royal bank of scotland cashing in on coal

8/9/2019 Royal Bank of Scotland Cashing in on Coal

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Researched & written by Kevin Smith of PLATFORMwww.carbonweb.org

Additional research by Mel Evans (PLATFORM) and Sara Pena

Published by BankTrack, Friends of the Earth Scotland,People & Planet, Scottish Education and Action forDevelopment, Stop Climate Chaos and PLATFORM in August2008

Advice and comments received from Bill Barclay (RainforestAction Network), Duncan McLaren (FoE Scotland), Mika

Minio-Paluello (PLATFORM), Greg Muttitt (PLATFORM), JamesMarriott (PLATFORM), Bronwen Smith-Thomas (People &Planet) Tim Jones (World Development Movement)

Designed by The Very Cooperative - www.very.org.ukPrinting by Calverts Co-op using vegetable oil-based inks on100% recycled paper

Creative Commons Attribution-No Derivative Works 2.0 UK

Large print format available [email protected]


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Cashing in on CoalRBS, UK Banks and the Global Coal Industry

ContentsExecutive summaryCoal & climate changeBanks & coal nance

Banks & climate changeCoal nancing from UK banks in the last two years

UK banks involvement in nancing the coal industry

The response of RBS to its fossil fuel nancingSpecic examples of coal nancing

Conclusion: The future of nancing coal

Websites and resourcesAppendix 1 - Table of investment dataAppendix 2 - Sources & footnotes

2 - 34 - 66 - 78 - 1011 - 1213 - 14

1516 - 1819 - 212122 - 2424 - 25

Pages

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There has never been a clearer global consensus

about the urgent need for large cuts in carbonemissions as soon as possible if the mostcatastrophic impacts of climate change are tobe avoided. Despite this knowledge, coal, whichis the most emissions intensive fossil fuel, isexperiencing a global boom. Some banks seeopportunities in this boom, and have been all too

quick to forget previous expressions of concernabout climate change.

While a sustained campaign in the US hasforced banks to start taking steps to assess andreduce their climate impact derived from coalnancing, UK banks are lagging behind. This

Executive summary

May 2006 RBS, HSBC and 9 other banks lend $779 millionto Millmerran Power Partners, who operate a 850 MW coalred power station in Queensland Australia.

Timeline of coal investment by UK banks May 2006 to April2008

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report examines the role in the last two years ofthe Royal Bank of Scotland (RBS), HSBC andBarclays in providing and arranging the nancial

means to the coal industry to extract and burnvast quantities of coal.

The research behind this report (presented in Appendix 1) shows that RBS, Barclays andHSBC are all heavily involved in nancing

new and expanded coal operations. BetweenMay 2006 and April 2008, HSBC was involvedthree times in loans to coal-related companies,

Barclays 17 times, while RBS participated in27 different loans. According to this reportsestimates, Barclays was responsible for sourcingan estimated $5.79 billion, HSBC $10.10 billionand RBS $15.93 billion in loans to companiesengaged in the extraction and/or combustion ofcoal.

While all three banks have been involved to somedegree, the data available shows RBS as havingbeen involved in the greatest number of loans, aswell as having been responsible for loaning thelargest estimated sum of money.

This report recommends that RBS and otherbanks should fully disclose the details of all theirfossil fuel nancing; make no further loans to the

development of new unabated coal combustingand extracting infrastructure; and that they

should cap and decrease the overall level of

carbon emissions embedded in their fossil fuelnancing.

September 2006 RBS and two other banks lends $200million to Constellation Energy, which is the biggest wholesalepower seller in the U.S. It owns 78 electricity generating unitsin the U.S. with a combined capacity of 8,700 MW, 35% ofwhich is generated from coal combustion.

May 2006 RBS and 11 other banks lend $814 million to TejoEnergia SA, who own the 628MW coal-red plant at Pego,Portugal.

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company E.ON applied to build the rst new

coal-red generating units in the UK in 30 years,

with proposals for six more such plants alreadyin the pipeline.

While use of coal varies from year to yearaccording to the relative prices of different fuels,there appears to be an upwards trend. Followingthe dash for gas, coals share of UK electricitygeneration fell to its lowest level in 1999 at 31.5%.Since then it has steadily risen, to 41.0% in 2006(although it declined slightly in 2007, to 38.6%).1

Carbon emissions from the power sector, whichaccounts for a third of the UKs total greenhousegas output, have risen accordingly. Carbondioxide emissions from power stations in the UKrose by a staggering 25% between 1999 and2006.2 Many environmental groups have pointedout that a continued trend towards coal would

October 2006 - RBS and one other bank loan $185 million toLower Wilgat LLC, the developer of two coal mine complexesunder construction in Illinois and West Virginia.

October 2006 - RBS and 4 other banks made a $1000 millionloan to Exelon Corp, a power generation company in the USwhose 6,500 MW capacity includes coal as well as oil andgas.

