Banking on Climate Chaos 2021

By Rainforest Action Network

This blog was originally published as case studies in “Banking on Climate Chaos: Fossil Fuel Finance Report 2021” — a report by Rainforest Action Network, BankTrack, Indigenous Environmental Network, Oil Change International, Reclaim Finance, and Sierra Club. You can see the full report here.

Carmichael Coal Mine

An Australian subsidiary of the Indian coal mining company Adani has started to construct a giant coal mine in the Galilee Basin in Queensland, one of the largest untapped coal reserves in the world. The Carmichael mine and related infrastructure, if brought into operation, would facilitate the opening of more mining projects in the basin, and would drive build-out of coal ports along the Great Barrier Reef coast — such as the existing Abbot Point terminal.

The Wangan and Jagalingou people, traditional owners of the land, have not consented to the Carmichael mine, which they’ve been fighting for years. In the fight to stop the project, Adrian Burragubba, spokesman for the Wangan and Jagalingou family council, was bankrupted after Adani sought reimbursement for court costs.

Over 40 banks have publicly committed to refrain from financing the Carmichael mine. However, in December 2020 it was reported that State Bank of India is ready to offer Adani a loan of approximately $678 million for the project. International investors, including BlackRock, Amundi, Axa, and Storebrand have spoken out against the loan. As of early 2021, it is unclear whether the deal will go ahead.

Apart from this potential project loan, other banks remain tied to the project. Bowen Rail Company, a subsidiary of Adani Ports and Special Economic Zone, will reportedly transport coal from the mine to the Abbot Point export terminal — meaning there is a potential risk that financing for Adani Ports and Special Economic Zone supports the Carmichael coal mine. Bank of America, Barclays, Citi, Credit Suisse, JPMorgan Chase, Mizuho, MUFG, and Standard Chartered all underwrote bond issuances for this company in the second half of 2020 — even though most of them (Bank of America, Barclays, Citi, Credit Suisse, JPMorgan Chase, and Standard Chartered) have made commitments either not to fund coal mines generally, or not to fund Carmichael coal and the Abbot Point port in particular. These banks urgently need to cut ties with Adani Ports and Special Economic Zone if they want to be wholly sure that they are not supporting the disastrous Carmichael project.

Bank data sourced from Bloomberg Finance L.P.

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Adaro Energy

Adaro Energy is one of the largest coal producers in Indonesia, producing over 54 million tons of coal per year. Adaro is a major supplier to the global seaborne thermal coal market. Its coal is used throughout Europe, Asia, and the Americas.

Adaro Energy operates the largest single-site coal mine in Kalimantan, Indonesia. In January 2021, flooding in South Kalimantan killed 24 people and forced nearly 100,000 to flee their homes. Local environmental activists are questioning whether this flooding is linked to the massive deforestation and mining activities near the watershed area.

In 2017, Adaro stated that it would diversify its business away from thermal coal mining, yet its latest annual report does not detail how the company will diversify or phase out coal. In fact, in 2019, Adaro generated 92% of its revenue from coal mining, 6% from mining services, and the remainder from other activities like coal power generation, including its involvement in the controversial Batang coal-fired power plant in Indonesia.

Citi, MUFG, and UBS were the most recent banks in this report’s scope to fund the company, underwriting a bond issuance in late 2019. As of February 2021, Adaro is reportedly seeking a $400 million loan from a syndicate of banks — an opportunity for these and other banks to make clear that they will no longer fund Adaro’s harmful coal operations.

Bank data sourced from Bloomberg Finance L.P.

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Hasdeo Arand

The Hasdeo Arand Coalfield lies in the Hasdeo Arand forest, one of the largest intact forests in Central India and an active elephant corridor. The coalfield is spread over 1,167 square miles (1,878 square kilometers), of which 933 miles (1,502 kilometers) had forest cover as of 2014.

In 2019, India’s Ministry of Environment, Forest, and Climate Change gave Rajasthan Rajya Vidyut Utpadan Nigam Limited (RVUNL) approval to mine coal in the 3-square-mile Parsa block of the Hasdeo Arand Coalfield. RVUNL is the same public sector power corporation that since 2013 had already been mining in the Hasdeo Arand forest through a joint venture with Adani Enterprises. For the most part, these companies are financed by state-owned Indian banks — though Standard Chartered lent to a mining-related Adani subsidiary in 2017.

