BANKS 2° SCORECARD
In December 2015, the Paris climate talks saw 195 nations agree to limit global warming to well below 2°C, compared with pre-industrial levels. In the lead up to Paris, ANZ, CommBank, NAB and Westpac all publicly championed the two degree limit, committing to support the transition to a low carbon economy.
But since then, the big four banks have loaned a combined $17 billion to the coal, oil and gas sectors. Worst of all, the banks have continued to finance new fossil fuel projects, which have no place in any serious plan to stay within 2°C.
In fact, new fossil fuel projects that have been enabled by big four loans since Paris are expected to add 3.4 billion tonnes of CO2 to the atmosphere across their lifetimes. That’s enough to cancel out Australia’s emissions reductions commitment almost 3 times over!
Clearly the big banks still don’t understand their role in keeping warming below 2°C.
With one of these banks?
Click below to tell them: If you continue to choose fossil fuels, I’ll choose another bank!
Commitments vs action
Action since commitment: Australia’s biggest lender to fossil fuels!
Action since commitment: Loaned $6 billion to fossil fuels.
Action since commitment: Still has no concrete policies to restrict fossil fuel lending, and has continued financing new fossil fuel power generation.
Action since commitment: Has financed the development of a new oil field projected to add a total of 342 Mt of CO2 to the atmosphere over its lifetime.
2° means no new fossil fuels
The 2°C warming limit gives us a very strict carbon budget to work within, meaning around 80% all the world’s known fossil fuel reserves must stay underground to give us a fighting chance of meeting the Paris Agreement. If we can’t burn all the carbon currently claimed by fossil fuel companies, clearly there is no room for anything new.
Studies into the carbon budget add up to paint a very clear picture: 2°C means there is no room for new fossil fuel exploration, production, transport or combustion projects. Our banks cannot finance these activities if their own commitments to support the 2°C limit are to be taken seriously.
“If the 2°C target is to be taken seriously, then current and future [fossil fuel] assets will have to be written off before the end of their economically useful life”
As early as 2011, the International Energy Agency (IEA) warned that, without strong global action to reduce emissions, “no new investment could be made after 2017 in new power generation… unless it were zero-carbon,” if we were to keep warming below 2°C.
That prediction has proven accurate, with the United Nations Environment Programme’s October 2017 Emissions Gap Report stating that no more new coal plants should be built if we are to keep warming below two degrees. This followed 2016 research from Oxford University telling us that to have just a 50% chance of keeping global warming below 2°C, “no new emitting electricity infrastructure can be built after 2017.”
The IEA now says that in order to keep global warming to well below 2°C, the world must reach net zero emissions by 2060. New fossil fuel infrastructure projects often have planned lifetimes well beyond that date.
We’ve also been told Australia is on track to burn through our share of the 2°C carbon budget in less than 20 years. The safer limit of 1.5°C would require us to stop burning fossil fuels in the next six years. We simply can’t lock in decades of emissions by building new fossil fuel power infrastructure if we are to have any chance of meeting our Paris Agreement commitments.
It’s not just fossil fuel power stations that have no future in a less-than-2°C world. The potential carbon emissions from current fossil fuel extraction projects would take us beyond the 2°C warming limit. Even if we stopped burning coal tomorrow, fully exploiting the oil and gas fields that are currently producing would still drive warming past 1.5°C. Carbon Tracker has found that the world’s 69 biggest publicly-listed oil and gas companies stand to spend US$2.3 trillion on exploration and development projects that would not fit within a 2°C carbon budget.
Clearly, coal, oil and gas companies are operating completely out of line with what’s required to meet the Paris Agreement. The money our banks are pouring into these companies and their new fossil fuel projects is only going to delay or counteract meaningful action on climate change.
Big banks still supporting new fossil fuels
The big banks’ continued financial support for new fossil fuel projects shows they are not operating in line with their commitments. Below are some of the clearest examples of bank lending that is completely inconsistent with 2°C.
Oil Search expansion plans
In June 2017, some 18 months after the Paris Agreement, each of Australia’s big four banks contributed $73 million to a refinancing deal for Oil Search. The loan was to cover capital expenditure and equity commitments for project financing, amongst other purposes, meaning Oil Search could use the money to finance their plans to explore and develop new fossil fuel reserves. A recent Carbon Tracker study found that 50-60% of Oil Search’s projected capital expenditure would be out of step with the 2°C warming limit.
Oil Search’s gas expansion plans are out of line with 2°C, but still attracted almost $300m in finance from the big four banks.
Photo credit: Damian Baker.
