February 5, 2020

By Jiri Jerabek, Utility and Finance Coordinator for Europe Beyond Coal Campaign, Berlin

Financial institutions are increasingly dealing with the question of how to assess their climate
performance, as well as their clients’ climate actions. BNP Paribas, UBS, and the Italian
bank UniCredit are now using the Nationally Determined Commitments (NDCs) as a
benchmark. We believe such an approach is not in line with the need to keep the growth of
global temperatures under 1.5 or even 2 degrees Celsius.

NDCs are voluntary national pledges submitted by single signatory states of the Paris
Agreement (and the UN Framework on Climate Change). An overview of national pledges
announced to date is available

The Europe Beyond Coal campaign promotes real climate action. In this context, we have
serious concerns that using NDCs to assess the performance of energy utilities and other
companies is the right benchmark. These concerns can be summarised below.

NDCs are insufficient
Existing NDCs fall far short of the action needed to avert the worst consequences of climate
change. One recent report, the “2019 Production Gap,” shows how far behind these pledges
are the action necessary for 1.5 degree Celsius and even 2 degree warming scenarios.

Global CO2 Emissions from Fossil Fuels
National Plans fall far short of Paris Agreement and 1.5 DegC warming scenario

Source: http://productiongap.org/wp-content/uploads/2019/11/Production-Gap-Report-2019.pdf 

According to Climate Tracker’s analysis, almost no national plan is ambitious enough to meet the urgency of our climate crisis. Some countries do not even currently have an NDC or, as is the case with the United States, plan to withdraw from important UN climate treaties.

Some countries do not even currently have an NDC or, as is the case with the United States, plan to withdraw from important UN climate treaties. Against this background, to use NDCs as a primary benchmark for assessing climate efforts is to accept global warming of 3 degrees Celsius or greater, which is far from consistent with the Paris Agreement and a threat to human civilisation as we know it.

NDC compliance is a legal obligation for private sector climate efforts
NDCs are national climate and energy policies approved by national governments. Accordingly, businesses should be complying with such national plans in their regular operations. In other words, any business or other private entity should be expected to follow the NDCs of the countries in which they operate, just as they should be expected to follow any other environmental laws and regulations. NDC pathways should therefore be considered minimum requirement: i.e. mandatory compliance with national policies. Only efforts above the (NDC) pathways should be considered as an additional climate effort.

NDCs have no coal or energy targets
Many NDCs lack specific targets for energy and coal reduction targets. Applying top-level greenhouse gas reduction targets to the broader energy and coal sectors will not put the world on track to meet its emissions reduction targets because not all fossil fuels are created equal. For example, research by Climate Analytics and the United Nations Environment Programme (UNEP) has shown that meeting the goals of the Paris Agreement will require OECD countries to be out of coal-fired power production entirely by no later than 2030.

Moreover, none of the EU member states have a national NDC, instead adhering only to the EU-wide NDC. This regional pledge only targets a 40 percent greenhouse gas emission reduction by 2030 compared to 1990 levels. The target has no specific goals for countries, for CO2, or for energy and coal. Historical data shows that EU countries have already reduced CO2 emissions from coal by more than 40 percent since 1990, raising serious concerns about whether the EU NDC plan provides any meaningful benchmark for climate action by European energy companies.

Policies should be in line with a 1.5 degree Celsius pathway
Instead of relying on the inadequate approach outlined above, which is likely to lead to global warming of 3 degrees or greater, financial institutions should establish clear policies with specific targets for their clients. Climate action assessments should use established methodologies to prevent greenwashing and “haggling” about whether a particular company is sufficiently committed to climate action.

Crédit Agricole is a useful case in point. Until recently, the French financial institution ranked high on Europe Beyond Coal’s list of financial institutions bankrolling Europe’s most coal-dependent utilities. However, in 2019, the company approved a policy with clear demands on existing clients, indicating that coal needs to be phased out by 2030 in European and OECD countries, by 2040 in China, and by 2050 everywhere else. To get there, by 2021, Crédit Agricole will require all client companies to adopt a detailed plan to shed their coal assets in line with these phase-out targets. By setting out these concrete requirements, Crédit Agricole has become a leader in its field.

Such policies should become a benchmark for all financial institutions. It’s 2020. We have ten years left to secure the necessary total coal phase out in Europe. Financial actors have a responsibility to engage with energy companies and urgently deliver clearly articulated and detailed plans for the gradual closure (not sale!) of existing coal plants and mines. Europe and the OECD must be coal free by 2030 at the latest.

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