French banks are still funding new oil and gas projects, despite the threat of climate change. NGOs have sued banks for their support of these projects and have called for a halt to the financing of fossil fuels. Asset managers, pension funds, and insurance companies also invest in fossil fuels. Private and public combined investment in energy transition reached $1.1 trillion in 2022, according to Bloomberg Nef. The reduction of fossil fuel investment in France was primarily due to supply constraints in car production, and once the limitations were lifted, the industry could experience a rebound. Moreover, state subsidies for coal, oil, and gas consumption are on the rise, which hinders the energy transition. According to the International Energy Agency (IEA), these subsidies often benefit the wealthiest consumers instead of protecting the most vulnerable. To safeguard against energy price volatility, researchers recommend building a system based on renewable energy and energy efficiency.
Infographics: Who finances fossil fuels and contributes to global warming?
Fossil fuels remain the main cause of climate change, yet they still benefit from significant private investment and public subsidies. According to the Intergovernmental Panel on Climate Change, funding for fossil fuels is always more important than that for climate change mitigation and adaptation. While declarations of good intentions are made by companies and states on ecological transitions, their actions reveal a different reality.
The primary cause of climate change is the consumption of coal, oil, and gas, which release greenhouse gases when burned. Getting out of this dependence is crucial to preserving living conditions on Earth. Today’s investments determine the level of greenhouse gas emissions tomorrow, warns Maxime Ledez, a research fellow at the Institute of Economics for Climate (I4CE).
However, public and private funding for fossil fuels continues to surpass that for climate change mitigation and adaptation. The capital invested goes to new projects that are incompatible with our climate goals and companies that lack a transition plan, such as the EACOP project of TotalEnergies or the new LNG terminal in Le Havre.
The International Energy Agency (IEA) declared in 2021 that launching new projects for the exploitation of gas, coal, or oil was unnecessary to achieve the energy transition. Despite this, the sums invested by banks and private actors into the fossil fuel industry remain the same, while public subsidies are increasing. Franceinfo takes stock of these financial flows that fuel global warming.
Banks and private actors finance producing companies
Producing companies continue to receive significant private funding, notably from banks. The top ten banking institutions alone invested $3.8 trillion in the fossil fuel industry between 2016 and 2020. The largest financiers were JPMorgan Chase, Wells Fargo, and Citigroup.
Private funds are also a significant source of funding. BlackRock, the world’s largest asset manager, invested $85 billion in coal companies between 2016 and 2020, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
Public subsidies for fossil fuels
In addition to private funding, fossil fuels receive significant public subsidies. According to the International Monetary Fund (IMF), global subsidies for fossil fuels amounted to $5.9 trillion in 2020, up from $4.7 trillion in 2015. These subsidies are mainly given in the form of tax breaks and low-cost loans.
In conclusion, public and private funding for fossil fuels continues to surpass that for climate change mitigation and adaptation. It is imperative to reduce the dependence on fossil fuels and invest in renewable energy sources to limit global warming’s effects.
The world’s largest banks continue to finance fossil fuels
According to calculations by the coalition of NGOs “Banking on climate chaos,” the world’s 60 largest banks provided an average of $764 billion each year to fossil fuel companies since the signing of the Paris agreement in 2015. While the amount allocated each year to giants in the sector such as ExxonMobil or Saudi Aramco has decreased since 2019, financing still caps more than it is decreasing. The latest available figure of $742 billion for 2021 remains higher than that of 2016 and 2017.
Despite 44 of these banks committing to achieving carbon neutrality by 2050, they continue to make unconditional checks without asking their customers to take action. Lucie Pinson, director of an NGO part of the coalition, expresses her regret on this matter.
BNP Paribas, the leading French bank in the ranking, defends its strategy criticized by NGOs. While the bank’s investment curve is currently drawing a plateau, with $14.75 billion in 2021 against $17.87 in 2016, the director in charge of social and environmental responsibility at BNP, Laurence Pessez, assures that the rankings, which add up funding amounts over five years, erase their reduction trajectory. She further explains that at the end of 2022, BNP already has more financing going to low-carbon, mainly renewable energies, than to fossil fuels, at 55% compared to 45%. BNP has pledged to reduce its funding related to gas extraction and production by 30%, and that related to oil extraction and production by 80% by 2030.
