero commitments, such as joining the Net Zero Banking Alliance, whose members pledged to stop financing fossil fuel projects. They often tout their climate action plans in speeches and press releases, emphasizing that they will not finance the building of a new coal plant.
But banks such as JPMorgan and Citibank continue to finance fossil fuels, including the coal sector, via a major loophole that exploits the difference between project financing and corporate financing. They may not be lending money to a specific mine or coal plant, but they generously finance the companies building and operating coal plants. In total, 96% of the world’s 60 largest banks’ financing to the fossil fuel industry from 2016 to 2022 was described as general purpose corporate financing, while only 4% was described as project financing, according to the Sierra Club’s “Banking on Climate Chaos” report.
Coal remains the world’s single largest power source, and its use has increased in Europe and the U.S. in recent years.
“It’s an extremely common loophole for many banks,” said April Merleaux, research manager on the climate and energy team at the Rainforest Action Network. She added that another loophole — the lack of explicit policies to limit corporate financing to companies responsible for maintaining and operating coal plants — allows banks to keep financing coal-fired power plants. “It gives them wiggle room to finance a company developing coal power,” Merleaux said. “These plants still require the production of fossil fuels, and this financing delays really serious transition plans that take into account the people across the value chain.”
For example, JPMorgan Chase announced in February 2020 that it will not finance many coal-related enterprises, including coal-fired power plants. Yet since then, it has continued to finance energy companies that own coal plants. In April 2023, it co-financed the issuance of 650 million euros in bonds by French energy giant Engie SA, which generates electrical power through its coal plants. In March 2022, it co-financed a $5.4 billion revolving credit facility for German energy giant RWE AG, which recently made headlines for dismantling a wind farm to make room for an open-pit lignite coal mine in the western region of the German state of North Rhine-Westphalia.
Among major American banks, PNC Bank has also been outspoken about its climate commitments ever since it won praise almost a decade ago for announcing that it would stop financing coal companies that rely on mountaintop removal. “The climate crisis requires PNC — and all institutions, from governments to corporations to NGOs (nongovernmental organizations) and beyond — to work together to apply their expertise and resources in ways that can truly move the needle,” said Lora Phillips, PNC senior vice president and director of environmental, social and governance, in a new release. “PNC is committed to taking action right now on those areas we can control, and to laying a solid foundation for the work that is still to come.”
That strong rhetoric didn’t stop the bank in August from extending a $140 million credit facility to Indiana-based Hallador Energy Co., which owns the state’s second-largest coal producer. One of its coal-fired power plants in the town of Merom, Indiana, was set to retire in 2023, but its life was extended when a crypto mining company, AboutBit LLC, announced that it would buy power generated at the plant. In a December 2022 filing with the Securities and Exchange Commission, Hallador said, “We expect cash from operations generated primarily by our expected higher coal margins in 2023 to fund our capital expenditures and our debt service.” The Merom plant has been cited for violations of the Clean Air Act, according to a consent order with the EPA requiring it to reduce emissions of sulfur dioxide and nitrogen oxides. When AboutBit’s owner was asked about critics’ claims that the five-year deal would keep a polluting coal plan open, he replied, “It’s 100 percent correct.”
Coal production is increasing for several reasons, principally due to recent spikes in the prices of natural gas and other fuels, which has forced some countries and regions of the U.S. to use coal as a cheaper alternative. In addition, as the International Energy Agency reported, the world’s coal consumption will remain at elevated levels “in the absence of stronger efforts to accelerate the transition to clean energy.”
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A study claims heat suppresses economic growth. It falls apart under scrutiny
Climate change hurts the economy, according to a celebrated 2012 paper by economists Melissa Dell, Benjamin Jones and Benjamin Olken. That paper is in the top 1% of all academic economics publications by citation count, and it has received glowing coverage in the media. The authors teach at Harvard, Northwestern and the Massachusetts Institute of Technology, respectively, and have received some of the highest awards in the profession. I took a closer look at their study, and it doesn’t hold up.
The study claims that higher temperatures suppress economic growth in poor countries. The claim falls apart when you look at their definitions. The authors study the period 1961-2003 and assign each country a binary designation as “poor” or “rich” based on whether their per capita gross domestic product was below or above the median for countries in 1960.
But some countries faced drastic changes in fortune at the time.
