Yann Louvel, Climate campaigner, BankTrack
Share this page:
The following ‘principles and approaches for impactful public coal policies’ were developed by the Europe Beyond Coal Campaign.
In order to meet the UN Paris Climate Agreement goals of limiting “global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C”, no new coal power capacity may be built and coal power will need to be phased out in the coming years. Investors have recently acknowledged climate science research that supports the need to phase out coal by 2030 in the European Union and in Organisation for Economic Cooperation and Development (OECD) countries; by 2040, in China; and by 2050, in the rest of the world. More recent analysis by the IEA ‘beyond 2°C scenario’ indicates that non-OECD countries should phase out production from coal power even earlier, by 2040.
A. Overall commitment:
to mitigate climate and financial risks associated with the coal sector, finance actors* should adopt a public “no coal policy”, which supports the alignment of their business models with climate science-based targets that are consistent with the goals of the UN Paris Climate Agreement. This implies that finance actors should commit to over time (2030 in OECD/Europe, 2040 globally) eliminate coal assets from all business lines, and that all coal companies in which they are involved should either be actively engaged with or divested from.
B. Exclusion criteria for coal projects:
as a consequence, finance actors should not provide or renew direct support to coal plants/mines/infrastructures worldwide - including project finance and other dedicated finance support, advisory mandates, insurance underwriting, investment.
C. Assessment criteria for exclusion of coal companies:
the criteria below, from the Global Coal Exit List, capture companies that are currently either expanding or are highly exposed to coal, in relative as well as absolute terms:
- Companies with coal expansion plans, including the construction/development/expansion of coal plant/mine/infrastructure, and life extension of existing coal plants through retrofit, acquisition of existing coal assets;
- Companies producing more than 20 Mt of coal per year, or with over 10 GW of coal power capacity;
- Companies that generate more than 30% of revenues from coal mining or produce more than 30% of power from coal.
By applying these criteria to their financial universe, finance actors can identify which companies are currently unlikely to be able or be unwilling to transition rapidly enough to a 100% renewables-based energy system, and reconsider financial support**accordingly.
These criteria should become stricter over time, as the deadline for a complete coal phase-out is approaching.
D. Criteria for engagement with coal companies:
additional criteria need to apply to companies that own coal assets, but are considered to still have an opportunity to transition rapidly enough to a 100% renewables-based energy system. By applying targeted and impactful engagement*** finance actors should ask those respective companies to:
- Adopt, within one year maximum, a decarbonisation target to gradually align their business model with the UN Paris Climate Agreement.
- Publish, within two years maximum, a clearly articulated and detailed implementation plan for the gradual closure (not sale) of existing coal plants and mines, exiting coal at the latest in 2030 in the OECD and in Europe, and in 2040 in the rest of the world.
By applying these four recommendations, a finance actor will achieve zero coal exposure within the respective decarbonisation timeframes.
*Finance actors include banks, insurers and investors.
**Financial services include lending, underwriting, advisory, insurance coverage and investment with regards to own accounts as well as third parties.
***Financial institutions must gradually reduce/remove financial support within set timeframes (6, 12, 18, 24 months) if the engagement process does not lead to significant results.