NGOs and scientists call for BNP Paribas to stop supporting new oil and gas projects
In February, three NGOs sued BNP Paribas, and 600 scientists published an open letter in The Obs calling for the bank to stop supporting new oil and gas projects. The bank’s response to the call was that they regret that NGOs chose litigation over dialogue. The bank also highlights the scientific consensus on the need to reduce emissions and made new commitments that are fully in line with the International Energy Agency’s operational translation, which integrates both the climate emergency and other economic and social parameters.
However, Lucie Pinson, director of Reclaim Finance, recognizes that BNP Paribas’s 2030 objectives for their portfolio are aligned with the IEA roadmap. Still, she questions if the bank will help a lot of fossil companies in the meantime. She points out that the bank’s commitments only cover loans and not the issue of bonds, another financing tool that consists of selling debts from a business in the markets. A recent example illustrates the problem, where a loan granted to subsidiaries of Saudi Aramco was transformed into a bond with support from BNP Paribas, Crédit Agricole, Société Générale, and Natixis.
Lucie Pinson insists that BNP Paribas does not ask its customers to stop the development of new projects and disputes the preferential treatment granted to gas, which is labeled as an energy of transition by the European Union. She reminds us that gas is a fossil fuel, which is said to decrease in scenarios, just like the others.
Private investment and public subsidies continue to support fossil fuels, despite the fact that they are the primary cause of climate change. In 2021, the world’s 60 largest banks provided an average of $764 billion each year to fossil fuel companies. While this amount is decreasing, financing for fossil fuels remains higher than that for solutions to limit climate change. However, some banks have committed to achieving carbon neutrality by 2050, with BNP Paribas, Société Générale, and Crédit Agricole among the top-ranking French banks. BNP has also pledged to reduce funding related to gas extraction and production by 30% and that related to oil extraction and production by 80% by 2030.
Other private actors, including asset managers and insurance companies, are also involved in financing fossil fuels. In France, there is no obligation for them to disclose such investments. The annual overview of investments in fossil fuels in France, drawn up by the I4CE, showed that private and public investments in fossil fuels were down in 2021, at 62 billion euros, compared to 86 billion in 2019. However, once constraints are lifted, a rebound is expected.
States also provide significant subsidies for the consumption of coal, oil, and gas. In 2022, subsidies amounted to 1,000 billion dollars for coal and 626 billion dollars for consumer aid, such as price caps and energy vouchers. These subsidies are on the rise due to the energy crisis caused by the war in Ukraine.
NGOs criticize the insufficient commitments made by banks and call for them to stop financing new oil and gas projects. While some banks have committed to reducing their funding related to fossil fuels, NGOs question whether they will truly meet their decarbonization targets. All banks should apply a precautionary logic and condition their support on stopping the development of fossil fuels.
While investments in the energy transition are at the same level as those allocated to fossil fuels, there is still much work to be done to prevent irreversible damage to the planet.
Subsidies for fossil fuels are on the rise worldwide, with governments providing aid through price caps, tax advantages, and energy vouchers, among others. In 2022, state subsidies for coal, oil, and gas consumption amounted to $1 trillion, with an additional $626 billion for consumer aid not included in the methodology used by the IEA. While such measures may have social benefits, the IEA notes that they tend to benefit the wealthiest, and are rarely targeted to protect the most vulnerable, hindering the global effort to transition to clean energy. The Glasgow climate pact calls for the phasing out of inefficient fossil fuel subsidies while providing targeted support for the poorest and most vulnerable. In France, 2023 will see €19.6 billion in expenses deemed unfavorable to the climate, although this is largely reduced from previous years. Certain financing of fossil fuels, such as the tax differential between diesel and gasoline or the reduced VAT on plane tickets, are not included in the State’s calculations. While the question of how to decarbonize quickly without disrupting social and economic activities remains, experts agree that building a system based on renewable energy and energy efficiency is the best way to protect consumers in the long run.
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