Digital Zeitgeist – Despite Their Promises Global Banks Continue To Spend Billions On American Gas Exports
Numerous banks made commitments to achieve net-zero emissions, but their plans expressly exclude liquefied natural gas projects.
The enormous growth in US gas exports is going to accelerate. The Gulf Coast may see up to 12 additional liquefied natural gas (LNG) facilities constructed along its coastlines by the end of the decade.
According to one estimate, this development would increase the quantity of LNG that the US presently exports around the world by three times, adding to the annual greenhouse gas emissions produced by more than 200 coal plants.
Without funding from the megabanks that financed the initial boom less than ten years ago, the terminals cannot advance. Virtually all of these banks have committed to making efforts to achieve net-zero emissions. But, many people’s climate objectives expressly exclude LNG developments.
Banks have claimed that LNG exports help reduce climate pollution by substituting petrol for coal, but detractors claim that calculation is flawed because it does not account for all of the emissions associated with the exports, including those associated with the production and transportation of the fuel. According to Adele Shraiman, a Sierra Club’s Fossil-Free Finance project campaign representative, “Fossil fuel expansion is fundamentally incompatible with meeting that net-zero goal.”
The Intergovernmental Panel on Climate Change issued a warning in March that any further use of fossil fuels is likely to increase global warming above the more risky 2-degree mark. Major investors and environmental organisations agree that banks are not utilising their financial clout quickly enough to reduce carbon pollution and make investments in zero-emissions energy.
The majority of the construction expenditures for LNG along the US Gulf Coast have been funded by about 20 banks. According to information gathered by the Sierra Club, by the end of 2022, those financial institutions have jointly supplied loans or bond underwriting totalling more than $110 billion. This year, $14 billion more has been financed.
Three financial institutions, SMBC, Mizuho, and MUFG—Japanese megabanks that backed the construction of export facilities including Sabine Pass, Corpus Christi, and Plaquemines—provided around a fifth of the $110 billion. These investments were prompted by Japan’s demand for LNG in the wake of the Fukushima nuclear accident, however, no commitments have been made regarding LNG despite their vow to reduce carbon emissions.
Three financial institutions, SMBC, Mizuho, and MUFG—Japanese megabanks that backed the construction of export facilities including Sabine Pass, Corpus Christi, and Plaquemines—provided around a fifth of the $110 billion. These investments were prompted by Japan’s demand for LNG in the wake of the Fukushima nuclear accident, however, no commitments have been made regarding LNG despite their vow to reduce carbon emissions.
According to Shraiman of the Sierra Club, American banks are falling behind other international financial institutions, particularly European banks, in their commitments to lower emissions and in actually reducing their financing for fossil fuels.
The only two big US banks that have absolute emissions targets for the oil and gas industry for 2030 are Wells Fargo and Citibank, which have publicly committed to a reduction of 26% and 29% from 2019 levels, respectively. These two banks are the only two major US banks not as heavily invested in LNG.
Others have just vowed to reduce the overall average emission intensity of all the projects they sponsor. This may allow them to finance more greenhouse gas emissions overall, including more investments in less noxious gases than oil and coal, but it would also increase their overall carbon footprint.
The need for gas in Europe following the Russian invasion of Ukraine rekindled interest in American LNG. Nevertheless, any new projects wouldn’t start up until at least the middle of 2025. US developers have tried to bind customers to contracts that can last up to 20 years in order to prevent uncertainties over the fuel’s future consumption.
Banks are enticed to finance LNG by these long-term contracts, despite their claims that doing so will cut global carbon emissions.
“I think a lot more work needs to be done on getting folks to understand the [climate] risks associated with LNG,” Shraiman says, adding there’s a “pervasive view” in the finance industry that exporting gas will help displace coal more than renewables, and the need for gas will continue for decades. It’s a view shared by the CEO of America’s largest bank.
Shraiman says bank policies on LNG are among the gaps in their net-zero promises.
Take JPMorgan Bank as an example. The bank’s 2030 strategy intends to lower the average intensity of carbon emissions of the oil and gas projects it supports. The bank is one of the top investors in fossil fuel projects globally. But, the bank doesn’t explain how it plans to meet those objectives.
It’s not just JPMorgan Chase. The majority of large banks do not include loans to Gulf Coast LNG projects in their promises to reduce emissions.
Methane emissions and leaks from the transportation, processing, and shipping of the fuel are ignored when LNG and other enterprises are left out of those calculations. There may be unreported smaller but persistent methane leaks in American infrastructure, which can make a difference in whether exports truly produce more emissions than coal.
The Texas Campaign for the Environment’s Gulf fossil finance coordinator, Roishetta Sibley Ozane, claims that while surrounding Black and low-income areas, like Lake Charles in southwest Louisiana, offer local economic gains, they only experience the effects of a warming planet.
“The people in those communities aren’t the ones that are being hired,” she says, adding that it’s a “bad look” for the American banks that say they want to invest in these communities to fund industries that harm them.
She is concerned about a variety of factors, including rising coastline erosion and air pollution, particularly in light of the devastation that Hurricane Laura’s storm surges caused in the region. Inside the storm’s debris line is one proposed project.
The most outspoken financial institutions in Europe support financing for LNG and have more ambitious carbon emission reduction goals for 2030, up to a 34% decrease. Important exceptions do exist, though.
A first among banks of its size, HSBC declared in late 2022 that it would no longer fund new oil and gas developments. But, the British bank will continue to support and provide funding for other fossil fuel projects, including gas-fired power stations and shale gas extraction, under specific circumstances. When questioned about its views on LNG, the bank remained silent.
French bank Société Générale announced its withdrawal from Rio Grande LNG at the end of March. Although the bank earlier stated it would no longer invest in new or substantial LNG expansions in North America, it made an exception for “already required” projects, thus it was unclear until recently if it would still back the project. Inquiries concerning Société Générale’s connection to another significant project, Driftwood LNG, were unanswered.
Public pressure has occasionally changed things. A delegation of Rio Grande Valley Sierra Club members and local Indigenous activists came to Paris in 2017 to petition BNP Paribas, the project’s financial adviser at the time, on behalf of the proposed project in the vicinity of Brownsville. BNP subsequently abandoned the project after many months. Since 2017, it hasn’t supported an LNG terminal in the US.
Sibley Ozane and others have shifted their activism away from permissive state and federal authorities and towards the American banks financing the several projects that are now underway and those that are being considered in Louisiana and Texas.
“You can get all the permits that you want,” she says. “But if you don’t have the funding, you can’t get anywhere.”
online sources: theguardian.com,