Who Is Still Financing the Climate Crisis?

By Camila Bustos*

 

Despite the progress the international community has achieved in terms of tackling climate change, a great contradiction exists between what is stated in international accords and what happens in practice. This is particularly evident in the steady financing of fossil fuel infrastructure at the expense of people’s lives.

In 2015, States reached a historical agreement in Paris. After two decades of climate negotiations, countries finally laid the framework for a global effort to reduce greenhouse gas emissions. Some praised the accords, while others called it inadequate given that countries’ voluntary contributions do not add up to 2°C, the scientific agreed upon limit to “safe” warming. In fact, the pledges would lead to a rise of global temperature of 2.6 to 3.1°C according to the scientific journal Nature.

This month, the Paris Agreement will enter into force after more than 55 parties covering more than 55 percent of global greenhouse gas emissions ratified the agreement. Meanwhile, States negotiated an amendment under the Montreal Protocol to phase out HFCs (used as refrigerants and propellants), which contribute to climate change by trapping heat in the atmosphere. And to add to the climate related celebrations, international aviation companies agreed to offset carbon emissions starting in 2020.

“The Paris Agreement is a monumental triumph for people and our planet,” tweeted UN Secretary General Ban Ki-moon last year at the close of the UN climate talks.

“The Paris Agreement is a monumental triumph for people and our planet,” tweeted UN Secretary General Ban Ki-moon last year at the close of the UN climate talks.

But as international meetings convey some progress on the issue, is the green rhetoric on sustainable development – by governments, banks, and private institutions – backed up by their actions? Who, if not these same companies and governments, is financing the climate crisis?

The impacts of climate change continue to become increasingly visible across the world. In China, the Tengger Desert is expanding at an annual rate of more than 1,300 miles. In the Alxa League, the government has relocated thousands of people labeling them “ecological migrants.” In the Caribbean, Hurricane Matthew devastated countries, with the death toll in Haiti surpassing 1000 people. And although we cannot explicitly know climate change caused a particular storm, we know it is in fact increasing the frequency and severity of events like this one.

 

Financing Fossil Fuel Infrastructure

As the “dirtiest” fossil fuel, coal is responsible for one-third of all CO2 global emissions. The divestment movement has repeatedly asked financial institutions, schools, and pension funds to divert its money from coal extraction. Last year, Kiribati’s president asked for a global moratorium on new coal mines. Even the World Bank’s President Jim Yong Kim has said that  slowing down growth in coal plants is essential  to avoid catastrophic climate change.

However, there are more than 2400 plants under construction or being planned, of which two thirds are located in India and China. A new report on Asia’s coal demonstrates that combined coal use by these two countries already forms one of the most significant sources of emissions on the planet. Despite the decline in the number of proposed plants, Chinese investors are financing the construction of plants “from Indonesia to Pakistan, Turkey to the Balkans – as well as Africa and Latin America.”

On December 4th, The Rainforest Action Network helped to create an action in downtown Calgary highlighting the impact on climate change of individual investments in the 5 major Canadian banks. Photo by: ItzaFineDay

On December 4th, The Rainforest Action Network helped to create an action in downtown Calgary highlighting the impact on climate change of individual investments in the 5 major Canadian banks. Photo by: ItzaFineDay

In Brazil, the Senate just approved new coal funding. The provision includes the “modernization” of a coal power park, with new plants from 2023. The decision came a few weeks after the Brazilian national development bank, BNDES, had announced a shift towards funding solar energy and a reduction in coal. In Colombia, the government said that despite the drop in international coal prices, the country can take advantage of the national industry and generate energy through thermal plants. Both countries’ actions – by financing and promoting coal extraction and burning – contradict their commitments to tackle climate change.

Even despite its rhetoric on sustainable development, the World Bank is still financing coal. According to research by the Institute for Policy Studies, the Bank’s financing for coal projects around the world actually increased between the periods of 2000-2004 and 2010-2014. Furthermore, the Bank is still providing more than 1.5 more times the funding for fossil fuel projects than for renewable energy projects. Meanwhile, a report by Inclusive Development International found that the Bank’s’ private sector arm has financial ties with 41 new coal projects launched since 2013. In the last five years, the Inter-American Development Bank has invested 60 million dollars more in thermal plants than energy efficiency and renewables.

So why are these entities still financing coal? Partly because of the inertia created by fossil fuel infrastructure, partly because many developing countries and coal companies have presented coal as the solution to energy poverty around the world. Yet governments opting for this short-term development undermine human rights. According to a new report, the building of new coal-fired plants will only accelerate climate change, pushing hundreds of million of people into poverty. Furthermore, it will only aggravate the existing human rights impacts of coal extraction, transport and export. These impacts are well documented and include violations on the right to clean air, water, land, means of subsistence, and health among others.

 

Rethinking Alternatives

This all comes while in countries like South Africa, wind and solar are actually 40 percent cheaper than coal. And not only can these alternatives be cheaper, they can mitigate the human rights impacts associated with fossil fuel extraction and burning. Coal is not cheap and with increasing options in distributed generation  that use small-scale technologies to produce renewable electricity close to the end users of power, it is also not the easiest way to bring power to millions around the world. It is imperative that governments rethink their energy sources, something they will be forced to do anyway,  especially as fossil fuel reserves dwindle.

As the Paris Agreement enters into force, countries will be expected to gradually increase the ambition of their national contributions to reduce greenhouse gases. Not only is it important that developed countries fulfill their commitment to financially support developing countries, but that they  also rethink the financing of fossil fuel infrastructure, at home and abroad. Future nationally determined contributions should include the goal to eliminate coal financing.

Everyone can play a part in the efforts to curb emissions. Several civil society organizations are tracking the lending policies and financial support of actors like the Inter-American Development Bank and the World Bank for fossil fuel projects. The climate movement is already planning to demand a halt on any new fossil fuel infrastructure development, exploration, and expansion at the upcoming UN climate conference in Marrakech. People power can impact investors’ decision on whether to develop a project and can hold financial institutions accountable for failures to adopt more sustainable lending practices. So what are we waiting for?

 

*Camila Bustos is researcher at the Center for the Study of Law, Justice and Society (Dejusticia).

Photo credit: Anti-coal activists in Kauswagan, Philippines where a 540-megawatt coal plant owned by a subsidiary of Ayala Corp. is being constructed. Photo by: Aubrey Rocin Llamas