Before they benefit from any kind of bail-out, banks should commit to reducing their investment in fossil fuels. – This article was originally published at http://www.guardian.co.uk/commentisfree/2008/oct/08/fossilfuels.banks.
On the same day as it became apparent that RBS would need billions of pounds of taxpayers’ money to save it from collapse, the government’s climate change watchdog warned that we should abandon almost all fossil fuel use for power generation by 2028. The investments that banks like RBS make are taking us to the edge of environmental catastrophe as well as market meltdown, and any regulation involved in the public bail-out of RBS and other banks must include environmental as well as financial stipulations.
Although all the UK high street banks (with the honourable exception of the Co-op) are heavily involved in bankrolling new oilfields, gas pipelines and coal power stations around the world, RBS has been shown to have the worst track record of the lot.
A report released last year showed that the emissions embedded within RBS oil and gas project finance reached 36.9m tonnes of carbon in 2005 – equivalent to one-quarter of UK households, and almost as much as the entire emissions output of Scotland. In 2008, a subsequent report, Cashing in on Coal, showed that in the preceding two years, RBS loaned an estimated $15.93bn in 27 different loans to coal-related companies around the world. These included RBS taking a share in massive loans worth $70bn to Eon, the energy giant attempting to build the first coal-fired power station in this country in 34 years.
There’s a real danger that the recent global economic turmoil will edge out mounting concerns over climate change, when it should really be encouraging a move towards more joined-up thinking towards the environment, money and the market. New forms of regulation shouldn’t just be limited to the relatively cosmetic business of capping executive bonuses. They should cut to the heart of the climate damage being inflicted by RBS and other banks through their expansion of the fossil fuel frontier around the world. It’s bad enough that Joe Public’s savings have been used to bankroll this expansion: now their taxes could be as well.
Any bail-out should be conditional upon RBS making a full disclosure of its fossil fuel financing, as well as making a commitment to immediately cap and reduce the carbon emissions embedded in its investments and loans. The transition to a low-carbon economy requires substantial investment, in renewable energy, public transport infrastructure and energy efficiency measures. Such investment needs to be made instead of, rather than alongside, financing new coal and oil. To date RBS has been taking a contradictory stance of crowing over its clean energy financing while disavowing itself from its fossil fuel involvement. Freed of the short-term profit interests that dictate the “free” market, banks could play a huge role in allocating capital towards the massive overhaul that the global economy needs.
We cannot address the current financial crisis without simultaneously addressing the issues of climate change and our ongoing dependence on dwindling supplies of fossil fuels. For the first time in living memory, the government has the potential to have a direct say in the lending behaviour of banks like RBS, and that opportunity should be used to take us down the path of climate as well as economic stability.