The G7’s top leaders convene in Italy this week as the world swelters through its 12th hottest month on record. One key issue that needs to be addressed is G7 members’ continued bankrolling of coal, from fossil fuel subsidies to public financing and private investments.

The latest evidence shows that the world’s largest banks – the majority of which are headquartered in G7 nations – continue to pour fuel on the fire of coal expansion.

As the G7 summit approaches, there is a chance for countries to match their rhetoric with action. It is not enough for governments and regulators to “call on” private finance to end their support for coal power. The continued financing of coal by the private sector shows that countries must take concrete steps to implement policies that stem the global flow of funds that fuel the expansion of the coal industry and redirect them to clean energy investments.  

Bonn talks on climate finance goal end in stalemate on numbers

While attention is often directed at public fossil fuel subsidies for coal (which are a problem), the billions of dollars in commercial financing for the coal industry’s expansion cannot be ignored. Commercial banks provided a staggering $470 billion to the coal industry between 2021 and 2023 – money that could have otherwise been channelled into clean energy investments, grid infrastructure improvements, and energy efficiency. 

And the majority of this financing comes from financial institutions headquartered in G7 countries. Collectively, these banks provided $101 billion for coal development in the form of loans and facilitated bonds between 2021 and 2023.  

Worst offenders: US and Japan

Topping the list of offenders are US and Japanese banks, which are the largest coal lenders in the world. Bank of America, actually increased its funding of the coal industry by 30% between 2016 and 2023. It provided a whopping $6 billion in loans and facilitation of capital market issuances to the coal industry in the last three years. For perspective, $6 billion is the size of the entire GDP of the Maldives.

Japanese banks are not faring better.  Coal financing between 2021 and 2023 remained dominated by its megabanks, Mizuho ($8.1 billion), MUFG ($6.1 billion) and SMBC ($4.7 billion).  

Estimates suggest that the absolute greenhouse gas emissions associated with the activities financed by commercial banks in G7 countries are more than the combined emissions of Germany, Italy, the UK, and France. While banks do not directly produce all these emissions, they are borne out of their lending and investment activities of companies that they support.  

No shortage of public money to pay for a just energy transition

The ironic cherry on top is that this amount provided by commercial banks in G7 countries to the coal industry is more than twice the total pledged by the G7-led International Partners Group (IPG) to support the Just Energy Transition Partnerships (JETPs), an intergovernmental initiative intended to provide technical assistance and financial resources to help developing countries with their clean energy transitions. 

Coal phaseout unclear

Nor is the G7 showing great leadership when it comes to their own coal phaseout plans. The US alone still has over 200 gigawatts (GW) of remaining operational coal capacity alone. While this has been falling, there are also signs that this decline is stalling – 200 GW is more than the entire coal operating capacity of all the JETP recipient countries. And Japan has no clear coal phaseout plan despite its commitment.  

This shows that the capital required for the energy transition is available, but just poorly allocated. Financial regulations, such as stricter capital requirements and outright prohibitions, play a crucial role in redirecting capital and investments towards the energy transition. This must include setting international standards to stem the flow of funds towards the continued expansion of the coal industry and restrict financing to coal developers that continue to contribute to environmental degradation and air pollution.  

Financial regulation

The Italian presidency of the G7 2024 has a responsibility to prioritise climate-forward action across different sectors, including financial regulation. G7 Central Banks need to keep up the pressure on keeping climate action at the forefront of negotiations, and call for more international coordination and standard setting. 

Even if the G7 achieves its coal exit goal by the “first half of the 2030s”, this timeline falls short of what scientists say is necessary to limit global warming to 1.5°C, a critical threshold to avoid the most catastrophic impacts of climate change.

As UN Secretary-General Antonio Guterres said last week, “We are in control of the wheel that takes us off the highway to climate hell.” Individual G7 members must take an introspective look at changing outdated policies to adopt strong, binding regulations on private financing for coal.  

The data on private finance for coal is attributable to Urgewald and can be accessed at www.stillbankingoncoal.org.  

The post G7 coal charade: Funding the fire they claim to fight  appeared first on Climate Home News.

Last month, from Bangladesh to Kenya to Washington DC, over 40,000 activists in nearly 20 countries hit the streets calling on banks, governments and financial institutions to “#FixTheFinance” pushing the planet to the brink. 