South Korea is “poor,” according to the authors. In reality, it was very poor in the early 1960s and then became very wealthy. When I simply reclassified South Korea as poor from 1961-76 and rich from 1977-2003, the study’s results nearly disappeared. When I allowed classifications of all countries to change when they moved either above or below median GDP per capita, the results disappeared completely. Any study with results that collapse after such a simple specification change shouldn’t be published in a peer-reviewed academic journal.
I also found that unusual economic circumstances greatly influenced countries’ results. Per capita GDP in Rwanda dropped by 63% in 1994, the year of the genocide. That year happened to be warmer than average, tricking the model into showing that high temperatures cause GDP to fall. Dropping 16 unusual country/year observations out of 4,924 eliminated the main effect the study reported. Other seemingly arbitrary aspects of their technique, when changed, weakened or eliminated their results.
I extended their data from 2003 to 2017 and added additional countries to the sample. I found again that correctly classifying countries as poor or rich eliminated their results. Going back to their original data source, I discovered that monthly temperatures are available, although they used only annual temperature data. If high temperatures really reduce GDP growth, it seems likely that this effect would be greatest in the warmest months of the year. I found no evidence to support that hypothesis in the original or the extended data. I also used a completely different set of data on GDP by country and found no effect of temperature on growth.
Climate activists need evidence that high temperatures reduce economic growth to advance their policies. Responsible economists have found that high temperatures have only small effects on the level of GDP. If temperatures rise as the Intergovernmental Panel on Climate Change expects—assuming no CO2 mitigation at all—then according to responsible economists, global GDP in 2100 will be about 2.6% lower than if there was no temperature increase. With normal economic growth, GDP per capita in 2100 will be five times today’s level. A 2.6% reduction in GDP in 2100 would mean GDP growth of 4.9 times instead of 5—hardly a catastrophe. But if researchers claim to show that higher temperatures will affect the rate of GDP growth, then the effects of heat by the year 2100 could be significant. That is why pro-climate researchers are so desperate to find an effect of temperature on growth.
Econ Journal Watch, which published my debunking, contacted the authors and gave them an opportunity to respond to my work. They declined. It is astonishing that eminent economists, in universities with vast resources available to marshal evidence, chose to ignore my critique. But the mainstream media will ignore anything that reveals the weaknesses of climate research, and academic journals will continue to publish shoddy research that confirms the dogma of climate hysteria.
https://www.wsj.com/articles/debunking-study-saying-climate-change-hurts-economic-growth-16e07ec3
**************************************************Extraordinary Costs Of Green Energy Creeping Slowly Into Public Awareness
A key claim of the green energy movement has long been that the intermittent “renewables” — wind and solar — provide the cheapest form of energy. Therefore, the advocates say, just build enough wind turbines and solar panels, convert all use of energy to electricity, and sit back and enjoy a future of affordable energy without adverse environmental consequences.
Meanwhile a key theme at this blog has been exposing the incompetence and chicanery of the claims of low cost for electricity from wind and sun. Although it may often seem as if nobody is listening, I reassure myself that when the full costs of wind and solar electricity eventually get exposed, the people will catch on and not allow themselves to be impoverished.
Over in Europe, it looks like enough of the costs have now gotten exposed to cause the beginning of a public awakening. In August I had a post on how the costs of “green” energy were starting to change the “net zero” debate in the UK. Now, add to that report the results of the elections this past weekend in Germany and Luxembourg. In both countries, parties now standing at least somewhat against the green transition scored gains, while Greens lost ground. The process of ultimate political transformation looks to be long and slow; but I have faith that reality will eventually win out.
First, a short refresher on the claims of green energy advocates that the wind and sun provide the cheapest power. If you only read this blog, or other climate skeptic sources, you may find it incredible that anyone could believe such assertions. But you must remember that the self-designated climate advocates repeat these claims to themselves endlessly in an echo chamber where no one ever pushes back. Eventually, it appears, they come to believe that the claims are true.
And thus, here is my blog post from August 16, 2022, reporting on a Soho Forum debate on the energy future, between Steven Koonin and Andrew Dessler. Dessler, arguing for a future of wind and solar power, had as his main contention that those are cheaper than the fossil fuel alternatives, and therefore they will inevitably sweep the fossil fuel infrastructure away. Although he is some kind of leader in the climate alarm movement, Dessler appeared to have no clue that there was any counter-information to his contentions about the costs of wind and solar power. In support of his position, Dessler used as his main metric the “Levelized Cost of Energy” (LCOE) as published by investment bank Lazard. The LCOE metric is ridiculously flawed, and should not fool anybody, but seems to have fooled not just Dessler but also the entire green energy movement (and for that matter the entire Democratic Party and the President of the United States).