Coal & climate change

From concerns over air pollution and acid rain, tothe recent rising awareness of carbon emissionsand climate change, coal has been recognised asthe dirtiest, most dated and most inefcient fossil

fuel option. The reductions in national emissionslevels in the 1990s in UK were largely attributable

to the switch amongst power generators fromcoal to natural gas, which is less emissions-intensive. In the rst decade of this century, rising

gas prices and increasing electricity demandare reversing this trend, and the dash for gashas turned into the roll to coal. This trend washighlighted in December 2006 when the power

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threaten the emissions reduction targets that thegovernment has set.

Use of coal has soared globally, in both theGlobal South and the North. New coal plants are

rapidly being commissioned in the US, India andChina, with more than one new plant each week.From 2003-2005, coal demand increased by15% in China, 7% in Russia and 5% in Japan.3The resulting rise in the price of coal has creatednancial incentives for the development of new

mines and expansion of existing production in

Indonesia, Australia, India and the US. New coalports are under construction in Australia, Russiaand South Africa.4

In order to counteract the dirty image thatcoal has accrued in recent decades, the coalindustry is developing and promoting a number

of technological processes to allow industryboosters to attach the adjective clean beforethe word coal. This re-branding of clean coal isbeing used as a justication for burning more of

it, even if it is marginally less emissions-intensive,

resulting in a net increase in emissions rather thana reduction. The process of Carbon Capture andStorage (CCS), which some consider to be a morepromising option, has yet to be demonstrated inan integrated, commercial scale pilot project.None of the current coal power proposals fundedby the banks in this study will involve more than

small scale testing of CCS.

A report released in July 2008 by the ParliamentaryEnvironmental Audit Committee pointed out thatclean coal can be used as a g leaf to cover

technological and economic uncertainties overcoals future, and concluded that, unless there

October 2006 - RBS and six other banks lend $1,829 millionto AGL Energy Ltd, an Australian power company whosegeneration portfolio includes coal.

October 2006 - RBS participates in an $800 million revolvingcredit facility to Arch Coal, a coal mining company that isinvolved in extremely destructive mountain top removal coalmining in the Appalachia Mountains in the eastern US.

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The last seven years of rising oil and gas prices

and the resulting increase in global coal use hasallowed the coal industry to dramatically ramp upits operations the world over. For example, over50 coal-red plants are being planned to be put

into operation across Europe over the next ve

years6 while in July 2008, Rio Tinto announcedplans to double its mined output in Australia by

2015.7

Opening new mines and commissioning new coalplants requires large sums of capital, and bankshave readily stepped in to provide the money tomake this coal boom possible. In the two yearsprior to April 2008, British banks were involved

Banks & coal nanceis a dramatic technological development, coalshould be seen as the last resort, even with thepromise of carbon capture and storage.5

Leaving aside the public relations campaigns,

coal remains dirty coal, and stands to addconsiderably to greenhouse gas emissions. Yetthis is precisely the industry that banks are helpinggrow, by providing nancing and investment to

build new plants and dig new mines.

November 2006 - Barclays and two other banks lend $855million to NE Energy Inc, whose power generating assetsinclude Mt Tom, a 146 MW coal red facility.

November 2006 - RBS and two other banks make a $1,260million loan to Glencore International, one of the worldslargest suppliers of a wide range of commodities includingcoal.

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in over $108 billion of lending to corporationsinvolved in the coal sector. RBS, Barclays andHSBC nanced coal mining companies operating

in Bangladesh, Kazakhstan and Indonesiaand new coal power stations from the US to

Australia.

British banks, with a background in nancing

oil and gas and large infrastructure projects,have actively supported the rise of coal inrecent years by providing the nancial means

needed for rapid expansion. Banks play a vital

role in driving forward this carbon frontier. As inother capital intensive industries, both powerand mining companies rely heavily on banks tonance their ongoing operations and expansion

of infrastructure. When an electricity generatingcompany such as E.ON plans to build a new coalpower station, it needs to borrow a signicant

November 2006 - Barclays and four other banks lend $100million to Alliant Energy Co, whose power generation portfolioincludes coal-red plants.

November 2006 RBS and ve other banks lend $907 millionto Rugeley Power Ltd, who run a 1,000 MW coal-red powerstation in the UK.

proportion of the construction costs. Similarly,coal extraction companies such as UK Coal or

Arch Coal require loans and credit to open orexpand new mines.

Apart from providing and arranging loans, bondsand credit, RBS, Barclays and HSBC play anincreasingly key role acting as nancial advisers

and structuring the loan agreements that makenew projects possible.

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It is only in recent years that some banks haveclearly recognised that fossil fuel consumptionis primarily responsible for climate change. Asrecently as 2007, an RBS spokesperson wasquoted publicly as saying that there was still

debate among scientists as to the cause ofglobal warming.8 All the major banks now havesome form of environmental policy in whichthey address the emissions of their high-streetbranches and ofces by energy efciency

measures, reducing paper and water wastageand so forth.

Banks & climate change

November 2006 RBS, HSBC and four other banks lend$48,025 million to E.ON, that plans to build 17 new gas- andcoal-red power plants in Europe and Russia by 2010.

