The Chinese financial sector has been called upon to support air pollution control and the clean energy transition by cutting lending to coal-related industries. According to a new study released by People’s Bank of China Research Institute and Greenovation Hub, large bank loans to coal-related enterprises are primarily concentrated in the mining sector, and loans totalling up to 5.5 trillion RMB have been handed to 168 coal-related companies listed between 2008 and 2014. This has contributed to a massive capacity glut in the sector, but has also contributed to recent drops in coal production and use. Coal’s downward trend has continued for 35 months now, and over 80 per cent coal companies are facing losses, leading the study to warn of an increasing risk of loan defaults as China tightens air pollution controls. Continued investment in renewables, energy efficiency and emission reductions is also contributing to a gloomy outlook for coal, especially as China is hailed for its leadership in renewable energy investment. As China is crafting a systematic green financing policy framework, and more global financial agencies are stepping away from fossil fuels due to an increasing risk of stranded assets under the 2DegC climate target, it is a clear signal for Chinese financial sector to address the current huge gap of financing that are hindering the nation’s war on pollution and its efforts of energy transition.
MT @nicoleghio: Chinese banks must cut #coal lending, shift to cleaner businesses: study http://t.co/yd9VsVhV1B https://twitter.com/nicoleghio/status/592809447577223168
- Cartoon to share: The global cost of fossil fuel subsides (First Dog on the Moon)
- To combat pollution and achieve its climate goals, China’s banks must stop lending to coal projects now. According to a new study, bank loans were the main source of external financing for 168 coal-related companies between 2008 and 2014. The study points out that if Chinese banks cut the loans for the coal projects to 40 per cent of 2013 levels, China could limit coal use to around four billion tonnes by 2020, realising the pledged target announced last year. According to another study by Chinese Government, China could get 85 percent of its electricity from renewables by 2050.
- If China’s financial sector fails to join the global momentum to clean economies, they will miss out on the huge economic opportunities and advantages that are appearing. Scientists warn that most of world’s fossil fuel reserves are already “unburnable” under the 2DegC climate goal. This includes the majority of China’s reserves. Deutsche Bank, HSBC, Citibank, Morgan Stanley have recently been joined by French banks to abandon coal. China’s banks are being left behind, even as air pollution controls are tightened around them.
- Capping coal use will create more and better jobs, build more a resilient economy, and save untold lives in China. Aside from the enormous environmental benefits, capping coal will save 49,000 people from premature deaths every year, and US$6.2 billion in 2020 according to the China Coal Cap Project. Other studies highlight the missed benefits of its climate and energy actions, while it’s estimated that around 2.9 trillion yuan ($468 billion) a year will be needed over the next five years to boost clean energy and tackle pollution, with the need for green finance about 2 trillion RMB ($328 billion) per year.
- Chinese banks must cut coal lending, shift to cleaner businesses: study (Reuters)
- G20: fossil fuel fears could hammer global financial system (The Telegraph)
- HSBC Advises Clients Against Fossil Fuel Investment (Time)
- Distribution of fossil fuel reserves between stock exchanges (AndyYoungEnergy, Ow.ly)
- eijing Winland IFC (Flickr), Wind and Solar (Flickr)
Tools and Resources
- Report: Financial policy framework for China’s energy transition and total coal use control (Greenovation Hub)
- PR: China’s Green Finance Policy Should Support Coal Consumption Reduction (China Coal Cap Project)
- Blog: China’s National Coal Cap Policy Could Save Nearly 50,000 Lives and $6.2 Billion Every Year by 2020 (Huffington Post)
- PR: China’s Coal Cap Policy Will Increase Country’s Clean Energy Jobs (China Coal Cap Project)
- Analysis: Financing the transition to a green global economy (G7G20)
- Report: The Great Coal Cap: China’s energy policies and the financial implications for thermal coal (Carbon Tracker Initiative)
- Report: China’s Future Generation (WWF)
- Report: Assessing the missed benefits of countries’ national contributions (NewClimate Institute)
- Report: The End of China’s Coal Boom (Greenpeace)
- Report: Stranded assets and the fossil fuel divestment campaign (University of Oxford)
- “Investment in clean energy has risen substantially over recent years, but we are still not safe from the 2°C threshold for climate change. The world needs greater access to climate finance.” Christiana Figueres, Executive Secretary, United Nations Framework Convention on Climate Change.
- “China is investing in renewable energy. They have reduced the price of renewable energy technologies. India has also announced plans for 10,000 megawatts of renewable energy. This shows renewable energy will become a central player in economic transformation within the BRICS economies.” Achim Steiner, Executive Director of the United Nations Environment Programme (UNEP).
- “(China) should offer easy access for (clean) energy companies to borrow money at a lower rate, build a green investment bank and issue green bonds to direct investment into green and clean businesses.” Yunwen Bai, Director of the Climate and Finance Policy Centre, Greenovation Hub.
- “Most banks have no clue how to evaluate the cost of the environmental impact from projects.” Yuan Jia, Financial Research Institute of the People’s Bank of China.
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- China’s coal mine ban: A preview of the “new normal” for growth
- China aims to cap coal as soon as 2020
- Future of fossil fuels at risk as renewables push them out of EU energy mix
- RT@ClimateGroup: China’s national coal cap policy could save ~50,000 lives and $6.2 billion every year by 2020: http://ow.ly/Mootm https://twitter.com/ClimateGroup/status/594471454483161088
- RT@ourcarbon: China might force the shift from #coal to #renewables by pressuring who banks can lend to. http://t.co/oKF9zcj8Tc https://twitter.com/ourcarbon/status/591737934585339904
- RT@greenpeacepress: Chinese banks must cut coal lending, shift to cleaner businesses: study http://t.co/nqLVVfpTKq #endcoal via @thomsonreuters https://twitter.com/greenpeacepress/status/591251595540717569
- RT@GRI_LSE: China’s banks key to moving country to cleaner energy http://t.co/9axMfD7qNB https://twitter.com/GRI_LSE/status/591223617494638593