File this one under O for Ouch, that’s gotta hurt. The US coal industry has been banking on overseas buyers to make up for its ever shrinking share of the US power generation sector, but the world’s fifth-largest bank has just tossed a banana peel in its path. That would be Japan’s Mitsubishi UFJ Financial Group, Inc., otherwise known as MUFG. Last week MUFG set the Intertubes on fire when it announced that it will no longer finance the construction of new coal power plants, but that’s not what should really worry US coal stakeholders.
MUFG Ditches Coal, Sort Of…
Before you get too excited over last week’s announcement from MUFG, let’s take a closer look.
The new no-coal power pledge is part of MUFG’s newly minted Environmental and Social Policy Framework. In the new Framework, MUFG pledges to stop financing new coal-fired power generation projects. That’s all well and good, depending on what you mean by new.
Apparently MUFG means new as in “never heard of it before.”
Any projects that MUFG already has under consideration are exempt from the financing ban up until July 1. Though MUFG has said it will take a “cautious approach” toward moving any of those projects along, the likelihood is that they will move forward unless some outside force intervenes.
Another loophole in the Framework allows for MUFG to make exceptions “where governments need to build plants to meet local electricity demand.” That’s quite a loophole!
The loophole thing is also in play for MUFG’s position on coal mining. In the new Framework, MUFG pledges to place coal mining on its list of Restricted Transactions. However, it leaves enough wiggle room to stock a bait shop:
Recognizing their potential negative impact on the environment and society, MUFG will include in its consideration of financing for these sectors confirmation of the relevant client’s implementation status concerning environmental and social measures.
In other words, yes to new coal mine projects unless somebody else wants to step up and pull the plug.
…But That’s Only Part Of The Plan
The coal part of the new MUFG Framework may be somewhat reassuring to coal stakeholders in the US and elsewhere, but that’s kind of like looking at the wings of a wasp and ignoring the stinger.
The stinger is the fact that MUFG is a global leader in renewable energy finance. The bank is not shy about tooting its clean power horn:
…MUFG is acting as project finance arranger and lender for solar, wind and geothermal power generation projects. In these ways, we serve as a driving force behind the dissemination of renewable energy around the world. Thanks to these efforts, in 2017 we were able to secure first place in the global ranking of financial institutions serving as lead arrangers in financing for renewable energy projects. We have seized this position for a second consecutive year.
MUFG has also been among Bloomberg’s top three renewable energy and clean tech financial firms every year since 2012.
There’s plenty more where that comes from. The new Framework hints at more yen to come for MUFG’s clean power activities:
MUFG aims to provide a cumulative total of 20 trillion yen in Sustainable Finance (of this, 8 trillion yen is for the area of environment) between FY2019 and FY2030 to help build a sustainable society and attain the Sustainable Development Goals (SDGs) through the provision of financial services to its clients.
And Now For The Bad News
As for those MUFG coal projects in the pipeline, one of those is the proposed 1,320 megawatt Van Phong 1 power plant, slated to be located in Ninh Phước commune, Khánh Hòa province.
Financing appears to be in hand ahead for the project despite considerable opposition.
That brings us full circle around to the new Framework. It appears tailor-made to keep Van Phong moving forward, both from the perspective of Vietnam’s power sector and its coal mining sector, as well.
A partner in the project, JBIC, provides the explainer:
In Vietnam, demand for electricity has been increasing sharply against the backdrop of robust economic growth. However, the construction of power plants has been lagging behind the demand, resulting in tight power supply in the country, and it is, therefore, imperative for the Vietnamese government to resolve power supply shortages.
Okay, so there’s that. Van Phong I appears to be just one piece in the jigsaw puzzle of relations between Japan and Vietnam and China, which complicates the prospects for dropping the project like a hot potato. If you have any ideas about that drop us a note in the comment thread.
Meanwhile, CleanTechnica is reaching out to the green investor group Ceres to see if they can provide some clarity on what the new Framework really means for MUFG’s coal exposure.
As for the US coal industry, a growth spurt in global renewable energy investment is just one factor that could curb the growth of exports.
Another looming problem is the growing power of anti-coal activists in coastal cities. Port communities in the US are beginning to flex their veto muscles to opposed new and/or expanded coal terminals.
In one recent development on that score, last year Presidential contender and Washington State Governor Jay Inslee came out swinging against a proposal to export coal from US military bases in his state, so stay tuned for more on that.
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Photo: Hosoe solar farm in Japan courtesy of GE (MUFG Bank arranged project financing for this joint venture between GE Energy Financial Services and Pacifico Energy).