In the wake of last Saturday’s defeat, it’s important to remember that Australian politics is just one of many fronts in the struggle to stabilize the global climate and, in particular, to decarbonize electricity supply as rapidly as possible.
An important step in this process has been the push for financial institutions of all kinds: banks (public and private), pension funds, insurers and insurance brokers, corporate financial advisors and so on, to break with fossil fuels, starting with coal-fired electricity and thermal coal.
For a long while, victories in this effort were primarily symbolic. Ethical investors dumped coal, but there were plenty of others to take their place. A year or two ago, the process started to bite. The inability of Adani to find any outside finance for the Carmichael mine was an indication of things to come. By 2019, most global banks, export-import finance agencies and development banks had imposed restrictions on coal finance that were becoming increasingly stringent.
The great exception to this process was Asia where China, Japan, Korea and Singapore were all expanding their lending to coal projects in the developing world, even as they shifted towards renewable energy at home.
That’s changed quite suddenly. Beginning late last year, major Japanese banks have been adopting policies restricting lending to coal. The most recent instance is Mitsubishi UFG . Then, in the space of a month, all three of Singapore’s biggest banks followed suit. Now the focus of attention has shifted to Korea. Banks there are resisting pressure to divest, but it’s hard to imagine they can do so much longer.
That leaves China. Obviously there is not a lot of room for pressure from external groups or from civil society domestically. On the other hand, a situation where China is the sole source of funding for coal creates risks on both sides. For the banks, the implied overweighting of coal violates standard principles of financial risk management. For the borrowers, there is nowhere to turn for refinancing if China pulls the plug.
In these circumstances, it’s reasonable to expect that quite a few of the global coal projects currently being pushed by Chinese interests will not proceed. And sooner or later, this last source of money for coal will dry up.