Banks urged to invest in world's best interest

Canberra Times
26/12/2007 Page: 12

Carbon capture and underground storage of emissions is a "false solution" to climate change that the world's banks should refuse to finance, according to a new international report. The technology remained unproven, sanctioned the "continued lock in" of fossil fuel use and provided a disincentive to limit greenhouse emissions, financial sector watchdog BankTrack said.

Banks should also refuse to finance emission-intensive activities such as logging tropical forests and "industrial scale" cattle farming, as well as large dams, biofuels and nuclear energy stations. Instead, banks should "vigorously start to compete to become the bank of choice for the clean-teach, renewable energy, and energy efficiency industries", the global network said.

BankTrack's latest report estimates about 20 per cent of global GDP is now affected by "climate events" such as violent stories, floods and droughts, and climate risk is now more important than the risks posed by "interest rates or foreign exchange risk."

Banks must take a leading role in the fight against global warming by supporting investment in renewable energy and energy efficiency technologies, insisting commercial real estate clients meet rigorous energy efficiency standards, and offering lower mortgage rates on energy efficient homes, the report said.

Banks should develop climate policies to assess and report on all greenhouse gas emissions associated with their loans, investments and financial services, and establish strict portfolio and business-unit emissions reduction targets. Earlier this year, British economist Sir Nicholas Stern warned the global power sector must reduce its carbon emissions by 60 to 75 per cent by 2050. But banks were continuing to invest in new coal-fired electricity plants and oil and gas exploration, the BankTrack report said.

"Last year, global oil and gas companies spent approximately $US200 billion developing new energy projects, pushing the oil and gas frontier into every remote corner of the world in order to reach hitherto economically unviable reserves... Commercial banks are often key financiers of these highly lucrative undertakings.

"Yet, if banks are to play a positive role in facilitating a transition to a low carbon economy, they must gradually, based on clearly defined timelines and targets, terminate their support for new oil, coal and gas extraction and associated delivery projects such as pipelines and loading stations." Deutsche Bank recently claimed government efforts to tackle climate change were creating a "megatrend" investment opportunity, and has appointed a climate change planning strategist to investigate investment opportunities in renewable energy, water and agriculture.

The German bank has already attracted more than $US8.5 billion into climate change funds which target firms with products that cut greenhouse emissions. "We believe the shift away from a carbon-based economy is a megatrend that will shape the asset management industry for many years," the bank's global head of asset management, Kevin Parker, said.

BankTrack's recommendation that banks steer clear of financing Carbon Capture and Storage could have repercussions for the Federal Government's plans to set interim emissions cuts after Australian National University economist Professor Ross Garnaut delivers his review of climate change policies in June 2008.

During the recent United Nations climate summit in Bali, Prime Minister Kevin Rudd said carbon capture had "a rich future" as a solution to curbing Australia's greenhouse emissions. Garnaut has also flagged Carbon Capture and Storage will feature prominently as a solution in the climate change policy review he will present to the Federal Government next year.

During a public lecture in Canberra earlier this month, Garnaut said Australia had "an exceptional endowment of favourable sites for Carbon Capture and Storage" and also suggested Australia's coal industry would benefit from global greenhouse mitigation schemes.

Last year, CSIRO scientists told a Federal Government inquiry that capture and storage of greenhouse emissions from Australia's coal-fired power stations would double the cost of producing electricity and could increase carbon dioxide emissions from power plants by about 30 per cent. They told the inquiry at least 3500 large-scale geosequestration sites across the world would be needed to cut global greenhouse emissions by one billion tonnes of carbon dioxide a year. So far, Australia has only located 100 sites that could be suitable for underground storage of carbon dioxide.