November 2006 - Barclays and one other bank make a $350million loan to Duke Capital Corp, part of an electricitygenerating company with an approximately 28,000 MWcapacity including coal-red plants.

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But most banks are less keen to accept theirresponsibility for emissions from projects thatthey nance. However it is clear that the public

believe banks should share the responsibility forthe impacts of the activities they fund, through,

for example investment in projects or companiesthat are responsible for human rights violations.In the 1980s, Barclays bank was the subjectof a high-prole boycott due to its nancial

involvement in apartheid-era South Africa. Theinux of money can play a key role in enabling,

sustaining or amplifying social injustice and/or

human rights abuses.

While the Co-operative Banks ethical investmentpolicy prohibits it from nancing any coal, oil or

gas projects, some banks have made more timidsteps in cautiously acknowledging the role thattheir lending and investment portfolios play in

December 2006 - RBS and four other banks lend $600 millionto OGE Energy Corp that controls 5 coal-red generatingstations with 2,854 MW total capacity.

December 2006 - RBS and three other banks make a $1,600loan to PSEG Power LLC, one of the largest independent powerproducers in the US whose generating capacity includes coal-red plants.

exacerbating climate change. In 2006 HSBCadmitted that its most signicant impact [on

climate change] is the investment and lendingdecisions we make.9

There have been a number of initiatives that havebeen developed to address the issue of banksand their impact on climate change. Thesevary considerably in terms of how far they go inattributing responsibility for emissions.

The Carbon Disclosure Project (CDP), one such

initiative, is a not-for-prot organisation thatencourages banks and other corporate entitiesto respond in detail to questionnaires that delveinto their operational attitudes to climate change,how they account for their emissions and whatsteps they are taking to reduce them. Like mostsuch initiatives, it is based on the Greenhouse

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total carbon footprint of large commercial banks,with those emissions covered by the CDPrepresenting less than 1%.12

The CDP, like other such initiatives, lacks any

binding commitment on the part of the banks toadjust their lending behaviour accordingly. Manycommentators feel that corporations participatein such voluntary agreements in an attempt topre-empt stricter forms of regulation that couldbe imposed by governments.

December 2006 - Barclays and one other bank provideDuke Energy Corp with a $2,000 million loan. Duke EnergyCorp is part of an electricity generating company with anapproximately 28,000 MW capacity including coal-redplants.

December 2006 - RBS is appointed nancial adviser for thedevelopment of two 800 MW coal-red plants in Lnen andKrefeld-Uerdddingen in Germany, sponsored by Trianel.

Gas Protocol of the World Resources Instituteand the World Business Council on SustainableDevelopment which focuses on direct emissionsin order to avoid double counting.10

What that means in the context of the bankingsector, is that the CDP only covers the internalemissions of banking operations and the energythe bank buys to run its facilities, and doesntcount the core business of lending money. Soa bank like RBS can score a high AAA ratingin the 2007 report, but still be heavily involved

in nancing fossil fuel expansion around theworld. According to an (unpublished) analysisundertaken by the Rainforest Action Networkbased on ProFundo11 research on Europeanand North American banks and correspondingreports to the CDP, nanced fossil fuel extraction

consistently represents more than 99% of the

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December 2006 - Barclays and three other banks make a$500 million loan to Northern States Power Co, who arenow known as Xcel Energy, who operate 16 coal-red plantsacross the US with 7,921 MW capacity.

March 2007 - RBS, Barclays and four other banks make a$1,500 million loan to the American Electric Power Co Inc,currently the largest electricity generating utility in the UnitedStates and the 35th-largest corporate producer of air pollution,includes coal in its energy portfolio.

included at this time. Any loan being made to acoal-related company during the two year periodfrom May 2006 to April 2008 has been countedin this data analysis unless the information givenin Project Finance magazine has explicitly stated

that the loan is towards a part of that companysoperations that does not involve coal.

Since banks do not provide any systematicrecord of their fossil fuel nancing, any attempt

to quantify their coal lending will necessarily bea rough estimate. There are two main limitations

to representing a fully comprehensive picture ofcoal nancing.

1) The list here is incomplete. There areundoubtedly other instances of nancing that

have not been reported in the information sourcesaccessed for this report.

The information gathered here represents a snap

shot of the involvement of the three largest UKbanks in nancing coal-related operations in the

previous two years. The information has largelybeen collated from reports of individual projectsin the industry press.

A company involved in coal-related operations

has been dened in this context as: any powercompany that involves coal combustion as asignicant part of its generation portfolio,13 coal-red power stations and any company involved

in the coal extraction process. Companiesinvolved in the manufacture and construction ofcoal plant or mining equipment have not been

Coal nancing from UK

banks in the last two years

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March 2007 Barclays and four other banks lend $300million to CMS Energy Corp, a utility holding company in theUS whose assets include a 1,600 MW coal-red plant andnearby coal mine in Illinois.

April 2007 RBS co-arranges an $819 million loan to LSPower for its 664 MW Plum Point coal-red plant.

2) Some of the loans listed here have been madeto companies that are also involved in spheres ofactivities other than coal. While some instances ofnancing are project-specic, many transactions

are general corporate loans with no public

information as to how the money is spent.

