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The six major U.S. banks are behind more than one-third of the financing going to expanding fossil-fuel extraction, according to an update to a closely followed annual report by a collection of climate-change policy groups.
According to the Rainforest Action Network (RAN), the top 60 banks by assets globally together provided $1.3 trillion to the top 100 companies expanding fossil fuels between 2016-2021, the year’s since the monumental Paris climate accord, the network of advocacy organizations said Wednesday on the sidelines of the U.N.’s COP27 climate summit.
Of that amount, the big six U.S. banks — Bank of America
BAC,
JPMorgan Chase
JPM,
Citi
C,
Wells Fargo
WFC,
Morgan Stanley
MS,
and Goldman Sachs
GS,
— provided 33% to the top 100 coal, oil and gas expanders, funding valued at about $445 billion.
RAN’s comprehensive report hit in March.
This look at increased finance to the fossil-fuel industry comes as the banks say they have joined global efforts to cut carbon emissions in half as soon as 2030, on the way to net-zero emissions by 2050.
“Fossil expansion is a clear litmus-test for assessing the seriousness of banks’ net-zero commitments because of the hard but unavoidable carbon math, both on the supply side and the demand side,” RAN said with its release.
Net-zero commitments call for the reduction of atmosphere-warming emissions that have lead to deadly drought and more severe storms, which are costly in lives and economic loss. Banks have made their own net-zero pledges specific to their operations, but advocates want to see more action throughout the financial pipeline.
And, as RAN and other groups have pointed out, even oil industry groups have said new production must be curtailed to reach emissions milestones.
“If governments are serious about the climate crisis, there can be no new investments in oil
CL00,
gas
NG00,
and coal, from now, from this year,” Fatih Birol, executive director of the International Energy Agency, said in 2021, surprising the industry with the stark proclamation.
On the supply side, potential emissions from oil, gas, and coal currently in developed fields — the wells already drilled, the mines already dug, and fossil supplies already coming out of the ground — take the world well past 1.5°C of warming and jeopardize the well-below 2°C limit, RAN believes. Those are the temperature targets laid out in the 2015 Paris climate accord.
This is to say nothing about the much larger quantities of undeveloped reserves that oil, gas, and coal companies already own, RAN added.
The Sierra Club, which is also a RAN backer, released its own look at the financial sector in recent days.
The net-zero emissions commitments from Wall Street’s banking giants was a significant step toward holding global warming in check, but in the almost two years since each of the U.S. majors committed to net-zero, their progress remains slow, Sierra said.
Its report examines the banks’ interim 2030 targets to cut greenhouse gas emissions not just from their own operations but in how they finance the energy sector and other industrial segments of the economy.
Lawmakers and even some climate-watchers want both big finance and big oil to play a major role in the transition to cleaner energy because their reach can help make scalability of these new technologies possible.
For now, “big U.S. banks have fallen far behind the best practices of their global peers, setting only weak targets and policies riddled with loopholes that allow billions of dollars in new fossil fuels projects each year,” said Adele Shraiman, campaign representative for the Sierra Club’s Fossil-Free Finance campaign.
“If banks want to live up to their net-zero pledges, they need to commit to real emissions reductions and end financing for companies expanding fossil fuels,” she added.
Both the RAN and Sierra Club reports and the nearly two-week-long COP27 conference hit as the world grapples with high inflation and volatile energy markets as Russia’s invasion of Ukraine persists. And it hits as a close U.S. midterm election in several key races continues to be tallied.
Republican election campaign messaging has included complaints about high gasoline prices and global concerns about the availability of natural gas and the cost of alternatives, such as liquefied natural gas, in the wake of disrupted markets in the months since Russia invaded Ukraine. That messaging dovetails with a GOP argument that the U.S. should pump more of its own energy to avoid the geopolitical stress of relying on Russia and the Middle East.
In the U.S., fossil-fuel interests and their mostly Republican backers have pushed for natural gas to remain a fixture in a mixed energy offering that includes wind, solar and other alternatives.
And coal, long targeted as the “dirtiest” emitter and largely replaced by natural gas to power U.S. electricity, still remains a sticking point.
If the world ended coal production tomorrow, which is not likely, potential emissions just from the oil and gas fields already in production could exhaust the carbon budget for 1.5°C, RAN aruges. China and India, as two examples, were coal-reduction holdouts at the last COP summit, a stand that led to a watering down of the broader group’s post-conference communique. Parts of Europe have also revisited coal as energy markets were roiled this year.
“We see the [traditional energy industry] using the Ukraine invasion as an excuse,” April Merleaux, research manager at RAN told MarketWatch. “We’re talking about expansion of facilities that require several years to be up and running and adding to emissions down the road, not any sort of solution to a short-term issue. Reputable energy analysis says their sufficient capacity with [liquefied natural gas or LNG] to meet the emergency needs in Europe.”
“Energy earnings and stock buybacks and dividends contrast with energy shortages that we’re saying can be addressed with what are likely profitable investments,” she added.
Exxon Mobil
XOM,
for one, blew past earnings estimates for the third quarter, when it reported in late October. Chevron’s
CVX,
stock price hit a record after its big earnings beat.
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