The World Bank’s private lending branch is indirectly backing one of the world’s biggest new coal complexes, despite a new green policy.
In September, the International Finance Corporation (IFC) published its green equity approach (GEA), outlining that: “IFC no longer makes equity investments in financial institutions that do not have a plan to phase out investments in coal-related activities.”
Yet the client it chose to pilot the approach with in 2019, Hana Indonesia, has since approved project finance to the 2,000 MW Java coal power station in Banten, Indonesia.
A source with knowledge of the matter told Climate Home that when confronted, IFC officials claimed not to be aware of Hana Indonesia’s involvement in the coal megaproject.
“We are in discussion with PT Bank KEB Hana Indonesia to better understand its recent lending activities,” a spokesperson for IFC said.
Java 9 and 10 is predicted to release 250 million tonnes of carbon dioxide over 25 years, equivalent to the annual emissions of Thailand or Spain, according to a report by sustainable finance watchdog Recourse.
A Greenpeace report warned that the $3.5 billion coal project could lead to more than 4,700 premature deaths over a 30-year period and affect the air quality in the Indonesian capital Jakarta, 120km from the power plant.
Indonesia has the fourth largest coal pipeline in the world and is one of only five countries in the world to start construction of new coal power plants in 2020, according to Climate Action Tracker.
The GEA was developed precisely to encourage equity clients in such countries to shift away from coal, with a goal to reduce their coal exposure by 50% by 2025 and to zero by 2030.
“The approach will allow IFC to continue engaging with banks that finance coal, but with a transparent framework and declining limits in line with the Paris Agreement and various climate scenarios,” the IFC said.
The policy came two years after the IFC said it would proactively seek clients committed to moving away coal.
“If the IFC continues to fund really egregious coal such as Java 9 and 10 that is a huge disappointment and frankly a betrayal of all the GEA stands for,” Recourse co-director Kate Geary told Climate Home.
“The GEA will be revised in 2021 and we need to see this loophole closed – no new coal has to be a condition of IFC agreement to partner with a bank under the GEA.”
Hana Indonesia’s parent bank is Hana Korea, South Korea’s fourth largest bank. IFC has a “long-term relationship” with Hana Korea, according to Seongeun Lee, a researcher at the Korea Sustainability Investing Forum. “They have invested in Hana Korea from their inception.”
IFC and Hana Korea are both shareholders in Hana Indonesia. IFC owns almost 10% and Hana Korea almost 70% of equity in the bank, according to Recourse. Neither bank has made a public statement on coal financing.
Hana Korea is one of several South Korean banks to invest in Java 9 and 10, noted Yuyun Indradi, the executive director of campaign group Trend Asia.
“Korea is financing dirty energy projects [overseas], while they try to implement the Green New Deal domestically. It’s a double standard,” Indradi said.
When President Moon Jae-in won the election earlier this year, he announced an ambitious Green New Deal, which included a 2050 net zero pledge and ending state support for overseas coal projects.
In July, South Korean lawmakers proposed a bill that would end financing for overseas coal projects. Seongeun said it is currently unclear whether the bill will pass and said that to date only six Korean financial institutions have declared that they will no longer invest in coal.
“Hana has seen that [Java 9 and 10] is the last chance as a business opportunity [to invest] in the dirty energy sector,” Indradi said.
According to Recourse, IFC could play a pivotal role in ending Indonesian and Korean investment in coal.
“We need IFC to take Hana Indonesia to task over this, and to use its relationship with Hana Korea to have a serious discussion about the bank’s huge coal exposure around the world,” said Geary.
This article was amended to clarify the emissions comparison.
Leaders adamant on ending charcoal trade
The authorities of Paibona Sub-county in Gulu District have blamed political leaders for promoting massive tree cutting for commercial charcoal production.
Mr Joseph Otim, the National Forestry Authority (NFA) sector manager, in an interview on Friday, said local leaders at sub-county and district levels connive with charcoal dealers in the guise of raising revenue.
“One of the biggest challenges in forest governance in this country is that the people who should be taking action are relaxed. The ones in office, the foresters, and the leaders at all levels view charcoal trade as a lucrative business. So everyone looks at what goes into their pockets, at the expense of conservations,” Mr Otim said.