And nothing about LCOE and fraudulent advocacy based on it is going away. Long after the Soho Forum debate last August, Lazard went right ahead and came out with a new and updated Report in April titled “2023 Levelized Cost of Energy+.”
You can see right there that the cost (measured by LCOE) of solar PV is $24-96/MWh, onshore wind is even less at $24-75/MWh, and the cheapest fossil fuel alternative is combined cycle natural gas at $39-101/MWh. So wind and solar are cheaper — QED! But, as I wrote in my August 16, 2022 post:
[A]n LCOE calculation completely omits the dominant costs of generating reliable electricity using mostly or entirely wind and solar generators. These dominant costs are the costs of energy storage and/or backup, the costs of overbuilding, and the costs of additional transmission.
Meanwhile over in Europe, I doubt that many people are abandoning the green movement based on complex spreadsheet calculations of the costs involved. Rather, most of them are starting to face up to reality because of some combination of skyrocketing electricity bills and plans to ban gas heat and internal combustion cars.
The BBC reports here on the results of yesterday’s regional elections in the German states of Bavaria and Hesse. The swings in voter preferences were not huge, but still enough to be meaningful on the climate issue. For example, in Bavaria the BBC reports that the long-dominant CSU got 36.7% of the vote, and a second conservative party, the Free Voters (Freie Währen) expanded to 15%, while the Greens “slipped slightly” to 15% and the SPD (party of Chancellor Olaf Scholz) got only a “catastrophic” 8%. The BBC has this to say about the issues in the Bavarian election:
In an unusually ferocious campaign in Bavaria, conservatives and right-wingers railed against Berlin's plans to phase out fossil fuel boilers and high levels of migration.
While this was not a one-issue referendum on green energy, still it is clear from the results that opposing green energy in at least some respects was definitely a positive rather than a negative among the electorate.
In Luxembourg, the swings were also mostly small, but included a gain for the conservatives matched with a dramatic loss for the Greens. Bloomberg reports on October 8 that the long-time ruling coalition of Democrats, Socialists and Greens got “toppled.” In a parliament of 60, the Conservatives upped their total to 21 seats, while the Greens went from 9 seats to just 4. The result is likely to be a governing coalition of the conservatives with other parties, but excluding the Greens, which could mean a significant shift in green energy policies.
Back here in the U.S., the Biden administration continues with its wrecking ball approach to destroying our energy economy. But as Europe is showing us, small changes voter preferences can change that quickly after the next election.
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Voice to climate: Can you hear me?
Judith Sloan
The [Australian] Prime Minister has flagged that, post the Voice referendum, his government will turn its full attention to the decarbonisation of the economy and the prospect of Australia becoming an renewable energy superpower.
You really have to wonder whether Albo is smoking something if he thinks that moving from the toxic and divisive issue of the Voice to the fantasy world of climate action is a good idea. But if you live in the world of the vibe, one vibe is as good as another.
By contrast, most of us are living in the real world, wondering how we can cover the mortgage and the bills, getting the kids to school on time and thinking about what’s for dinner. Prosaic stuff to be sure, but beautiful thoughts about identity politics and climate change are generally back of mind, if at all.
To be sure, surveys tell us that people are concerned about climate change, which is not altogether surprising given the unrelenting and misleading conflation of weather and climate change perpetrated by all the mainstream media outlets. Several hot days in Sydney – climate change. Limited flooding in parts of Victoria – climate change. Bushfire warnings for parts of the east coast – climate change.
The implicit message is that Australia alone – or should that be NSW or the city of Sydney – can affect the pace of climate change and therefore reduce the incidence of unwelcome weather events. Most school students – OK, some, OK a few – would realise that this is a complete non sequitur as only global action counts.
But what the surveys also reveal is that, notwithstanding people’s concerns about climate change – economists call this elicitation bias or wanting to sound worthy – when it comes to bearing any additional financial burden to act on climate change, there is a marked reluctance to pay any significant price at all. The recent 20-per-cent rise in electricity prices, for instance, is well above the rate of increase that people are happy to pay for the sake of doing something about the climate.
