G7 Countries to End Coal Financing This Year

They say money makes the world go around so it might hold true that money can run it into the ground too. Whether it’s the World Bank or JP Morgan Chase or the Irish government, there’s a good reason why activists focused on the financing of coal funding in recent years and on pressuring those who hold the purse strings to stop being so generous with companies and industries profiting from and contributing to the climate crisis we are in. 

Slowly but surely, this tactic appears to be paying off. At least, that’s the impression from the latest communiqué released this week by the G7 Ministers—the Group of Seven nations consists of the United States, Britain, Canada, France, Germany, Italy, and Japan—responsible for Climate and Environment.

Among other commitments included in that document, is an explicit commitment to end their governments’ role in the international financing of coal projects: 

 “…recognising that continued global investment in unabated coal power generation is incompatible with keeping 1.5°C within reach, we stress that international investments in unabated coal must stop now and commit to take concrete steps towards an absolute end to new direct government support for unabated international thermal coal power generation by the end of 2021, including through Official Development Assistance, export finance, investment, and financial and trade promotion support.”

There are many good reasons to be encouraged by this development. Firstly, and most obviously, less money going to coal means less coal being produced and burned. And even though other countries—China and Australia, most notably—continue to drag their feet on a move away from coal, there’s little doubt that a commitment from the G7 leaves these other nations considerably more isolated. 

"Coal mining has come under pressure this week after the International Energy Agency said that no new coal mines should be needed if the world is to cut emissions to net zero by 2050," reported the Financial Times.

Writing for European climate think tank E3G just before this latest communiqué, Hanna Hakko laid out the behind-the-scenes pressure being put on Japan to join other G7 nations on this topic—particularly because until recently it was believed to be considering financing coal projects in both Indonesia and Bangladesh as part of its international financing efforts. Noting that pressure from fellow G7 nations had combined with positive U.S.-Japan relations; a regional rethink from the Asian Development Bank; as well as a shift in Japan’s private sector banking institutions’ position on coal, Hakko wrote that the time was ripe for such a commitment. 

It’s not just about coal, however. The speed at which the ground has shifted under the coal industry’s feet should serve as a warning for other fossil fuel industries—and their financial backers too. Writing a little while back on Twitter—long before this latest G7 announcement—renowned futurist Alex Steffen suggested that coal’s troubles might be a sign of thing to come for oil, gas, and other high-carbon sectors: 

It’s worth remembering that coal is the canary in the financial mine. Whole industries, tens of thousands of companies in different sectors, government bonds, infrastructure projects, real estate, etc.—a huge swath of the modern world—is at risk for rapid repricing now. 

Similarly, BlackRock CEO Larry Fink—when he famously used his Larry’s Letter to call for a fundamental reshaping of finance—argued we can expect real and perceived climate risk among financiers to become a driver of change: 

“...because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself. In the near future—and sooner than most anticipate—there will be a significant reallocation of capital.”

Not too long ago, those of us who followed climate and the environment were—most likely—resigned to the idea that mainstream financing was largely in bed with coal and other fossil fuels. And yet slowly, surely, we are beginning to see the money spigot getting turned off. 

Yes, it’s not yet happening fast enough. And yes, there is much more to be done. Yet we can be encouraged by how unlikely an announcement like this would have been just a few years ago. Given that coal’s climate troubles are shared by a wide range of other industries, we can also extrapolate that it won’t be the last such announcement in the months and years to come.