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Funded by British investment, mining brings deforestation, health problems and pollution to Samarinda, part of ‘coal’s last frontier’
Just 30 years ago, Samarinda was a sleepy village surrounded by deep equatorial forest and known mostly for its traditionally woven sarongs. Today it is the largest city in Indonesia’s East Kalimantan province, with nearly 1 million inhabitants. It is also the centre of the burgeoning coal industry, surrounded by more than 1,000 mines and concessions.
The forests have gone, opencast mines circle the city and giant barges pass down the river Mahakam every few minutes taking coal to India, Japan, Korea and beyond. Nearly 70% of the city has been handed to coal companies as concessions. In theory, Samarinda could be swallowed by coal.
The city and most of East Kalimantan is unrecognisable to those who left some three decades ago, but now, say Indonesian and British campaigners, coal mining is poised to rip through central Kalimantan, or Borneo, a few hundred miles west of Samarinda. Mining companies such as BHP Billiton are moving in with money raised in London to exploit some of the world’s largest deposits in what is being called coal’s last frontier. So far, 449 exploration concessions have been awarded, covering 15,313 square miles (39,662 sq km) – about 25% of the area of the whole densely forested province famed for its tribespeople, remoteness and wildlife.
According to the World Development Movement and its partner in Indonesia, the East Kalimantan Mining Advocacy Network, mining and the infrastructure needed to extract and export coal from the heart of Borneo will inevitably ruin vast, heavily forested areas at great cost to people living there and the environment.
Apart from the millions of tonnes of carbon that will be emitted from the burning of the coal, massive railway projects are planned, and giant pits and waste dumps will be needed to support the industry. This will lead to pollution of rivers and land-grabbing during the digging of vast open-cast pits each covering several square miles, as people flock there in search for jobs.
The pace of the mining is speeding up in central Kalimantan. More than 8.5m tonnes of coal were dug last year compared with less than 1m tonnes in 2005; and by 2020 companies could be extracting more than 20m tonnes a year. Indo Met, the largest concession in central Kalimantan, owned by BHP Billiton, covers 350,000 hectares and is thought to have coal reserves of more than 774m tonnes.
Where mining has started, people complain of air pollution, flooding, and land grabs. “We receive all the negatives of coal but very little of the benefits. We will receive the full impact of the waste when they start dumping. The forest will be gone and we will lose our rubber trees,” Erly Aisha, a Dayak leader from Maruwei village, told WDM.
Waste from Borneo Lumbung‘s mine has seeped into the local rivers, say other villagers. “The water is dark and dirty and makes your skin itch. We don’t drink it now. The new mine is not operating but the company already has our land. We feel afraid,” said Yesmaidfa, a mother in Maruwei.
According to WDM, the UK financial sector is involved in more than 50 major coal mines worked by 12 large companies in East and others in central Kalimantan.
BHP Billiton, which is listed on the London Stock Exchange, has recieved millions of pounds of investment from Barclays. Because it is part of the FTSE 100, almost every pension holder in the UK has money invested in it. Borneo Lumbung, which controls the Asmin Koalindo Tuhup mine in central Kalimantan, received a loan of $1bn (£0.6bn) from the UK bank Standard Chartered in 2012. Most of the money, says WDM, was used to buy shares in Bumi, the troubled London-listed firm co-founded by financier Nat Rothschild that owns large stakes in some of the biggest mining projects in East Kalimantan.
BHP Billiton, which has a 75% share in the giant IndoMet coal project, is estimated by WDM to have used about £110m of money raised in London. Elsewhere, Adaro Energy, Indonesia’s second-largest producer of thermal coal, received £245m from a coalition of UK banks, including HSBC and Standard Chartered.
“With the financial sector shrouded in secrecy, it will be very hard to do anything more than estimate the true extent of involvement that UK financial and investment institutions have in fossil fuel projects in places such as Indonesia,” said Alex Scrivener, author of the WDM report. “The sector and its institutions must be held to account for their bankrolling of climate change and environmental destruction.”
Andrew Hickman, from the Indonesian mining watchdog Down to Earth, said: “The energy we consume in Britain is dirty, but the profit that UK companies make from Indonesia’s coal is dirtier. Local communities facing health problems, pollution and human rights abuses in Indonesia know that this coal is deadly too. BHP Billiton’s Borneo coal concessions will be a disaster for local people, the environment and our climate.”
A spokesman for BHP Billiton in London said: “The IndoMet coal project is a joint venture between BHP Billiton and Adaro. The first stage of development is a small operation called Haju and we are continuing to evaluate the potential for larger scale developments in the region. Any development in central and East Kalimantan will be subject to detailed environmental and social impact assessments, feasibility studies and will require all appropriate permits to be in place before activities commence.”
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Anti-carbon divestment campaign targets £5bn of British funds
An international campaign to urge large institutions to dump fossil fuel investments reaches the UK this week, following rapid success in the US.