One of the demands being made to the nancial

institutions by civil society organisations suchas the BankTrack network is that they provide acomplete and transparent picture of their fossil fuelnancing so that these possible inaccuracies can

be resolved. In addition, banks need to insist ongreater accountability on the part of the borrowersas to how the money will be used. In the absenceof such transparency and accountability, it canonly be assumed that the loans, at least in part,are being used in the production and consumptionof coal. Until the banks themselves are willing to

make such detailed disclosure about their loanhistory, reports such as this represent the bestestimate that can be made.

In September 2007, RBS won a joint takeover

battle for Dutch bank ABN-Amro, jointly withSantander and Fortis. ABN-Amro is being splitthree ways, with Santander taking ABNs opera-tions in South America, Fortis swallowing Dutchretail and RBS the global markets and lending,investment banking and other emerging marketsdivisions including most energy nancing. For

this reason, post-October 2007 loans from ABN-Amro have been counted towards the RBS totalin the data analysis.

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May 2007 RBS, Barclays and 10 other banks participatein a $2,070 million credit facility for Dynegy, which plans tobuild numerous new coal red plants across the US.

June 2007 Barclays and one other bank loans $950 millionto Tata Power, which has a stake in coal production in Indone-sia and operates a number of coal-red plants in India.

The research behind this report (presented in Appendix 1) shows that RBS, Barclays andHSBC are all heavily involved in nancing new

and expanded coal operations. Between May2006 and April 2008, HSBC was involved threetimes in coal loans, Barclays 17 times, whileRBS participated in 27 different loans. The total

value of the loans that the banks were involved inwas $38.24 billion for Barclays, $71.09 billion forHSBC, and $95.83 billion for RBS.

Most loans involve a consortium of banks, sothese gures do not represent the actual sums for

which each bank is responsible. Given the lack of

UK banks involvement in

nancing the coal industry

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June 2007 RBS, Barclays and 21 other banks loan $3,000million to Energias de Portugal, which operates a number ofcoal-red plants in Portugal.

June 2007 Barclays and six other banks arranges a $2,650million loan to Duke Energy, an electricity generating com-pany with an approximately 28,000 MW capacity includingcoal-red plants.

nancing indicates that HSBC loaned more to

coal-related industries than Barclays. However,this is due to their involvement in two substantiallylarger loans to E.ON. Barclays has been involvedin signicantly more separate loans to a larger

number of companies than HSBC.

Yet RBS comes out signicantly worse than either

HSBC or Barclays, both in terms of the size ofits lending to coal companies, and in the numberof different loans that it has been involved in.Compared to other British banks, RBS is clearly

the biggest provider of nancing to coal miningand power plants, including some of those mostcontroversial for environmental destruction andhuman rights. The bank has been involved inthe most and the largest loans nancing coal

operations from Indonesia to Kazakhstan, fromAustralia to Portugal.

public data as to the exact breakdown of eachbanks involvement, an estimated calculation canbe made by dividing each loan by the numberof banks involved, and then attributing an equalslice of the pie to each participant.

Based on this process of estimation, Barclayswas responsible for an estimated $5.79 billion,HSBC $10.10 billion and RBS $15.93 billion.

This method of estimating involvement in

14

Bank Total No.of LoanDeals

Total Valueof all Deals(billion)

EstimatedTotal Share(billion)

RBS 27 $95.83 $15.93

HSBC 3 $71.09 $10.10

Barclays 17 $38.24 $5.79


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July 2007 Barclays and seven other banks make a $500million loan to Southern Co, a power generation companywhose energy portfolio includes coal-red stations.

July 2007 RBS and nine other banks loan $1,200 millionto the Noble Group, that owns coal production assets inAustralia and Indonesia, and supplies a wide range of coalproducts from China, Russia and South Africa.

RBS has responded to the charges of dangerouslyexacerbating climate change by highlightinghow much money it puts into renewables. Whileit is laudable to increase the amount of nancial

support being directed into the renewablesindustry, this needs to happen insteadof fossilfuel nancing rather than alongside it. Massive

deployment of renewable energy infrastructurewill not address the threat of climate change if wecontinue to increase the rate at which we extractand consume fossil fuels, in particular coal.

This response from RBS is also inconsistentin that the bank claims that it should not have

The response of RBS to its

fossil fuel nancing

to take responsibility for the climate impactsof its lending, - suggesting that must rest withthe borrower14 - while simultaneously claimingresponsibility for the climate benets of the

renewables that it nances.

RBS has issued thousands of glossy leaets to

all its branches titled RBS & the Environment,in which it talks about its renewables nancing

and the fact that they achieved the highestpossible rating (AAA) for environmental and socialmanagement, by the Innovest ratings agency in

2007.15 RBS chooses not to mention InnovestsOctober 2007 Carbon Beta Rating whichspecically assesses climate risk management.

