Policy-makers across Europe have been criticised today for having promoted a fuel dirtier than coal as a solution to climate change, leading to years of unsustainable investment by financial institutions.
New research by responsible investment campaigners ShareAction reveals investors and banks have a blind spot when it comes to financing the biomass power sector which generates electricity through the burning of wood pellets. Looking at the energy and forestry policies of Europe’s 15 largest banks, nine completely ignore biomass as an energy source; only six support eliminating deforestation by 2020; and only seven exclude financing for illegal logging. One major bank makes a blanket statement that biofuels are a climate solution.
This fuel has misleadingly been pushed as low-carbon as a result of the UK’s Bioenergy Strategy in 2012, when the government started handing out generous ‘renewable’ energy subsidies for biomass power generation as a way to meet the EU’s Renewable Energy Directive targets. For example, in 2017 Drax received a staggering £729 million.
However, consensus has emerged among experts that burning wood to generate electricity is far from the climate solution that solar and wind have proven to be. Burning large volumes of biomass causes enormous damage to forests and results in greater carbon emissions than coal when burned. This carbon cannot be captured by the slow regrowth of forests in the short time we have to meet the goals of the Paris Agreement. The government’s current plans to pull further subsidy support falls drastically short of repairing the damage done to the climate and forests.
Another reason biomass has been allowed to pass as renewable for so long is that the UN’s reporting guidelines require GHG emissions related to bioenergy to be counted where the tree is cut down rather than where it is burned. This gives permission for the importing country to ignore emissions of combustion by assuming they have already been accounted for, making carbon emissions of biomass power appear artificially low. For example, Drax misleadingly states that it ‘saved around 86% of CO2 emissions compared to the coal benchmark’ in 2016-17.
Shockingly, we lack the level of disclosure necessary to assess the carbon intensity of different forms of biomass. This would require emissions from combustion to be counted and the impact on forest carbon stocks measured.
ShareAction strongly suggests that investors demand this type of quantitative information in order to raise standards across the industry. In addition, investors and banks should halt investment in the biomass power sector, limiting its global growth. Without such intervention, the demand for wood pellets in South Korea and Japan is expected to increase sixfold by 2027, enough additional energy to power three million homes.
ShareAction makes three clear recommendations to investors:
- Investors and banks should not provide financial support for new biomass power infrastructure;
- Greater engagement is needed with existing biomass power operators and supply chains to adopt and enforce very strict criteria; and
- Biomass should not reduce or deflect funding away from solar or wind energy projects.
Jo Alexander, research and engagement manager and author of the report, says: “The UK Government has got it very wrong on biomass and its mistakes should be seen as a cautionary tale to policy-makers around the world. Perversely, subsidies that were intended to decarbonise the UK’s power sector have actually damaged forests and the climate. We cannot afford to make such basic errors in our management of the carbon cycle if we are to meet the goals of the Paris Agreement.
“Investors should not be taken in by the green-washing of utility companies that sell biomass power generation as a climate solution. Their claims that biomass reduced carbon emissions compared to burning coal are based on flawed calculations that omit the most significant CO2 emissions from the combustion of biomass.”
ClientEarth law and policy advisor Caroline Haywood said: “The large-scale burning of wood for energy is a major climate blind spot, increasing greenhouse gas emissions just when we need to be reducing them to avoid disastrous temperature rise.
“ShareAction’s report highlights that investors need to know that investing in biomass is not the green investment it is touted to be – it looks likely to carry growing investment risk. Responsible investors should call for better disclosure and greater transparency from the industry on the climate impacts of biomass.”
Notes to editors:
- For more information, please contact Beau O’Sullivan at firstname.lastname@example.org or +44203 475 7859
- The UK Government is now making it more difficult for new biomass projects to qualify for subsidies and is likely to remove them entirely if they adopt the recommendations by the UK’s Committee on Climate Change.
- The £729 million subsidy that Drax received in 2017 was through two schemes, £481 million from ‘Renewable Obligation Certificates’ and £248 million from ‘Contracts for Difference’.
- The calculation for the conversion of wood pellet demand growth number of homes powered is based on the following assumptions: Wood pellet demand in Japan and South Korea is expected to increase by 14.3 million tonnes by 2027. 3.4 million tonnes of wood pellets convert to 1 GW of power (based on Drax power station which consumes 6.8 million tonnes of wood pellets from a capacity of just under 2 GW). 1 GW powers 750 000 homes.
- About ShareAction: ShareAction’s vision is a world where ordinary savers and institutional investors work together to ensure our communities and environment are safe and sustainable for all. Our mission is to unleash the positive potential of the mainstream investment system. To do this: We’re building a movement for change in our investment system by working with people inside and outside the industry to challenge the status quo; We’re unlocking the positive potential of the investment system by working with large and small investors to change unsustainable corporate practices; We’re reforming the investment system by advocating for change in the policies, governance, and incentives that drive behaviours in the investment industry.