Sabine Pass LNG Terminal
CommBank’s loan helped this massive LNG project in Louisiana, USA get off the ground. Likely to add over 1,600Mt of CO2 to the atmosphere over the course of it’s life, the Sabine Pass project is about the clearest example of a project that is completely inconsistent with keeping global warming below 2°C.
InterOil Elk-Antelope fields
In April 2016, Westpac and ANZ contributed to a refinancing deal for InterOil, with the money to be used to develop “one of Asia’s largest undeveloped gas fields, Elk-Antelope” in Papua New Guinea. The fields will provide gas for a new LNG facility, locking in decades of highly greenhouse gas-intensive LNG production.
Johan Sverdup Oil field
“The Johan Sverdrup discovery is one of the largest oil discoveries ever made on the Norwegian continental shelf and will prolong the life of the Norwegian oil industry for several decades” – Lundin Petroleum. Lundin’s ownership stake in the massive new oil field was financed by ANZ and Commonwealth Bank.
US Gas Power Stations
No less than six new gas power stations to be built in the US have been financed by CommBank and/or NAB since late 2016. These power stations are estimated to add 327 million tonnes of CO2 to the atmosphere over their lifetimes, cancelling out more than a quarter of Australia’s emissions reduction commitment from 2005-2030.
Climate impact of new fossil fuel projects
The big four banks have provided direct project finance for 13 new fossil fuel projects since committing to 2°C. During their lifetimes, these projects are expected to emit 3.4 billion tonnes of CO2 – enough to cancel out Australia’s emissions reduction commitment (2005-2030) almost three times over!
The table shows the estimated lifetime emissions of each new fossil fuel project enabled by the big banks since October 2015.
Sabine Pass LNG terminal
Noting that 88% (amounting to 19.5 mtpa) of the project’s first five trains is already contracted, and the Terminal is planned to reach a nameplate capacity of 27 mtpa, it was assumed that this facility would liquefy 20 mtpa (approx 75% capacity) of gas, on average, over 30 years. This amounts to 600 million tonnes of LNG over the lifetime of the project. Based on information sourced from Prometheus Energy, one tonne of LNG equals 621 LNG gallons, resulting in 372.6 billion LNG gallons processed over the lifetime of the project. The same source supplies a conversion factor of 1 LNG gallon = 82.6 cubic feet of gas. Therefore, 372.6 billion LNG gallons is equivalent to 30.77676 tcf of gas processed over the lifetime of the project. The US EIA supplies an emissions factor of 53.12 kg CO2/thousand cubic feet natural gas, resulting in the project processing enough gas to emit 1,634,861,491,200 kg CO2. Total: 1.63 billion metric tonnes of CO2 over its lifetime.
Note that these calculations do not account for emissions generated on site during the liquefaction process or upstream in the process of gas extraction or transport.
Johan Sverdrup oil field and Heidelberg Deepwater oil field
Net 2P reserves at Johan Sverdrup are 2,279 MMBoe. The field is 95% oil and 5% gas and natural gas liquids. This equates to 2,165 MMBo and 114 MMBoe gas. One barrel of oil releases 0.43 metric tons of CO2 when combusted. Therefore, emissions from the oil portion of the field are 2,165 MMBo x 0.43 = 931 million tonnes of CO2. 114 MMBoe is equivalent to 6.612×10^14 Btu or 6.612×10^9 therms. Natural gas releases 0.005302 tonnes CO2/therm when combusted. Therefore, emissions from the gas portion of the field are 6.612×10^9 x 0.005302 = 35 million tonnes of CO2. Total: 966 million tonnes of CO2
Elk-Antelope gas field
Average certified 2C resource at Elk-Antelope is 6.43 tcf of raw gas. One thousand cubic feet of natural gas releases 53.12 kg of CO2 when combusted. Therefore, Elk-Antelope facilitates emissions of approximately 6.43 x 53.12 x 10^9 kg of CO2. Total: 341.5 million tonnes of CO2
Westmoreland and Towantic CCGT plants
Assumed a 50% average capacity factor across a 30-year economic lifetime for both facilities. Used 920 lbs CO2 / MWh, indicated on the Westmoreland CCGT project website, across both facilities. Converted 1 kg to 2.20462 lbs.