RBS scored only BBB, worse than Barclays (AA)and HSBC (AAA). Out of 15 banks reported on inInnovests Carbon Disclosure Project report, RBSwas the only bank to score worse than A.16

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August 2007 RBS and one other bank arrange a $1,000million loan billion for LS Power & Dynegy for their 900MWSandy Creek coal-red plant.

November 2007 Barclays, ABN Amro and three other banksmake a $100 million loan to the Alliant Energy Corporation,who are operating and building new coal-red plants in theUS.

Specic examples of coal

nancing

A detailed investigation of the operations of eachcompany that has received loans from UK banksis beyond the scope of this report. What followsare three examples of the companies involved inthe coal industry who have received money fromUK banks.

E.ONIn the UK, no power company has generated morecontroversy in 2008 than energy giant E.ON. Thecompany has faced wide-scale opposition overits plans to build the rst coal-red power station

in the UK for 30 years at Kingsnorth in Kent,17 andit has also announced plans to build a further 17

coal and gas-red power plants across Europe

and Russia by 2010.18 E.ON is also exploringoptions of switching its Russian gas-red power

stations to increased coal use.19

Acting as mandated lead arranger alongsideBarclays and HSBC, RBS participated in nancing

E.ON $70billion over the course of 2007.20 Theproximity of the nancing to the announcement

of the new power stations, combined with thesize of the sums of money, leads to the suspicionthat this borrowing will help nance the new

power plants.

Despite vigorous attempts to promote its greencredentials, E.ON Groups project choices arebased rmly in a commitment to shareholder

prot through vertical integration. E.ON seeks

to gain control of the entire supply chain, with

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November 2007 Barclays, ABN Amro and three other banksmake a $300 million loan to the Interstate Power and LightCo, the Iowa utility subsidiary of Alliant Energy Corporationthat operates coal-red plants.

November 2007 RBS and three other banks loan $1,000million to Oklahoma G&E which has nine power plantscapable of producing about 6,100 MW and generates about70% of its electricity from coal.

renewables playing a minor role in the UKits renewables portfolio accounts for just 2%of energy generated, with coal accounting for61%.21

Arch CoalIn October 2006, RBS participated in an $800million revolving credit facility22 for Arch coal.23

Arch Coal is the second largest coal producerin the US, and owns a number of mountaintop mines in the Appalachia region.24 Its useof Mountain Top Removal coal mining (MTR)

has attracted high levels of controversy andcriticism. Arch Coal has been responsible for thedisappearance of 300,800 acres of biologicallydiverse hardwood forest through MTR.25 Thepractice uses explosives to remove up to 1,000feet of vertical rock and produces vast quantitiesof coal sludge which is dumped in neighbouring

valleys. The companys operations have beencondemned by numerous groups such as theSierra Club, Rainforest Action Network and theOhio Valley Environmental Coalition.

Arch Coal is making substantial prots from theglobal coal boom. Its share price almost doubledin 2008, while its West Virginia productionincreased from ve million tonnes in 2007 to nine

million tonnes in 2008.26 Referring to both theglobal demand and relative cost of renewableenergy, John W. Eaves, Arch Coal President

asserts that we are facing the pure economicsof coal.27

Dynegy/LS Power

In 2007, RBS took part in almost $4 billion ofloans to LS Power and Dynegy. In March 2007,Houston-based Dynegy acquired LS Power, and

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November 2007 Barclays and four other banks take partn a $2,750 million loan to First Energy Corporation, whoseelectric generation is primarily from coal and nuclear powerplants.

November 2007 RBS and four other banks loan $600 millionto OGE Energy Corporation which has nine power plantscapable of producing about 6,100 MW and generates about70% of its electricity from coal.

in doing so became the largest developer of coalplants in the US.28 About 91% of the additionalenergy capacity that Dynegy gained from theacquisition was derived from emissions-intensivepulverised-coal plants and added an extra 62.4

million tonnes to its annual carbon dioxideemissions.29

Strong criticism from civil society has quicklymounted against Dynegys expansion plans.CEO Bruce Williamson, was runner up to the2008 Fossil Fool of the Year in recognition

of the companys unceasing promotion ofdirty coal power.30 In March 2008, a coalitionof environmental organizations and activistsincluding the Sierra Club and Co-op Americarallied at the companys shareholder meeting inHouston against new coal plant plans, as partof the Clean Up Dynegy platform.31 The Sierra

Club has also announced plans to sue Dynegyover the potential mercury emissions of the rst

coal-red plant planned to be built in the state of

Georgia in over 20 years.32

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November 2007 RBS, Barclays, HSBC and eight other banksmake a loan of $22,284 million to E.ON, that plans to build17 gas- and coal-red power plants in Europe and Russia by2010.

February 2008 ABN Amro, Barclays and 7 other banks takepart in a $750 million loan to EN+ Group. Two months later, itacquires assets including a coal-red power-station in Russiaand a coal eld which had a coal output of about 10 milliontons in 2007.

This report shows that the three largest Britishbanks are all heavily involved in nancing new

coal, locking in emissions from the dirtiest fossilfuel, over the decades-long lifetimes of powerstations and coal mines. These investments willhave devastating impacts on the climate. Amongthe three, RBS is the most involved in the drive

to support coal.