The year-old divestment campaign, Fossil Free, has grown even faster than similar efforts that once targeted apartheid, tobacco and arms manufacturers. It now aims to focus attention on the £5bn invested in coal, oil and gas by the endowment funds of UK universities. The move comes as financial giants such as HSBC, Deutsche Bank and Goldman Sachs are starting to take seriously the prospect that global action to reduce carbon emissions could leave two-thirds of the world’s proven fossil fuel reserves unburnable and worthless.
“The divestment campaign will start politically to bankrupt the fossil fuel industry and throw into stronger relief that it is a rogue industry, committed to burning more carbon than any government on Earth thinks it would be safe to burn,” said Bill McKibben, a prominent US climate campaigner and figurehead of the Fossil Free campaign. “One reason we are losing the battle against climate change – the most important challenge humans have faced – is the power of the fossil fuel industry to block change,” he told the Observer. “It is the richest industry in the history of human enterprise.”
The US campaign has already led to more than 40 institutions, including the city of Seattle, universities and churches, pulling out of fossil fuel investments. Addressing the political debate in the UK over rising energy bills, McKibben said: “England has been burning fossil fuels since James Watt: there is no way you get to transition [to low-carbon energy] for free. But as economist Lord Nicholas Stern has said over and over again, the cost of not doing it is orders of magnitude higher than doing it.”
Student divestment campaigns have sprung up at 20 UK universities, including the three with the largest investments: Cambridge, Oxford and Edinburgh. UK universities have more than £5bn – £2,000 per student – invested in fossil fuels, according to student group People & Planet and the 350.org campaign, which McKibben co-founded.
“Investing in fossil fuel companies, which harm communities and destroy the climate, is not OK,” said Miriam Dobson, from People & Planet at Edinburgh University, where the campaign tour begins on Wednesday before visiting Birmingham and London.
British campaigners claimed a first victory last week, with the University of Surrey shifting funds from two unnamed fossil fuel companies into a renewable-energy-focused company.
The report also lists the research funding that companies, including Shell and BP, give universities, including £6m to Oxford and £17m to Imperial College London. “UK universities have become victims of corporate capture,” said Kevin Smith from oil and gas watchdog Platform. “We are allowing public infrastructure to be used to subsidise a dangerous, outdated energy model.”
A separate report found that the fossil fuel divestment campaign is growing faster than any previous one. “Stigmatisation poses a far-reaching threat to fossil fuel companies,” said Ben Caldecott, a research fellow at the University of Oxford’s Smith School of Enterprise and the Environment, and an author of the report. “In every case we reviewed, divestment campaigns were successful in lobbying for restrictive legislation.”
The divestment campaign argues that there is also a financial reason for getting rid of fossil fuel investments, because increasing policies to cut carbon will eventually impact on the stocks’ value. The landmark climate change report in September, from the Intergovernmental Panel on Climate Change, stated that agreement by the world’s governments to restrict global warming to less than 2C meant keeping total future carbon emissions under 500 gigatonnes. Analysis by the International Energy Agency and the Carbon Tracker thinktank has shown this would mean that about two-thirds of the coal, oil and gas on the books of fossil fuel companies would have to remain unburned.
Carbon capture and storage technology would, if developed successfully, bury emissions equivalent to just 4% of total global reserves, according to Carbon Tracker.
With the 200 biggest fossil fuel companies spending $674bn in 2012 on finding new reserves (compared to $281bn renewable energy investment), the risk of inflating a stock market “carbon bubble” to the tune of trillions of dollars is “very big indeed”, according to Stern. “The financial crisis has shown what happens when risks accumulate unnoticed,” he said in April.
On Thursday, a group of 70 global investors with $3 trillion of collective assets launched the first coordinated effort to demand that the world’s 40 leading fossil fuel companies, including ExxonMobil andf BHP Billiton, assess the financial risks a carbon bubble poses to their businesses.
“Companies must plan properly for the risk of falling demand to minimise the risk our clients’ capital is wasted,” said Craig Mackenzie, at Scottish Widows Investment Partnership, one of Europe’s largest asset management companies. Storebrand, a $76bn Norwegian pension fund, divested from 19 fossil fuel companies in July, saying that the stocks would be “worthless financially” in the future.
While stock markets, including London which is heavily exposed to coal, have yet to significantly adjust company valuations, big financial players have started analysing the issue with reports in the last six months on the future risks of coal investments from Deutsche Bank, Goldman Sachs and Citi Commodities, while Morgan Stanley and Citi GPS have examined the wider energy market.
McKibben said the divestment campaign was one front in the battle against climate change, but a vital one given the role of similar tactics in previous historic changes, such as ending apartheid in South Africa. The Nobel peace prize winner Archbishop Desmond Tutu has blessed the movement, stating: “Divestment played a key role in helping liberate South Africa. The corporations understood money even when they weren’t swayed by morality. Climate change is a deeply moral issue, too.”