It’s clear that we can’t address the climate crisis unless we fix the finance flows that are failing the planet. When we know that we have hardly any time left to avoid runaway climate breakdown, it’s absurd that so much of the world’s money is still being poured into fuelling climate change, while barely any is going to the solutions. 

Let’s face it – the climate crisis is really about money, and our choices to use it and make it in really stupid ways.  

G7 offers tepid response to appeal for “bolder” climate action

Many of the world’s most powerful private banks are holding their Annual General Meetings over the next weeks. Banks like Barclays, HSBC and Citibank are pumping billions into fossil fuel expansion, knowing full well that their decisions directly lead to climate chaos and devastating local pollution, particularly for communities in Africa, Asia and Latin America. At their AGMs they will undoubtedly celebrate their profits, self-congratulate on miniscule policy tweaks, and try to ignore the clamour of climate criticism.   

ActionAid research last year showed that these banks are financing an astonishing amount of fossil-fuel and industrial agriculture activities in the Global South, causing land grabs, deforestation, water and soil pollution and loss of livelihoods – all compounding the injustice to communities also getting routinely hit by droughts, floods and cyclones thanks to climate change.  

HSBC, for example, is the largest European financer of fossil fuels and agribusiness in the Global South. Barclays is the largest European bank financier to fossil fuels around the world. And Citibank is the largest US financier of fossil fuels in the Global South. The banks have so much power, and so much culpability, much more than most people realise. But they want us to forget the fact that they are working hand in hand with, and profiting from, the industries that are wrecking the planet.  

The banks can actually turn off the taps. They can end the finance flows that are fuelling the climate crisis. So to avert catastrophic climate change, the fossil-financing banks must start saying no to the corporations destroying the planet.  

But it’s not only private finance that is flawed – public funds are being misused as well. Governments are using far more of their public funds to provide subsidies or tax breaks for fossil fuels and industrial agriculture corporations, than they are for climate action. This is ridiculous – it’s hurting the planet, and its hurting people.  

Public funds instead need to be redirected towards just transitions that address climate change and inequality.  

There is growing appetite for climate action. But this just isn’t yet matched by willingness to pay for it. Or even to stop profiting from climate destruction. 

COP29 finance goal

This year’s COP29 climate talks will be a critical test of rich countries’ commitment to securing a liveable planet. The world’s poorest countries are already bearing the spiralling costs of a warming planet. So far they have only received begrudging, tokenistic pennies from the rich polluting countries to help them cope. The offer of loans instead of grants in the name of climate finance is just rubbing salt into the wounds. 

If we want to unleash climate action on a scale to save the planet, rich countries at COP29 will need to agree a far more ambitious new climate finance goal based on grants, not loans. 

Because if we want to save our planet, we will actually need to cover the costs. 

Tensions rise over who will contribute to new climate finance goal

Last month the International Monetary Fund and the World Bank held their Spring meetings in Washington DC. These institutions are powerful symbols of the planet’s dysfunctional finance systems which urgently need fixing. The World Bank is financing fossil fuels yet being extremely secretive about it. The IMF is pushing climate-devastated countries deeper into debt that often requires further fossil extraction for repayment.

Even as they brand themselves as responsible channels for climate finance, the world’s most powerful financial institutions are pushing our planet to the brink. Their stated aim to get “bigger and better” really amounts to all-out push to get “bigger” but only token tweaks to get “better”.  The Spring meetings ended with business-as-usual backslapping. But if they were taking climate change and its consequences seriously, at the very least, the IMF and World Bank would stop financing fossil fuels and cancel the debts that are pushing climate-vulnerable countries into a vicious cycle.  

Will blossom of reform bear fruit? Spring Meetings leave too much to do

All of these finance flows need fixing. At the moment, the global financial system is better designed to escalate – rather than address – climate change, vulnerability and inequality. The activists, youth and frontline communities who filled the streets last month hope that their calls to stop financing destruction will be heard in the boardrooms and conferences on the other side of the world. 

They say that money talks. This is the year that the climate movement is going to make sure it listens.  

The post How to fix the finance flows that are pushing our planet to the brink appeared first on Climate Home News.