Banks outside Britain are slowly beginningto address climate issues resulting from coalnancing. A high-prole civil society campaign in

the US pressured three of the biggest US banks(Citibank, JPMorgan Chase and Morgan Stanley)

Conclusion: The future of

nancing coal

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March 2008 Barclays and nine other banks loan $845million to Tata Power, which has a stake in coal productionin Indonesia and operates a number of coal-red plants inIndia.

March 2008 RBS and two other banks make a loan of $700million to Constellation Energy Partners, which is the biggestwholesale power seller in the U.S. It owns 78 electricitygenerating units in the U.S. with a combined capacity of 8,700MW, 35% of which is generated from coal combustion.

to lay out a set of principles in relation to theirlending to coal-red power stations in February

2008.33 These guidelines assess the futurecarbon emissions of proposed power plantsand give indications of what should and should

not be nanced. While a positive rst step, theorganisations co-ordinating the campaign arguethat the Carbon Principles must go further,as so far they involve no clear and bindingcommitments.

These rst moves away from coal by international

banks, particularly in the US, are threatened by thefact that the coal companies can turn instead tothe UK banks, who have no guidelines or policiesregarding coal nance and climate change.

While Barclays and HSBC also nance the coal

industry, RBS is the most heavily involved. In

the UK, RBS has already been the subject ofa sustained campaign in recent years over itsheavy involvement in nancing new fossil fuel

developments around the world. A report releasedby civil society groups in 2007 highlighted the fact

that the banks lending decisions were responsiblefor over 43 million tonnes of carbon emissions -more than Scotland.34 In the year since summer2007 there have been over 60 protests at bankbranches, student unions have passed motionscondemning the banks fossil fuel nancing and

a number of shareholders have raised concerns.

The bank is helping hold back wider industrychange both through its nancing and through

its general positioning on climate change refusing to accept any responsibility for lendingto fossil fuels. By aggressively arguing that it ispreposterous to believe that RBS derives climate

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April 2008 RBS/ABN Amro and three other banks loan$2,500 million to Florida Power and Light, which maintainstwo coal-red plants in Florida.

responsibilities for nancing fossil fuels, the bank

is providing a disincentive for other banks to stepforward and adopt progressive policies.35

Faced with the serious threat of climate change,

the expansion of the coal industry is highlyirresponsible. Yet banks are failing to live up totheir responsibilities, and are continuing to driveforward the carbon frontier, by investing heavilyin coal. These banks will increasingly be placedin the spotlight for their role in climate change,as civil society, bank customers and investors

demand that they stop being part of the problem,and become part of the solution.

This report recommends that banks:- Fully disclose information on all fossil fuelnancing activities.

- Recognise the full implications of their operationson climate change and introduce comprehensiveclimate change policy.

- Cap and decrease the overall level of carbon

emissions embedded in their fossil fuel nancingby shifting their portfolios away from projectsand companies directed at expanding fossil fuelextraction and consumption.

- Make no future loans that support unabatedcoal operations.36

Websites and resources on coal and fossil fuel nancing

The Oil & Gas Bank RBS & the nancing of climatechangewww.carbonweb.org/documents/Oil_&_Gas_Bank.pdf

Campaign site targeting RBS and its nancing of fossilfuelswww.oyalbankofscotland.com

The Stop Kingsnorth campaignwww.stopkingsnorth.org

End Mountaintop Removal Resource and Action Centrewww.ilovemountains.org

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DATE

NAMEOF

COMPAN

Y

DESCRIPTION

C

OUNTRY

LOAN

AMOUNT

(million)

