Why Australia's ANZ Bank is cutting off lending to coal-fired plants
Australia’s ANZ Banking Group, the smallest of the nation’s “Big Four” banks, intends to cut off funding for new coal-fired power plants by lending at least A$10 billion over five years to projects that reduce greenhouse gases.
The five-year commitment will fund a range of low-carbon initiatives such as renewable, low-emissions transport, reforestation and carbon capture and storage (CCS), which the coal industry believes will prolong the viability of fossil fuels.
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ANZ is essentially ending its support of power plants that don’t use new, advanced technology to reduce carbon dioxide emissions in an effort to create a low-carbon economy over the next five years.
“We understand some of our stakeholders view our financing of fossil fuel industries as a material risk and in direct conflict with our stated position on the need to reduce greenhouse gas emissions,” said ANZ in a statement.
“Today, around 40 percent of the world’s electricity comes from coal-fired power stations and coal remains the cheapest source of fuel. We therefore consider that decarbonization of the economy must be managed responsibly and over time.”
In the past, ANZ has been criticized by climate activists by being Australia’s largest financer of fossil fuel projects, including the controversial Maules Creek mine in New South Wales as well as Adani Mining’s Carmichael project in Queensland.
However, ANZ announced its commitment to the global target of limiting global warming to 2C above pre-industrial times by reporting its progress on climate and setting targets to reduce its own emissions.
A study by University College London reveals that 90 percent of Australia’s coal reserves must be left unburned to keep the world from warming over 2C. According to AGL, 75 percent of Australia’s ageing coal-fired power stations were operating past their “useful life” but are too expensive to shut down.
Australia’s other three major banks may end up doing the same to tighten conditions surrounding the country’s coal industry amid more and more requests to reduce carbon emissions from green groups, who cite potential damage to the nation’s climate as well as the Great Barrier Reef.
Since 2008, the top four Aussie banks have provided over A$36 billion to fossil fuel projects in Australia.
Despite being the smallest of the four major Aussie lenders, ANZ faces the most exposure to the fossil-fuel industry. With coal still the leading fuel for global power generation with a share of about 40 percent of all inputs, ANZ plans to also improve its due diligence processes to lending to coal mining, transportation and power generation.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”