Activist groups warn providing finance for coal-fired power stations is inconsistent with banks’ commitments to Paris agreement
Environmental and progressive activist groups are urging Australia’s major banks and financial institutions not to fund new coal projects now that the Morrison government has flagged taxpayer assistance for power generation.
The Australian Conservation Foundation, GetUp, Greenpeace, Environment Victoria, the Australian Youth Climate Coalition, the Australian Centre for Corporate Responsibility and the Australia Institute wrote on Thursday to chief executives of the major lenders, warning the provision of finance for new coal, or retrofits of old coal-fired power stations, would be inconsistent with their public commitments to the Paris agreement.
The pressure on financial institutions follows the energy minister, Angus Taylor, calling for expressions of interest in new power generation projects to be underwritten by taxpayers, including, potentially, new coal builds or retrofits.
The government has made it clear that the new projects must be coal, gas, batteries or pumped hydro to be eligible for the government underwriting. A very tight timeframe is also proposed, with proponents having to put their hands up by January 23.
The environmental groups have told the banks the evidence is in on climate change, and an urgent response is required to combat the risks.
The groups have told the banking chiefs they risk providing finance for stranded assets if they finance new coal projects. “We strongly believe that the provision of finance from your financial institution for any new coal generation project or any retrofit to extend the life of an existing coal generator, would be inconsistent with your public position on climate change, counter to the concerns of your customers, and unmindful of the high risk of any new coal investment resulting in a stranded asset.”
The Investor Group on Climate Change – an organisation representing more than 70 Australian and New Zealand institutional investors with more than $2 trillion of funds under management – has raised similar concerns with Taylor.
The IGCC has told the energy minister subsidising high-emission electricity generation is inconsistent with the objectives of the Paris agreement and exposes the assets to substantive carbon price and transition risks.
“For around a decade, investors and banks have been expressing no appetite for exposure to new coal fired generation assets in Australia and investors are unlikely to provide any capital towards new high emission generation assets moving forward,” the IGCC’s letter to Taylor says.
“Institutional investors would strongly oppose any policy that indemnifies new generation from current and future carbon risk”.
The IGCC also advises the government not to set itself up as the “central planner of generator investment”. It says if the government pursues policies that “effectively nationalise part of the electricity market at short notice” there will be significant impacts on investor confidence and market efficacy.
Tania Constable, the chief executive of the Minerals Council of Australia, said on Thursday the immediate focus of the underwriting program should be ensuring that investors are able to replace Liddell power station’s capacity “with a technology mix that will maintain reliability and security at the lowest sustainable cost”.
Government conservatives are focused on Liddell, and have wanted Taylor to use his much vaunted “big stick” divestiture powers to extract the ageing power plant from AGL, its current owner. AGL plans to retire the plant and replace it with a mix of gas and renewables.
But the “big stick” legislation cannot be passed before budget week next year, and it appears to lack the necessary support to clear the Senate.
Labor and the Greens are opposed to any taxpayer support for coal projects, and will continue efforts once parliament resumes next year to try to frustrate the Coalition’s program, potentially by attempting to amend the divestiture bill, which stalled in the final sitting week, to include a prohibition on power companies receiving commonwealth support.
The MCA said any contracts agreed under the underwriting program needed to be honoured by a future government.
The government’s policy document suggests phase one of the underwriting program is anticipated to commence in the first quarter of 2019 – which puts some of the decision making pre-election in the event the government goes to the polls in April.
Labor has attempted to warn market participants it does not support taxpayer support for coal projects, but has a policy at the federal level of honouring contracts.