Deutsche Bank / Coal finance / Green Climate Fund (GCF)

Deutsche Bank Special: Blackening its image: Deutsche Bank finances Punta Catalina coal plant

End funding for coal, Image: urgewald

Deutsche Bank has been accredited as an implementing entity of the Green Climate Fund (GCF) since July 2015. NGOs criticized its inclusion as sending the wrong signal, since Deutsche Bank is one of the world’s largest financiers of the coal industry and thus undermining climate finance. In a series of blog posts in cooperation with the environmental and human rights organization urgewald, provides insights into Deutsche Bank’s current coal and fossil fuel financing activities.

Deutsche Bank states on its website that its project on sustainable energy for Africa was approved at the meeting of the Green Climate Fund (GCF) in October 2016. Accreditation by the GCF is burnishing the environmental image of the bank, as is its support for green bonds intended to combat climate change. There may in fact be parts of the bank that take climate change seriously and want to prevent it.

If that is the case, however, their efforts are being stymied by other parts that continue to drive climate change with their investments. In late 2015, for example, Deutsche Bank and other banks provided a credit tranche of $200 million for the Punta Catalina coal plant in the Dominican Republic. It arranged the project finance loan of over a total of $632.5 million being granted in cooperation with ING, Santander, Société Générale and Unicredit.

Punta Catalina is a 770 MW coal plant consisting of two power plant units that is expected to cost a total of about $2 billion. The project was initiated by the Dominican Corporation of State Electricity Companies (CDEEE). In addition to the power plant, a dedicated terminal is to be built for the incoming coal.

Coal plants need a considerable amount of water, and Punta Catalina’s problematic aspects include access to water in a region where the population is short of water for drinking and irrigation agriculture. Local environmentalists complain that the fight against power shortages is being used as an excuse to build a power plant that threatens public health, the environment and agriculture in the province.

The project also has corruption issues, as the construction contract was awarded in a dubious process that does not comply with public procurement law in the Dominican Republic. A clause in the concession agreement that provides that the state must buy the plant if it proves unprofitable for the investor has met with criticism. Furthermore, the contract was concluded without a proper call for tenders.

According to a report by the NGO Banktrack, Punta Catalina is expected to produce 5 to 8 million tons of CO2, 175,000 tons of ash and 14,000 tons of slag per year and 30 tons each of nitrogen dioxide and sulfur dioxide daily, as well as numerous heavy metal micro-particles. Two environmental organizations filed an injunction with the Superior Administrative Court out of concern over respiratory and cardiovascular diseases and negative impacts on agriculture.

In May 2016, international and Dominican environmental organizations spoke out against the plans of the Dominican government to use $600 million from a pension fund to finance Punta Catalina. This would be necessary because the Brazilian Development Bank (BNDES), which was also to have been involved in the financing, froze its funding because Odebrecht, the company slated to build Punta Catalina, is being investigated for corruption in Brazil. Environmental organizations led by the Dominican National Committee to Combat Climate Change (CNLCC) warn that this would be an unacceptable and potentially dangerous use of public funds.

Moreover, the CNLCC criticized that the construction of Punta Catalina contradicts the Dominican Republic’s national development strategy of 2012. The development strategy stipulates the decarbonization of the economy by prioritizing renewable energy sources, energy efficiency and clean transport. The construction of a new coal plant does not fit into this strategy.

With regard to the involved banks, Enrique de Leon of the CNLCC comments: “With the abundance of renewable energy potential which the Dominican Republic possesses, it’s been very surprising to see a string of European banks, which all say they are committed to the clean energy transition and fighting climate change, getting behind a project which will require major coal imports to the island, and will lead to considerable environmental and health impacts if the Punta Catalina plant starts firing.”

This applies to all involved banks, but especially to Deutsche Bank, which proudly boasts its accreditation as an implementing organization of the Green Climate Fund.

Guest post by Regine Richter, urgewald