Pressure mounts on banks to stop doing business with Indonesian coal giant Adaro

JAKARTA — Adaro, one of Indonesia’s largest coal companies, has shown no signs of moving away from fossil fuels despite a net-zero pledge, sparking calls for global financial institutions to cut ties with the company.

More than 33,000 people have signed an online petition calling on JPMorgan, Citi and Deutsche Bank to drop Adaro as a client. Citi has lent $400 million to Adaro, and JPMorgan and Deutsche Bank’s environmental, social and governance (ESG) policies do not preclude them from lending to the company.

According to research from the Carbon Measures database, Adaro is a major emitter, responsible for 0.28% of global carbon dioxide emissions since the Paris Agreement was signed in 2015. But a petition organised by global consumer watchdog Eco says the company has no credible plan to reduce its emissions.

Eco-activist Apekshita Varshney said Adaro’s business model was “harmful” and that 70% of the company’s total revenue still came from selling thermal coal, which is used to generate electricity.

“If banks are thinking about going green as a customer and at the same time trying to appear green to the world, they risk doing significant damage to their own reputations,” she said.

Environmental concerns have led major banks including BNP Paribas and DBS to refuse to underwrite Adaro’s future bonds, and South Korean carmaker Hyundai has walked away from a contract to source aluminum from a smelter built by Adaro, Varshney noted.

“This is a clear signal that miners cannot get away with greenwashing and fake transition plans,” she said.

In April 2022, Adaro Energy CEO Garibaldi Thohir announced the company’s intention to “end its reliance on coal” and move to renewable energy. In October 2023, Adaro released a statement in which it fully supports the Indonesian government’s commitment to reduce greenhouse gas emissions by converting its coal operations to green energy.

But an analysis by Ekō and BankTrack, a network of NGOs that monitor funding for environmentally harmful activities, found Adaro’s transformation claims to be false.

For one, Adaro continues to expand its coal business, both thermal and metallurgical coal, used in steelmaking.

Metallurgical coal: hot new products

Adaro said metallurgical coal remains central to the country’s energy transition plans, given its importance in steel production. Across Indonesia’s coal mining industry, metallurgical coal is seen as the industry of the future, as demand for steel grows to support clean energy technologies, from electric vehicles to renewable energy infrastructure.

Wind turbines are made of 66% to 79% steel, according to the National Renewable Energy Laboratory. ArcelorMittal, the world’s second-largest steelmaker, says it takes 120 to 180 tons of steel per megawatt of wind power, compared with 35 to 45 tons for solar.

For Adaro, in fact increase The company’s metallurgical coal mining is part of its efforts towards decarbonization.

“[O]”High-quality metallurgical coal is expected to remain critical to producing the steel needed to support a green economy, decarbonization and infrastructure growth for decades to come,” Thohir said in a statement.

So Adaro has been ramping up production. In 2023, it reported a 39% increase in metallurgical coal sales to 4.46 million tonnes. It is targeting a 21% increase this year to 5.4 million tonnes, and ultimately 6 million tonnes in 2025.

While much of the scrutiny of the coal industry has focused on phasing out the burning of thermal coal, metallurgical coal remains largely excluded from mining companies’ and financial institutions’ coal phase-out plans, even though it remains a significant contributor to global greenhouse gas emissions, particularly through the release of methane. Methane is a greenhouse gas that is 80 times more potent than carbon dioxide for the first 20 years of its release into the atmosphere, causing climate warming at a faster rate.

According to the International Energy Agency (IEA), mines producing metallurgical coal emitted about 12 million tonnes of methane in 2021. This is equivalent to about 990 million tonnes of CO2, making them more of a global warming contributor than the CO2 emissions of Germany or Canada.

Overall, the steel industry’s reliance on coal accounts for 11% of global carbon dioxide emissions and 7% of global greenhouse gas emissions, and the mining, transportation and combustion of metallurgical coal has far-reaching, well-documented negative impacts on communities and ecosystems around the world.

