Even banks turning green

Making a policy statement, Energy Secretary Alfonso Cusi asserted outright the Philippines can not afford to ditch coal as one of the energy sources for the country’s electricity requirements. In his first media briefing since being appointed by President Rodrigo Duterte, Cusi declared the new administration considers coal as “the more dependable, more reliable source for base-load” power plants.

The Philippines relies on imported coal, mainly from Indonesia, to supply around 6,000 megawatts of its electricity requirements. In terms of proportion of production exported, Indonesia is the world’s second largest coal exporter.

“As a developing country we cannot afford not to have coal,” the energy secretary cited. Thus, we can reasonably expect our country’s coal imports could even rise to 16 percent over the next six years of the Duterte administration. Or, about 17.6 million tons, based on government projections.

Elsewhere around the world though, many business reports tell a different story. There seems to be a swelling chorus in many countries predicting time is running out for coal.

Last week, The New York Times (NYT) reported about German banking giant, Deutsche Bank, became the latest of the major global lenders to turn its back on coal. This is amid a weak market and increasing pressure from environmentalists. I said “latest” with good reason.

Western financial institutions such as the World Bank and European and American development banks are walking away from funding coal-fired power projects. Even conventional, non-development and for-profit banks are doing the same thing.  

In the United States, among the well-established financial institutions – JPMorgan Chase, the Bank of America, Citigroup and Morgan Stanley – have all declared they are backing away from coal-fired power projects.

Three major French banks, namely, BNP Paribas, Societe Generale, and Credit Agricole, joined eight other international banks that have spoken out against the prospect of funding mega-coal mines in the Galilee Basin.

The Galilee Basin is a geological basin in the western Queensland region of Australia. Vast coal deposits in the Galilee Basin are proposed for coal mining for export markets. Australia is the world’s fifth-largest coal producer, after China, the US, India and Indonesia.

When it comes to securing financing for its massive coal mine projects, Australia never had any problems before. But for the last couple of years, the world’s biggest lenders to the coal industry have started balking.

“Pressured by environmentalists and worried about big losses from a troubled industry, many large banks and other lenders have made a hasty retreat from coal mining in recent years,” The New York Times reported on their July 7 feature story: Deutsche Bank Pulls Back from Deals in Coal Mining Sector.
The Times’ energy correspondents, Michael Corkery and Clifford Kraus wrote coal miners could always rely on Deutsche Bank to provide funding even when other banks were pulling out. But not any more, they noted. “This is another sign of the increasing risks for banks that finance industries that contribute to climate change,” they pointed out.

According to the NYT story, this once precious and sought-after resource, coal has obviously fallen into hard times. Earlier this year, the NYT noted, environmental groups like the Rainforest Action Network “faulted Deutsche Bank for not going far enough in shunning coal.”

The NYT further reported: “Other large banks, including JPMorgan Chase and Bank of America, revised their policies to reflect a broader pullback from coal mining. Deutsche Bank had said that it would no longer finance so-called mountaintop removal projects, which involve extracting coal from the surface of mountains, often leaving large gashes in the landscape. But its public policy stopped short of the commitment to a broad retreat that many of the other large banks had made.”

Are the so-called environmentalists winning or are the banks just following the money by making a profitable shift to green energy investments?

For bankers who are always driven by profits, coal may not be the enemy. It might simply be just passé, a losing investment in the new road map toward a sustainable future.

The NYT story further read: “The American coal industry, in particular, is now suffering a plague of bankruptcies. Power utilities are increasingly turning to cheap natural gas and renewable energy sources such as solar and wind to replace coal. Demand for coal from China has also cooled as its economy slows and the Chinese government tries to shift to cleaner energy sources.”

In the United Kingdom, the rapid rise of solar panels and of climate change concerns has also seen the use of coal plummet. Last May, solar power in the UK produced more electricity than did coal across the whole month. This is the first time this has happened since the late 19th century, according to research by analysts at Carbon Brief, a UK-based website covering the latest developments in climate science, climate policy and energy policy.

The UK government has pledged to phase out all coal-fired electricity by 2025, and some have even called for the shutdown at least two years earlier. This policy decision of London came way before Brexit, or Britain’s exit from the European Union.

Meanwhile investment in renewable energy around the world now far outstrips that in coal and gas plants. In 2015, it was reported $286 billion was invested in renewable energy, more than double the investments in fossil-fuel power stations.

The coal industry is undergoing what many analysts and investors describe as a permanent downsizing. But in Southeast Asian countries, including the Philippines, coal demand is set to triple in the next 25 years. This is bucking a global trend and giving coal exporters a sorely needed last gasp.

The Philippine government just approved 29 more coal-fired plants on top of the 17 already existing in the country. While banks all over the world are walking away, the Philippines is embracing coal. 

You have to wonder why the Philippine government is so intent on bucking the global trend. And yet, the country is in the forefront of climate change actions to reduce carbon footprints. While banks are turning green, our country is turning to coal. So what gives?