A new analysis from Recourse, Trend Asia, and Inclusive Development International found that despite the Multilateral Development Banks’ (MDBs) commitment to stop financing coal power projects, their policies do not cover captive coal units for industrial facilities, some of which play a role in renewable energy and electric vehicle supply chains. MDBs are at risk of funding a wave of ‘captive’ coal expansion in climate-vulnerable countries, such as Indonesia, despite commitments to shift funds from fossil fuels to renewable energy. The report highlights two examples of captive coal projects in Indonesia financed by Hana Bank Indonesia and OCBC NISP, financial intermediary clients of the International Finance Corporation (IFC).

With many captive coal units expected to see rapid demand increases in the coming decades for powering the processing of nickel, cobalt, steel, aluminum, and other metals/minerals (because of their role in low-carbon technologies), it is vital that the captive coal loophole is closed and that MDBs instead support efforts to decarbonize industry (while supporting only climate projects that protect human rights and do no harm to communities or the environment).

These policy gaps are a significant issue as the role of MDBs in international climate finance, and the demand for metal processing facilities looks set to increase greatly in coming years. It would be a great irony if, in the name of financing the production of materials needed for a renewable energy transition and the decarbonization of transport systems, MDBs also financed the rapid expansion of climate-busting captive coal. Failing to close these loopholes may undermine the many other commitments to end coal finance announced by governments and development finance institutions (DFIs) in the past decade, as well as efforts to reduce global greenhouse gas emissions and limit global temperature rises to 1.5oC.

Photo by Esa Setiawan/Trend Asia