Westmoreland emissions = 925 (MW capacity) x 8760 (hours in the year) x 30 (years) x 0.5 (capacity factor) = 121,545,000 MWh = 111.821 billion pounds CO2 = 50,721,394,163 kg CO2. Total: 50.7 million tonnes of CO2
Towantic emissions = 785 (MW capacity) x 8760 (hours in the year) x 30 (years) x 0.5 (capacity factor) = 103,149,000 MWh = 94.897 billion pounds CO2 = 43,044,642,614 kg CO2. Total: 43.0 million tonnes of CO2
Other Gas Power Stations
Assumed a 50% average capacity factor across a 30-year economic lifetime. Assumed emissions intensity of 0.36 t CO2/MW – the lowest emissions intensity for this type of gas technology as reported in Emission Intensity Limit New Utility Scale Electricity Generation South Australia.
Black Point emissions = 550 (MW capacity) x 8760 (hours in the year) x 30 (years) x 0.5 (capacity factor) x 0.36 (t CO2/MWh emissions intensity) = 26,017,200 t CO2. Total: 26.0 million tonnes of CO2
AES Corporation portfolio emissions = 1300 (MW capacity) x 8760 (hours in the year) x 30 (years) x 0.5 (capacity factor) x 0.36 (t CO2/MWh emissions intensity) = 61,495,200 t CO2. Total: 61.5 million tonnes of CO2
CPV Fairview emissions = 1050 (MW capacity) x 8760 (hours in the year) x 30 (years) x 0.5 (capacity factor) x 0.36 (t CO2/MWh emissions intensity) = 49,669,200 t CO2. Total: 49.7 million tonnes of CO2
Muara Karang emissions = 500 (MW capacity) x 8760 (hours in the year) x 30 (years) x 0.5 (capacity factor) x 0.36 (t CO2/MWh emissions intensity) = 23,652,000 t CO2. Total: 23.7 million tonnes of CO2
Cricket Valley emissions = 1100 (MW capacity) x 8760 (hours in the year) x 30 (years) x 0.5 (capacity factor) x 0.36 (t CO2/MWh emissions intensity) = 52,034,400 t CO2. Total: 52.0 million tonnes of CO2
Lackawanna emissions = 1480 (MW capacity) x 8760 (hours in the year) x 30 (years) x 0.5 (capacity factor) x 0.36 (t CO2/MWh emissions intensity) = 70,009,920 t CO2. Total: 70 million tonnes of CO2
Jawa 2 emissions = 880 (MW capacity) x 8760 (hours in the year) x 30 (years) x 0.5 (capacity factor) x 0.36 (t CO2/MWh emissions intensity) = 41,627,520 t CO2. Total: 41.6 million tonnes of CO2
|Project name and location||Australian Banks invovled||Lifetime CO2 emissions|
|TOTAL EMISSIONS||3446 Mt|
|Sabine Pass LNG Terminal, Louisiana, USA||Commonwealth Bank||1,634 Mt|
|Johan Sverdrup offshore oil field, Norway||Commonwealth Bank, ANZ||966 Mt|
|Elk-Antelope gas field, Papua New Guinea||ANZ, Westpac||342 Mt|
|Lackawanna Energy Center (1430 MW gas-fired), Pennsylvania, USA||Commonwealth Bank||70 Mt|
|Heidelberg deep water oil field, Gulf of Mexico||Commonwealth Bank||86 Mt|
|AES Corporation 1300 MW gas-fired portfolio, California, USA||Commonwealth Bank||61 Mt|
|Cricket Valley Energy Center (1100 MW gas-fired), New York, USA||NAB||52 Mt|
|CPV Fairview 1050 MW Energy Center (gas-fired), Pennsylvania, USA||Commonwealth Bank, NAB||50 Mt|
|Towantic Energy 785 MW CCGT plant, Connecticut, USA||NAB||43 Mt|
|Jawa 2 800 MW CCGT Power Plant||ANZ||42 Mt|
|Westmoreland 925 MW CCGT plant, Pennsylvania, USA||Commonwealth Bank||51 Mt|
|Black Point Power Station 550 MW additional gas-fired unit, Hong Kong||ANZ||26 Mt|
|Muara Karang 500 MW gas power plant, Indonesia||ANZ||24 Mt|
Total lifetime emissions of new projects financed by each bank since 2°C commitments
Putting renewables lending in perspective
When challenged over their immense financial support for fossil fuels, banks often point to renewable energy lending as a defence. But lending to renewables does not excuse or cancel out funding for dirty alternatives. Every dollar to fossil fuels locks in more harmful emissions, which can’t be undone.
Even since their 2°C commitments, the big four have loaned three and a half times as much to fossil fuels as renewables. During that time, ANZ had by far the worst lending ratio of the big four, providing $6.80 to fossil fuels for every dollar loaned to renewable energy. Astoundingly, ANZ has loaned even more to coal than renewables since committing to 2°C.