Indian law requires the consent of the gram sabhas (village councils) for development in the Hasdeo Arand forests — but impacted people have alleged that this step was bypassed. Local villagers have formed Hasdeo Arand Bachao Sangharsh Samiti (Save Hasdeo Arand Campaign Committee), a community movement that includes Indigenous people and traditional forest dwellers who want to protect the forest from the impacts of coal mining.

From October to December 2019, thousands of villagers protested mining in the area. The protest ended in December 2019 as attention turned to local government elections, and then was not resumed due to the onset of the COVID-19 pandemic.

In June 2020, the Indian government proposed putting another five coal blocks in the Hasdeo Arand forests up for auction. Building on the years of resistance by the Indigenous communities residing in the Hasdeo Arand forest, and after objections by the state government, in August 2020 the mining ministry took those blocks off the auction list. While this is a temporary respite, the struggle of the Hasdeo Arand communities will likely continue so long as the threat of future development looms over the forest.

Local community leader Bajrang Singh Pakra was quoted in The Ecologist explaining, “This jungle, it is the link between the past, present and the future, between our ancestors, us and our future generations.” Jainandan Singh Porte, another local, stated: “They use our coal to generate electricity and the shame is that we only recently got it two and a half years ago. They say that they cannot give us a railway or telephone line because the forest is too dense, yet there is now a coal train that runs through the forest, all day, every day.”

Bank data sourced from Bloomberg Finance L.P.

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Jawa 9 and 10

Jawa 9 and 10 is a 2,000-megawatt coal power project proposed to be built in Indonesia’s Banten province, an area already saturated with coal plants. Reports have highlighted the horrendous air pollution and associated respiratory and skin diseases affecting the local population. Modelling of health impacts has estimated that Jawa 9 and 10 will contribute to 4,700 premature deaths over its operating lifetime. Over the years of development, local fisherfolk have had to go increasingly further offshore to catch fish, and worry another coal power plant will only exacerbate the problem.

The pollution and other impacts caused by Jawa 9 and 10 would be especially egregious given that much of the electricity produced by Jawa 9 and 10 may go unused. Indonesia’s electricity demand was estimated to come in 9.7% below expectations in 2020, and the Jawa-Bali grid, where Jawa 9 and 10 is located, was projected to be oversupplied by up to 41.5%.

The total cost of Jawa 9 and 10 is estimated at around $3.4 billion, and the sponsors of the project are the Korea Electric Power Company (KEPCO), Indonesia’s state utility Perusahaan Listrik Negara (PLN), and the private Indonesian company Barito Pacific. KEPCO decided to invest in Jawa 9 and 10 despite the fact that a pre-feasibility study required by the Korean government estimated that the project could have a lifetime negative profitability of $43.58 million, meaning a potential $7 million loss for KEPCO.

In July 2020, a syndicate of banks from across Asia, including Bank of China, came together on a $2.5 billion, 15-year loan to fund this massive polluting coal power plant.


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Matabari Coal Projects

The Matarbari coal projects are part of a proposed power complex on the remote Matarbari Island, in Cox’s Bazar district on the southeastern coast of Bangladesh. The first power plant, Matarbari Phase I, is being developed by Coal Power Generation Company Bangladesh Limited (CPGCBL) and Sumitomo Corporation, and is already under construction. Matarbari Phase II will likely be built by Sumitomo Corporation, Toshiba, and IHI Corporation of Japan. The third proposed plant is Kohelia, a Sembcorp and CPGCBL project. The three projects together will add up to 3,100 megawatts of coal power capacity.

While construction on Matarbari Phase I has already started, there is a chance that the Matarbari Phase II and Kohelia power plants will be canceled under the proposed new energy plan from Bangladesh’s Ministry of Power, Energy and Mineral Resources. If the plan is approved, all but five coal projects across the country will be canceled.

Impacts from the construction of Matarbari Phase I are reportedly already being felt by local communities and would be further aggravated by the construction of the Matarbari Phase II and Kohelia plants. Families have been displaced by the land acquisition process, have lost traditional livelihoods in salt cultivation and shrimp farming, and say they have, to date, not been adequately compensated. Construction of the plant has blocked water gates and drainage systems, contributing to the waterlogging of 22 villages and the drowning of five children. In addition, pollution from Matarbari Phase I and II and Kohelia is projected to result in over 10,000 premature deaths over the projects’ operational period.

Despite these impacts and the political risk faced by these projects, Japan International Cooperation Agency (JICA) provided finance for Matarbari Phase I and was also asked to provide finance for Phase II, and SMBC Group is acting as financial advisor for Matarbari Phase I and the Kohelia project.

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