The IEA said existing coal mines are sufficient to meet demand until 2030 and called for a halt to the development of new metallurgical coal mines.

However, Adaro plans to open new metallurgical coal mines on three concessions. Currently, the company holds two metallurgical coal mine concessions.

Thohir justified the expansion of coal for steelmaking by saying coal is an irreplaceable raw material in the steelmaking process, adding that the future of coal for steelmaking is bright. Adaro also said it was researching technologies to reduce emissions, such as carbon capture, utilization and storage (CCUS) technology.

But contrary to what the mining industry claims, metallurgical coal is no longer essential to steel production, according to a recent analysis by the Institute for Energy Economics and Financial Analysis (IEEFA). Simon Nicholas, IEEFA’s lead global steel industry analyst, attributes this to advances in steelmaking technology and predicts that global demand for metallurgical coal will decline while demand for steel remains strong.

Carbon capture technology has also not been demonstrated at scale, and there are no steel plants anywhere in the world that use CCUS on a commercial scale, with virtually none planned, IEEFA noted.

This means that the global steel industry needs to move away from coal for the transition to a low-carbon industry, IEEFA said.

Thermal coal remains strong

While Adaro is expanding its metallurgical coal production, it is not abandoning thermal coal entirely. Thohir said Adaro has no plans to open new mines or acquire thermal coal assets, adding that “production will remain relatively flat” and “will decline.”

However, in 2023, Adaro’s thermal coal production and sales will Increased Those cuts will be 5% and 7%, respectively, starting in 2022. Asked at a public event in November 2023 whether Adaro would cut thermal coal production, Lee Lachman, the company’s chief financial officer, said Adaro would maintain production levels.

Adaro has made significant investments in its coal supply chain, including barges and heavy equipment, through 2022 and 2023. The bulk of the capital investment has gone into building a massive aluminum smelter in an industrial park in North Kalimantan. The smelter, billed as “green” because it will eventually run on hydroelectric power, signed a high-profile contract to supply aluminum for Hyundai’s EVs. It was then revealed that the smelter would initially run on a new 2.2 gigawatt coal-fired power plant, also built by Adaro, forcing the Korean giant to terminate the contract under pressure from consumers around the world.

Eko said that given that metallurgical coal production is increasing while thermal coal production shows no signs of declining, Adaro has not presented a credible transition plan and the company’s operating policies remain inconsistent with internationally agreed climate targets.

The company’s net-zero declarations are also vague and not focused on actual emissions reductions, Eco added.

Bondan Andriyanu, a climate and energy activist at Greenpeace Indonesia, said all this meant that Adaro was not serious about moving away from coal, despite its claims and promises.

“[I]”If Adaro wants to regain the trust of global corporations, both donors and buyers, it needs to truly move away from coal and not just resort to greenwashing,” he said in a press statement.

Failure to do so would further isolate Adaro from global markets, said Nabila Gunawan, an activist at climate finance watchdog Market Forces.

“Without a credible transition plan that involves limiting coal expansion, Adaro will have to face increasing financial risk and the fact that more investors will abandon this filthy company,” she said.

Banner image: Environmental activists wearing masks and holding placards, banners and balloons labeled with dangerous gases released from using coal protest during a shareholders meeting of coal mining company Adaro in front of the Raffles Hotel building in Jakarta, Indonesia, on May 15, 2024. Photo by Greenpeace/Mas Agung Willis Yudah Baskoro.

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Article by Hayat

alternative energy, carbon emissions, charcoal, clean energy, climate, climate change, climate change policy, coal, corporate environmental violators, corporate responsibility, corporations, emissions reduction, energy, environment, finance, fossil fuels, fossil, green, green energy, greenhouse gas emissions, just transition, mining, renewable energy

Asia, Indonesia, Southeast Asia

Adaro, Hyundai, JPMorgan Chase (JPM)

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