CommBank’s lending ratio of $4.15 : $1.00 is completely inconsistent with it’s promise to “play a role in supporting the transition to a low carbon economy.”
Westpac has loaned over three and a half times as much to fossil fuels than renewables since it’s Paris commitment.
While NAB’s fossil fuels to renewables ratio was the best of the big four banks, it still favoured dirty power sources. What’s worse, the bank’s ratio has tipped further towards fossil fuels since we last conducted this comparison at the end of 2016.
Direct funding for new coal projects has dried up
Encouragingly, the banks haven’t directly financed a single new coal project since committing to support the 2°C warming limit. We’ve also seen a considerable drop off in lending to the coal sector in general over recent years. In 2015, more than $3 billion flowed from the big four banks to the coal sector, but that figure was cut in half in 2016.
From 1 January 2017 to 30 June 2017, the banks loaned just $99 million to coal projects and companies. But a huge refinancing for the Newcastle Coal Infrastructure Group (NCIG), which owns and the world’s biggest coal port at Newcastle, saw total 2017 lending to coal jump to $458 million in July.
It seems direct finance for new coal projects is a thing of the past, but money is still flowing from our banks to the coal industry. Existing coal mines, transport infrastructure, and power stations still have the emissions potential to push us beyond 2°C, while a number of coal companies are actively looking to expand their operations, often with the financial support of our big four banks.
These include the likes of Glencore, which is actively seeking to expand coal mining operations, and has received loans from all four big banks since their 2°C commitments.
Indian companies Rural Electrification Corporation and Tata Power are both trying to expand their coal power capacity, and have been financially supported by ANZ in the last 18 months.
Every deal that enables coal projects and their operators to extend their scale or lifetime, reduces our chances of meeting the Paris Agreement. So, on top of categorically ruling out any project finance for new coal ventures, we need our banks to end corporate financing for companies looking to expand their coal operations and actively manage down their exposure to existing coal projects.
Australia’s big four banks fall well behind their international peers when it comes to climate policies. Both Commonwealth Bank and NAB were given FAIL grades in all four categories of a June 2017 study into international banks’ fossil fuel lending policies. With no publicly disclosed restrictions on lending to coal mining, coal power, LNG exports or extreme oil, CommBank and NAB found themselves at the bottom of a group of 37 international banks, receiving an F in all four categories.
Even Westpac’s coal policies, which became the strongest of our big banks following an April 2017 update, scored C- grades in the report. The bank failed in the extreme oil and LNG categories. ANZ’s weak extreme oil, coal mining and coal power policies received D-, D- and C- scores respectively, while the bank failed in the LNG category.
Four major international banks have ruled out any future finance for coal mines and coal power stations. A further 12 have some exclusions on those activities or the companies responsible for them, or have committed to reduce their exposure to coal sectors.
While we would argue that these policies should extend to rule out finance for any project or company that stands to expand the size of the fossil fuel industry, international banks are clearly miles ahead of our big four.
Click to learn more about each bank’s policies:
- Continue lending to new coal-fired power stations that have the worst emissions intensity of new coal power technology
- Lend to new and existing coal mines anywhere around the world
- Remain invested in any current coal fired power station provided there is a plan (the nature of which is not defined) in place for how emissions would fall beyond the lifetime of the power plant.
- An acknowledgment that addressing climate change requires a “material decrease in the use of fossil fuel-based energy and a corresponding increase in renewable energy”
- A recognition of the important role that “carbon budgets” play in guiding action
- A statement that the bank is committed to playing an active role in this transition and that it affects the bank’s “operations and financing activities”.
While the position statement indicates NAB is heading in the right direction, the statements haven’t developed into a concrete policies to restrict lending or reduce fossil fuel exposure.
In relation to power generation, the bank committed to:
- Reduce the emissions intensity of its power generation portfolio
- Only lend to new coal power stations that reduce the overall emissions intensity of the energy grid they will operate in
- Not lend to existing coal power stations for the expansion or lifetime extension purposes, unless there is a reduction in emissions intensity
These are steps in the right direction, but leave far too much room for Westpac to finance more dirty power generation.
To Australia’s big banks,
You claim to be committed to strong action on climate change. It’s time to prove it. Holding global warming to below two degrees requires urgent action to reduce greenhouse gas emissions. Your actions and decisions are key to this outcome.
We demand that, as a minimum, you:
● Make no further investments that expand the size of the fossil fuel industry, and
● Reduce your exposure to the thermal coal sector to zero by 2020, and all fossil fuels by 2030.