U

K

B

ANKS

TOTAL

BANKS

May-06

Millmerran

Power

PowerStation

A

ustralia

$779.38

R

BS,

H

SBC

11

May-06

TejoEnerga

SA

PowerStation

P

ortugal

$814

R

BS

13

Sep-06

Constella

tion

Energy

PowerCompany

U

SA

$200

R

BS

3

Oct-06

LowerWilgat

LLC

CoalMineDevel-

oper

U

SA

$185

R

BS

2

Oct-06

ExelonCorp

PowerCompany

U

SA

$1000

R

BS

5

Oct-06

AGLEner

gy

Ltd

PowerCompany

A

ustralia

$1,830

R

BS

7

Oct-06

ArchCoa

l

CoalMining

U

SA

$800

R

BS

1

Nov-06

NEEnerg

y

Inc

PowerCompany

U

SA

$855

B

arclays

3

Nov-06

Glencore

Internatio

nal

CommoditySup-

plier,including

coal

U

SA

$1,260

R

BS

3

Nov-06

AlliantEn-

ergyCo

PowerCompany

U

SA

$100

B

arclays

5

Nov-06

Rugeley

PowerLtd

PowerCompany

U

K

$908

R

BS

6

Nov-06

E.ONAG

PowerCompany

G

ermany

$48,026

R

BS,

H

SBC

6

Nov-06

DukeCap

ital

Corp

PowerCompany

U

SA

$350

B

arclays

2

Appendix1-

Tableofinvestme

ntdata

Asfaraswecould

determinefrom

publicin

formation,allthecasesincludedhereinvolve

eithernanceofwhichasignicantproportionsupportedthedevelop

mentofcoal-related

activities,ornancingactivitieswithasig

nicantabsoluteimpactonemissions.We

acknowledgethatnotallofthesumsinclude

dherewillhavedirectly

nancedcoal-related

activities,butasnotedinthebodyofthisreport,thereareotherinvestm

entswhichsupport

coalwhicharenot

includedhere.Ontheinfo

rmationpubliclyavailable

wecouldnotmake

amoredenitiveassessment.Wecallonthe

banksinvolvedtodisclo

sefullinformation.It

mayprovethatthebanksinvolveddonotgath

erorrecordadequateinformationonthelikely

climateimpactsoftheirinvestmentstobeablemakeadenitiveassessment.Ratherthana

reasonableexcuse,thismightbeconsidered

tobeafailureofduedilig

enceinaworldwith

rapidlyrisingcarbonprices.

22


25/28

Dec-06

OGEEnergy

Corp

PowerCompanyU

SA

$600

R

BS

5

Dec-06

PSEGPower

LLC

PowerCompanyU

SA

$1,600

R

BS

4

Dec-06

DukeEne

rgy

Corp

PowerCompanyU

SA

$2,000

B

arclays

2

Dec-06

Trianel

PowerStations

G

ermany

Appointed

Financial

Advisor

R

BS

1

Dec-06

Northern

States

PowerCo

,

knownas

XcelEner

gy

PowerCompanyU

SA

$500

B

arclays

4

Mar-07

American

Electric

PowerCo

Inc

PowerCompanyU

SA

$1,500

R

BS,

B

arclays

6

Mar-07

CMSEne

rgy

Corp

UtilityHolding

Company

U

SA

$300

B

arclays

5

Apr-07

PlumPoint

Powersta

-

tion

PowerStation

U

SA

$819

R

BS

1

May-07

Dynegy

PowerCompanyU

SA

$2,070

B

arclays,

R

BS

12

Jun-07

TataPower

Powerstation,

coalproduction

India

$950

B

arclays

2

Jun-07

Energiasde

Portugal

PowerCompanyP

ortugal

$3,000

R

BS,

B

arclays

23

Jun-07

DukeEne

rgy

PowerCompanyU

SA

$2,650

B

arclays

7

Jul-07

Southern

Co

PowerCompanyU

SA

$500

B

arclays

8

Jul-07

NobleGroup

CoalProduction

A

ustralia,

Indonesia,

$1,200

R

BS

10

Aug-07

LSPower&

Dynegy

PowerStation

U

SA

$1,000

R

BS

2

Nov-07

Alliant

EnergyCor-

poration

PowerCompanyU

SA

$100

B

arclays,

A

BNAmro

5

Nov-07

Interstate

Poweran

d

LightCo

PowerCompanyU

SA

$300

B

arclays,

A

BNAmro

5

23


26/28

Nov-07

Oklahoma

G&E

PowerCompanyU

SA

$1,000

RBS

4

Nov-07

FirstEnergy

Corporation

PowerCompanyU

SA

$2,750

Barclays

5

Nov-07

OGEEne

rgy

Corporation

PowerCompanyU

SA

$600

RBS

5

Nov-07

E.ONAG

PowerCompanyE

urope,

R

ussia

$22,285

RBS,

Barclays,

HSBC

11

Feb-08

EN+Grou

p

PowerCompanyK

azakhstan

$750

ABN

Amro,

Barclays

9

Mar-08

TataPower

PowerStation,

CoalProduction

India

$845

Barclays

10

Mar-08

Constella

-

tionEnergy

Partners

PowerCompanyU

SA

$700

RBS

3

Apr-08

Florida

Poweran

d

Light

PowerCompanyU

SA

$2,500

RBS/ABN

Amro

5

Appendix 2 - Sources & footnotes

1 Source: Department for Business, Enterprise and RegulatoryReform, Quarterly Tables: Energy Trends (ET) 08/79b, Table5.1: Fuel Used in Electricity Generation and electricity supplied,updated 26 June 2008, http://stats.berr.gov.uk/energystats/et5_1.xls2 Source: Department for Environment, Food and Rural Affairs,e-Digest Statistics: Climate Change, Table 5a: Estimated emis-sions by source, fuel type end user, National Communicationcategories, 1970-2006, http://www.defra.gov.uk/environment/statistics/globatmos/download/xls/gatb05.xls3 Source: The World Coal Institute, The Coal Resource - AComprehensive Overview of Coal, 2005, p 39, http://www.worldcoal.org/pages/content/index.asp?PageID=374 Source: Reuters, 15 July 2008, Australia considers rst newcoal port in 25 years 15 July 2008 http://uk.reuters.com/article/oilRpt/idUKSP29044620080715?pageNumber=2&virtualBrandChannel=05 Source: BBC News website, 22 July 2008, Clean deadlinecall on coal power, http://news.bbc.co.uk/1/hi/sci/tech/7518311.stm6 Source: New York Times, 23 April 2008, EuropeTurns Back to Coal, Raising Climate Fears, http://www.nytimes.com/2008/04/23/world/europe/23coal.html?_r=2&hp&oref=slogin&oref=slogin7 Source: The Herald Sun, 25 July 2008, Rio Tinto showsmuscle in coal industry debate, http://www.news.com.au/her-aldsun/story/0,21985,24078301-664,00.html8 Source: Sunday Herald, 18 March 2007, RBS is accusedof sponsoring global warming, http://www.robedwards.com/2007/03/threat_to_boyco.html9 Source: HSBC response to Carbon Disclosure Project 3questionnairehttp://www.cdproject.net/download.asp?le=CDP3_HSBC_

