It’s a seriously damaging discriminatory attack by the big four banks (and insurance companies) on Australian-owned companies that are major suppliers of Australia’s second-biggest export earner – and a key element in sustaining regional Australia – coal. The consequences of this mounting ideology-driven costly assault had received little media attention until a current parliamentary inquiry into export funding revealed an emerging crisis. The banks’ clearly stated environmental purposes in declaring coal ‘black’ are not only to damage Australia’s export earning capacity as the nation struggles to recover from the Covid-19 recession, but also to destroy Australian-owned coalmining companies by withdrawing all funding while leaving foreign-owned and multinational companies, financed by foreign banks, to take over the entire market sending their profits overseas.
Initially aimed at miners providing thermal coal not only for export but also for local power generation, it thereby undermines the Morrison government’s policy of keeping affordable reliable fossil-fuelled base-load domestic power available until technology replaces it, hopefully by 2050. But the banks’ ideologically-based decision to exit coal totally by 2030 pre-empts the government’s non-disruptive program by 20 years. Worse, it is already well under way with Shayne Elliott, the chief executive of ANZ (formerly the sector’s biggest local lender) boasting that he was proud that ‘the bank had not lent a dollar to any coal miners’ since his appointment five years ago. So the boards of directors of the big four Australian banks are seeking personal and corporate public accolades for environmental purity at the expense of shareholders who are missing out on what has in recent years been a major source of bank profits.
While depriving coal companies (and their local regional suppliers and contractors and even their vehicle fleets) of funding, the banks are hypocritically happy to enjoy the profitable benefits of their local transactional banking business. That their consequential economic demolition of so many regional centres dependent on coalmining is in conflict with the government’s emphasis on developing regional Australia, adds yet another dimension to the Australian banks’ ideology-led contribution to damaging our emergence from recession – and gives the banks another reason to close more regional branches. To put sour icing on this unpalatable cake, the local insurance industry and sanctimonious investment fund managers (of other people’s money – especially in industry superannuation funds) have also banned coal. As the anti-emissions logic behind the attack on coal applies equally to gas and oil as fellow fossil fuels, both vital elements in our export and local energy markets, they are clearly next for the chop. If the fact that Australian higher quality coal’s capacity to reduce (but not cease) emissions in foreign HELE generators does not justify it being funded, how can the banks continue to justify (and to fund) gas on the very same basis that it also reduces (but does not cease) emissions.
Of added significance to the local banks’ ban is that funding of major coal projects is generally done in international syndicates, with foreign banks willing participants provided local banks are also involved, on the grounds that the locals will have a better idea of the merit of the proposal. Foreign potential funders have already indicated their unwillingness to participate without local bank participation, whereas they may support their own foreign-owned projects without the need for local bank participation.
There is some truth in the claim by anti-coal activists that (their successful) pressure on the banks is also coming from governmental regulators like the Australian Prudential Regulation Authority: ‘finance sector regulators have repeatedly warned that climate change poses system-wide risks’. But the absurdity of the banks’ claim that concern about the risk of ‘stranded assets’ as coal is killed off is a factor in their anti-coal crusade, is evidenced by the revelations in the latest International Energy Agency outlook indicating continuing strong coal demand in the Asia/Pacific region which accounts for more than 80 per cent of world usage. This is expected to rise to 7.4 billion tonnes per annum (the declining Europe and the US markets that account for less than 10 per cent have little impact on the total). To meet that demand, IEA expects a pipeline of new projects (more than a third in Australia, a quarter in Russia and one-fifth in South Africa). Australia, although the world’s biggest exporter, currently provides only a fraction of Asia/Pacific thermal coal demand, but its relatively lower-emissions higher quality coal is increasingly being sought by regional nations in their pursuit of lower emissions targets. So the Australian banks’ jihad on coal is also an attack on regional nations’ emissions-reduction campaigns.
As Australian-owned Whitehaven Coal noted in its submission to the parliamentary inquiry, the IEA forecasts that South-East Asia will experience growth of nearly 30 per cent over the next decade, bringing with it continuing demand for Australian lower-emissions coal to be burned in the more than $1 trillion of capital invested in existing coal-fired generation, much of it in young HELE plants with many years of economic life ahead. And many more HELEs are either planned or under construction in the region.
While there is still strong long-term global demand, the NSW government’s Strategic Statement on Coal Exploration and Mining has stated that ending or reducing Australian thermal coal exports would not lower global carbon emissions, as most coal consumers would seek coal from elsewhere and much of this would be lower quality – worsening the world’s emissions.
But it took the submission by a major foreign-owned coal company, Yancoal, to demonstrate the basic absurdity of the banks’ ban, which relates more to the far greater emissions in foreign countries by the almost 90 per cent of Australian coal production that is exported than to those emitted in local Australian power generation or steel production. For the banks to penalise Australian miners for emissions in other countries for which those nations are responsible under international agreements, is not only irrational, it is in conflict with government policy.
As Energy Minister Angus Taylor said last month, ‘Our prosperity will be undermined if we pursue decarbonisation at the expense of reliable and affordable energy. It is a folly to think that we can reduce emissions by restricting coal or gas exports. This won’t reduce global demand for those products. Until clean energy solutions are cheaper than their existing alternatives, any supply gap will be filled by our competitors’. Tell that to the big four banks, the insurance industry – and to the government’s own financial regulatory authorities.
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