National Australia Bank (NAB) has announced that it will stop funding new thermal coal projects, in the latest blow to the sector.
In a brief statement, NAB said that while it would continue to support existing clients across the mining and energy sectors, it “has an important role to play in the orderly transition to a low carbon economy”.
The move was hailed as a “market-leading position for an Australian bank” by Greenpeace, which remarks that “all over the world, financial institutions are turning their backs on coal after realising its contribution to climate change and the damage it does to the health of communities and the planet”.
It follows shortly after the World Bank announced that it would “no longer finance upstream oil and gas after 2019” in line with the Paris Agreement’s stated goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels.
NAB’s move also follows competitor Commonwealth Bank of Australia (CBA)’s announcement in November that it will end all new investments in coal. It’s expected that CBA will phase out coal funding by the end of 2018, but there was no official confirmation of the timeline.
NAB’s commitment is being greeted as the most comprehensive among Australian banks. Pressure will now be mounting on the other two members of Australia’s “big four”, ANZ and Westpac, to follow suit.
“NAB’s decision to abandon coal shows Australian banks realise they cannot continue to ignore the very real damage every mine and every coal-fired power plant is doing to the health of the communities that surround them, and the contribution their fossil fuel financing makes to climate change. It’s time for ANZ and Westpac to do the same and rule out investing in new coal projects,” says Greenpeace spokesperson Jonathan Moylan.
NAB joins the likes of ING, which stopped financing new coal projects in 2015, JP Morgan, which halted direct financing of coal mines and plants in 2016, and Deutsche Bank, which pulled out of its coal commitments early in 2017.
Development banks such as the European Bank for Reconstruction and Development, European Investment Bank and the Asian Development Bank have been winding down their coal commitments in recent years, funding only those projects in which no viable alternative power source is available. Export credit agencies have followed suit.
Industry in decline
Despite efforts in the US to revive the industry, coal is in terminal decline. Environmental concerns, allied with greater affordability of alternative, cleaner energy sources, have led to a rapid winding down of coal power.
In January 2017, the National Energy Administration in China cancelled plans to build 103 coal-fired plants across 13 provinces, mainly in the coal-rich north and west. This ruling barred new projects, but also halted work on dozens of projects already underway. In total, 120GW of future coal-fired capacity was pulled, 52GW of which was already under construction.
China remains the world’s biggest polluter, but has also made a serious commitment to revolutionising its power sector. As the US withdrew from the Paris Agreement, China was already surpassing its end-of-decade solar power target.
In Australia, where the coal lobby is strong and where mines are a big source of employment, the decline has also been as stark as it has been surprising: only three years ago, the government of Tony Abbott was defanging the public institutions responsible for rolling out renewable energy.
The decline is perhaps best viewed through the failure of Indian company Adani Group to obtain financing for its massive coal mine in Carmichael. The company today (December 18) cancelled a A$2bn contract with Downer, an Australian mining services company, due to a lack of commercial funding.
The big four banks all either ruled out or withdrew funding from the Adani project, amid environmental concerns. The mine was to be the first in the Galilee basin. In April, when ruling out financing the project, Westpac said it would be focusing on mines in “existing coal-producing basins”. In December, meanwhile, the Chinese banks said they would not fund the Adani mine, dealing a huge blow to the plans.
Also today, the port of Newcastle in New South Wales, the world’s largest coal terminal, was warning that it needs to prepare for a future without coal.
“Clearly the long-term outlook for coal is a threat to the port and Hunter region, but it is also a huge opportunity. While the world’s demand for our coal is beyond our control, our ability to invest in new sources of growth and innovation is not. Among our challenges will be ensuring a level playing field for the development of a viable and competitive container terminal,” said the port chairman Roy Green.
A torrid time for coal, meanwhile, has been a bountiful time for renewable energy Down Under. In announcing funding for two solar projects last week, the government-owned Clean Energy Finance Corporation (CEFC) reached a milestone of 1GW in solar energy funded since 2013.
The lender issued A$207mn in funds to Wirsol Energy-operated farms in Victoria and Queensland, with a combined capacity of 200MW.
“Australia’s large-scale solar market is maturing, and we are pleased to see growing interest from private sector financiers in refinancing projects once they are contracted and operational, because of the lower perceived investment risk,” said Niall Brady, CEFC’s transaction lead.