24

AQ 3213 df 24 S Th A h C l b i d 1 /0 /08


27/28

AQ_3213.pdf10 See http://www.ghgprotocol.org/11 Profundo is an economic research consultancy analysingcommodity chains, nancial institutions and Corporate SocialResponsibility (CSR) issues. http://www.profundo.nl/12 Source: Personal correspondence with Bill Barclay, GlobalFinance Campaigner, Rainforest Action Network13 For instance, a loan that was made to Pacic Gas and

Electric was excluded as coal provided only 4% of its powergeneration in 2007.14 Source: The Herald, 11 July 2007, Royal Bank stands up forsize of its carbon footprint, http://www.theherald.co.uk/busi-ness/news/display.var.1534803.0.0.php15 Source: RBS Leaet, October 2007, RBS and the Environ-ment, http://www.rbs.com/content/corporate_responsibility/environmental_impact/downloads/Low_resEnvironmental.pdf16 Source: Innovest, Carbon Disclosure Project Report 2007Global FT500, http://www.innovestgroup.com/images/pdf/cdp5_ft500_summary_report.pdf17 There is some variance in perspectives as to how long agothe last coal-red plant in the UK was built. Some people usethe starting point as the completion date of Drax, the last coalred power station, in 1986.18 Source: Point Carbon, 6 March 2008, E.ON to build 17fossil-fuelled generation plants.19 Source: E.ON power point presentation, 17 September 2007,E.ON will enter Russian power market, http://www.eon.com/en/downloads/Acquisition_of_OGK4_17092007.pdf20 Source: Project Finance, Issue No. 287, February 200821 Calculations made from http://www.eon-uk.com/generation/191.aspx22 A loan system that works like a credit card, providing liquidityfor the companys day-to-day operations.23 Source: BankTrack, Mind The Gap, 2007, pp.124-5, http://www.banktrack.org/?show=183&visitor=1

24 Source, The Arch Coal website, accessed 17/07/08, www.archcoal.com,.25 Source: Newsletter from the Ohio Valley Environmental Co-alition, accessed 14/07/08 www.ohvec.org/newsletters26 Source: The State Hournal, 10 July 2008, Arch PresidentSees Positive Future for Coal, http://www.statejournal.com/story.cfm?func=viewstory&storyid=4104527 ibid28 Source: The BankTrack website, accessed 15 July 2008,http://www.banktrack.org/?show=dodgy&id=11529 Source: Innovest Strategic Value Advisers, Dynegy: CarbonRisk AccompaniesLS Power Merger, updated 27 March 2007, http://www.innove-stgroup.com/images/dynegy-ls%20power%20merger%20report%20v%20nal%20%282%29.pdf30 ibid31 Source: Sierra Club Press Release, 14 May 2008, Hundredsrally against coal plants at Dynegy shareholder meeting inHouston: Coal Isnt Worth It, http://www.cleanupdynegy.org/downloads/051408.pdf32 Source: Atlanta Business Journal, 6 May 2008, SierraClub, GreenLaw and Friends of the Chattahoochee sue overGa. power plant, http://charlotte.bizjournals.com/atlanta/stories/2008/05/05/daily30.html33 Since the principles were unveiled, they have also been ad-opted by Credit Suisse, Bank of America and Wells Fargo.34 Source: PLATFORM, The Oil and Gas Bank RBS & thenancing of climate change, http://www.carbonweb.org/docu-ments/Oil_&_Gas_Bank.pdf35 Source: the Scotsman, 11 July 2007, http://business.scots-man.com/ViewArticle.aspx?articleid=330317036 In the context of these recommendations, abated emissionsrefer to a hypothetical, fully operation CCS system that wasresponsible for reducing coal emissions by at least 80%

25


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From concerns over air pollution and acidrain, to the recent rising awareness of carbon

emissions and climate change, coal has beenrecognised as the dirtiest, most dated andmost inefcient fossil fuel option.

Despite this, coal is experiencing a globalboom, and private banks are making largesums of money by nancing the expansion of

coal extraction and combustion. This reportexamines the role in the last two years of theRoyal Bank of Scotland, HSBC and Barclaysin providing and arranging the nancial means

to the coal industry to extract and burn vastquantities of coal.

Cashing in on Coal

royal bank of scotland cashing in on coal

Documents