JPMorgan Chase is scaling back on financing new coal projects in advanced economies, in an effort to reduce global warming, the multinational banking firm announced Monday.
The new measure adds the company to a growing list of financial institutions, including Bank of America, Cititgroup, Morgan Stanley, and Wells Fargo & Co., that have pledged to stop or scale back support for coal – as part of a broader divestment campaign led by environmental groups looking to move the global economy beyond fossil fuels.
Environmental groups have applauded the move as a significant step toward transitioning away from dirty energy production. However, critics have questioned how significant the impact of the measure could be given that it only applies to projects in high-income countries.
“This is the first major policy change we’ve seen following the Paris agreement,” Ben Collins, a climate campaigner at the Rainforest Action Network advocacy group in San Francisco, told the Financial Times. “It’s a step away from financing coal, which we see as the dirtiest and most carbon-intensive fuel,” he said, adding it would be better if banks immediately halted all support for coal mines and power plants.
The bank's new official "environmental and social policy framework" prohibits it from financing new coal-fired power plants in high-income countries, as defined by the Organization for Economic Co-operation and Development. Some 32 countries, including the United States, Japan, Australia and most of Europe, qualify as high-income according to the OECD.
The company will continue to finance coal-fired power plants in developing countries like China, India, and Indonesia, but only if the plants employ the “ultra-supercritical” technology that is more efficient than conventional systems. The banking giant, one of the 10 most significant financial backers of the coal industry, had already placed restrictions on mining operations involving controversial mountain-top mining, the Financial Times reports.
“We believe the financial services sector has an important role to play as governments implement policies to combat climate change,” JPMorgan said in the document.
The National Mining Association, which represents coal producers including Peabody Energy Corp. and Arch Coal Inc, called the decision “hardly a heroic gesture,” in an e-mail to Bloomberg.
The company’s divestment is yet another blow to an industry already struggling through its worst downturn in decades. The coal industry has in the recent years been plagued by a number of misfortunes, largely stemming from increased environmental regulations, and market pressures. Coal prices have drastically dropped in recent years, with the shift to natural gas as cheaper fuel source for electric power plants.
Twenty-six percent of US coal companies have gone out of business in the last three years, and the value of the companies that have managed to survive has dropped 76 percent in five years, the Huffington Post reported.
In January, Arch Coal Inc., the company that holds the second-largest reserve of coal in the United States, filed for bankruptcy, citing competition, production of cheap gas, and strict environmental regulations as the causes for the company’s financial woes. And last year Walter Energy, an Alabama coal mining company, filed for bankruptcy a few days before SNL Financial released revealing data that highlighted how coal the industry was struggling.
Compounding the industry’s woes, the Obama administration announced a temporary ban preventing coal companies from obtaining new leases that allow coal mining on federal lands, last January.