The real paradox is why Albo thinks it’s an attractive political idea to emphasise the energy transition and the exciting world that lies ahead. Let’s face it, it hasn’t been going well, what with delays in the commissioning of new renewable projects, the growing opposition to the construction of new transmission lines and, let’s not forget, the disastrous Snowy 2.0 project. If I were to run a book on when Snowy 2.0 will be fully up and running, I’m not sure I would have too many bets on this decade.
I could do a similar thing with offshore wind installations, as the economics of these projects overseas deteriorate to the point that most investment is currently stalled. Rising costs, worker and equipment shortages and higher interest rates are an uncongenial mix. The UK government ran a tender for new offshore wind projects recently and there was not a single bid because the strike price was set too low.
The rent-seekers in this space in the US have declared that a doubling of the prices they receive is now necessary to make offshore wind a viable investment. This is another counter to the ludicrous proposition that renewables are the cheapest way to generate electricity, something to which Albo still clings.
The one bright light in the energy transition has been the rapid growth in rooftop solar by households and some businesses. This is seen as one means to save on electricity bills in the context of very limited options. According to the Clean Energy Regulator, ‘Australian households and businesses continue to install rooftop solar at world leading rates. 1.6 gigawatts of capacity from almost 160,000 rooftop systems were added in the first half of 2023. Three gigawatts would bring the amount of rooftop solar capacity added to the grid close to the 2021 record of 3.2 GW’.
There are two reasons for mentioning this. The first is that households’ fondness for their rooftop solar panels often morphs into their support for renewable energy more generally – something recognised by state politicians, in particular. The continued subsidisation of rooftop solar installations, albeit at reduced levels, is partly explained by the ability to cadge additional votes.
Secondly, the unexpected rise in rooftop solar is playing havoc with the economics of large-scale solar installations. For several hours during the day, electricity prices can be deeply negative. Those large-scale solar installations are in effect competing with rooftop solar.
To be sure, most of the large-scale installations have been backed by power purchase agreements or similar (mainly from state governments) which guarantee the investors/operators certain prices. But the reality is that large-scale solar is looking like a particularly bad investment bet at the moment save a substantial step-up in the prices being offered. It is already clear that the expected roll-out of new projects has significantly slowed this year.
Again as the Clean Energy Regulator notes, ‘it was a quiet first half of the year for new large-scale renewable energy investment (including wind) commitments. We’ve downgraded out expectations and now expect 2023 investment may not reach three gigawatts’.
Even the deep-green Australian Energy Market Operator doesn’t expect the 82 per cent renewable energy target by 2030 to be met. No doubt, Albo will have to downplay these real world realities.
And he definitely won’t want to mention the fact that the Victorian government is now propping up not one, but two coal-fired power stations in the anticipation that its energy transition plans are in tatters. The only feasible alternative is to hand out hundreds of millions of taxpayer dollars – although precise figures are kept under wraps – so they don’t close down. The NSW government will start handing out big bucks to the owner of Eraring to keep that plant going.
Let’s not forget that the cost curve for these plants resembles a bathtub. Towards the end of their lifespans, the costs increase dramatically particularly when they are used to back up intermittent renewable energy, something for which they are not designed.
He might also want to avoid talking too much about the much-vaunted green hydrogen revolution, something for which other rent-seekers are keen to hoover up as much government money as possible. It’s becoming clear that, at best, hydrogen will play a niche role in the energy transition.
Using intermittent energy to power electrolysers to produce hydrogen is inherently inefficient and the problems of transport and bespoke infrastructure just add to the costs. The winners are likely to be close to the demand and blue hydrogen (made from gas) has much more going for it in terms of costs than green hydrogen.
The idea that Australia will become an energy superpower on the basis of green hydrogen is fanciful notwithstanding the ongoing enthusiasm of Twiggy. It’s a bit like the underground electricity cable from the Northern Territory to Singapore – ain’t going to happen.
Albo may need to move onto another vibe – it’s just not clear what it will be.
https://www.spectator.com.au/2023/10/voice-to-climate
***************************************My other blogs. Main ones below
http://dissectleft.blogspot.com (DISSECTING LEFTISM )
http://edwatch.blogspot.com (EDUCATION WATCH)
http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)
http://australian-politics.blogspot.com (AUSTRALIAN POLITICS)
http://snorphty.blogspot.com/ (TONGUE-TIED)
http://jonjayray.com/blogall.html More blogs
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Jim Hansen and his twin
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