MANILA

Algo: Another year of missed chance for coal divestment

IT HAS been a year since the start of lockdowns in the Philippines due to the Covid-19 pandemic. While the country is lagging behind in curbing the spread of the coronavirus, the crisis has brought on an increased awareness on accounting for planetary health in decision-making by key government units and actions by communities.

However, this has not translated into meaningful changes in the country's energy sector, especially on the just transition from fossil fuels to renewable energy (RE). Coal, in particular, continues to dominate the national power generation sector, with no signs of slowing down despite its role in causing the climate crisis.

There are several factors driving the continuing dominance of coal, including inconsistent policymaking leading to RE development. On one hand, the Department of Energy issued a moratorium on new coal-fired power plants, effectively shelving up to 2.9 GW of coal power capacity. This compliments the passage of a House resolution last November declaring a climate and environmental emergency that calls on local governments to adopt a "no to coal" or "no to new coal policy," and initiatives by the department to finally fully implement the Renewable Energy Act, more than a decade after its enactment.

However, this moratorium does not cover the coal capacity in the pipeline, which could end up adding as much as 11 GW into the energy mix. The committed policies and measures of the energy sector also remain lacking in the latest draft of the Philippines's Nationally Determined Contributions, its self-determined pledge to reduce greenhouse gas (GHG) emissions as a Party to the Paris Agreement. With the sector already being the highest GHG emitter, the addition of more coal power violates the country's own pursuit of climate justice and would lock it in an outdated energy set-up, resulting in stranded assets and immense long-term costs to its economic and citizens' well-being.

However, the role of financial institutions in maintaining the dominance of coal must not be overlooked. As the time for Annual Shareholders Meetings of major Philippine banks approach, it is important to take a deeper look into the current role of these financial institutions in maintaining the country's addiction to coal.

Funding a pollutive future

Since 2010, the Philippines added 16 new coal-fired power plants to its fleet. While no new coal plant has been added since 2017, up to 23 such facilities currently remain in the pipeline. These would lead to the continued reliance by the country on coal for the next two decades, barring any drastic changes in policy implementation.

Fifteen of the nation's largest banks have played a major role in this coal expansion, having issued more than USD13 billion in loans and underwriting to coal-related projects and companies from 2009 to late-2019. The Bank of the Philippine Islands (BPI) issued the largest amount of coal financing during this span, with nearly USD3.5 billion worth of loans and bonds for at least 15 coal plant projects and six coal developer companies. It is followed by BDO Unibank, which provided around USD2.5 billion in financing for a minimum of 14 coal plants.

While smaller banks issued considerably smaller financing compared to BPI and BDO, their size makes these loans and underwritings significant and does not take away from the impacts of the coal projects that benefited from said funding on nearby communities.

Furthermore, most of these banks do not have any commitment or adopted policy towards divesting their assets away from this fossil fuel. Only RCBC has announced its intent to no longer fund coal projects, which complements its existing sustainable finance framework and integration of environmental and social risks in its business practices. This is in contrast to the growing list of major financial institutions globally that have committed to stop financing coal projects for the foreseeable future, such as the European Investment Bank.

Recent measures, such as the Sustainable Finance Framework published in May 2020 could help change the policy directions needed to create a more favorable environment for spurring RE development in the Philippines. Yet these would be rendered ineffective without the initiative and proper coordination between and among government units and the private sector, an issue that has hampered other policies before.

The processes of divestment and just energy transition, which are linked in many aspects, would take years or decades to accomplish and for the Philippines to experience their benefits. But they are necessary processes that must be undertaken as urgently as possible, not only for recovery from the Covid-19 pandemic, but also for laying the foundation for energy security and sustainable development for all.

Without transformative decisions by governments and businesses, and pressure from the Filipino people for these actors to implement such changes, the country's future would be compromised by dirty energy. Another year, another wasted opportunity to divest from coal.

***

John Leo is the Deputy Executive Director of Living Laudato Si' Philippines and a member of the interim Secretariat of Aksyon Klima Pilipinas. He has been a citizen journalist since 2016.


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