He said some of the forest officials have been targeted and threatened by such leaders, especially whenever they impound forest products.
“Another challenge is the people who are highly placed and connected in the security organs who issue threats,” Mr Otim added.
During a field assessment by the district authorities to map deforestation in the area last week, heaps of cut trees being burnt for charcoal were found but no dealers found on site.
But in Akor and Ayweri villages that have chunks of deforested land, there are 193 registered commercial charcoal dealers. Some of these dealers were found on site and have been asked to abandon the trade. For fear of prosecution, some of the dealers withheld their identities. They, however, told Daily Monitor that they cannot abandon charcoal business because it is their only source of livelihood.
Mr Jackson Ayoli, the chairperson of Paibona Sub-county, however, said leaders cannot fight commercial charcoal burning because it is a major source of revenue.
He noted that the sub-county collected Shs3 million in the Financial year 2021/2021 from taxing charcoal and other forest products. From the September to November 2022 quarter, Mr Ayoli said the sub-county collected Shs3.1 million from forest-related products.
“Forest products are one of the major sources of local revenue in this sub county and without it, paying the allowances of the sub-county councillors and other staff would be a huge challenge,” Mr Ayoli said.
The Sub-county Chief, Mr David Kercan, said Paibona projected to collect Shs 16 million in local revenue in the last Financial Year (2021/2022). Local revenue sources include local service tax, trading licenses, and operations from Non-Governmental Organisations. “However, we realised only 67 percent of local revenue projections, translating to Shs 10,720,000 out of Shs16 million,” he said.
Ms Betty Aol Ocan, the Gulu City Woman Member of Parliament, said local governments should be innovative and find other sources of revenues.
The Global Forest Watch says Gulu District lost 988 hectares to illegal logging and charcoal burning in 2021—an equivalent to 440,000 tonnes of carbon dioxide emissions.
It is also estimated that between 2001 and 2021, Gulu lost 38,700 hectares of tree cover.
Source: Daily Monitor
EACOP Partners With Surveyors Body as Pipeline Land Acquisition Nears Completion.
The East African Crude Oil pipeline Company (EACOP) Ltd on Wednesday entered a partnership with the Institute of Surveyors of Uganda (ISU) which will see them work together to among others bolster local capacities ahead of the construction of the regional oil pipeline.
Through this arrangement, USU undertook to conduct training of EACOP staff and offering internship programs for university students from universities of Makerere, Ndejje and Kyambogo.
The initiative will provide a three-months training and internship placement for selected participating university students twice a year during the breaks between semesters.
The Institute of surveyors of Uganda (ISU) has over 2200 members that brings together land surveying, quantity, surveying, valuation surveying, mining, and hydrological surveying professionals whose mandate is to promote professional surveying practices that can enhance the quality of services under the various surveying disciplines in Uganda.
Speaking during the MOU signing ceremony held in Kampala today, EACOP Managing Director Martin Tiffen said while they are currently employing several surveyors registered with ISU, they needed a platform for a stronger collaboration.
The partnership is hoped local content and capacity building in the oil sector in Uganda
“We have been consumers of services of different kinds of surveyors…but this agreement is a way for some of our staff to improve on their professional qualifications” he said“It also gives us a mechanism to receive students who need (internship) positioning into our organization.”
On his part, Dr. Nathan Kabwami, the President Institute of Surveyors echoed the significance of commitment of EACOP to the partnership with the Institute of Surveyors of Uganda to facilitate the delivery of quality training to future surveyors that will work on this incredible project.
“I thank EACOP for this commendable skilling initiative and urge all University students who meet the criteria for this program and are interested in being part of the transformation of Uganda’s oil and gas industry to embrace it.” He said.
Meanwhile, Mr Tiffen revealed that EACOP is progressing well with the process of acquiring land for the pipeline.
Since February last year when the oil Final Investment Decision was signed, Tiffen says over three quarters of project affected persons (PAPs) have been paid off.
There is a total of 3648 PAPs spread across 170 villages where the oil pipeline will pass through inside Uganda.
The EACOP MD also revealed that so far, construction of new houses for people for displaced families is nearly complete and that all 180 houses will be handed over to the owners early this year.
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