Sumitomo Corporation’s new coal policy still includes major loopholes
– NGOs urge Sumitomo Corporation not to participate in the EPC bidding for Matarbari Units 3 and 4 –
Japan Center for a Sustainable Environment and Society (JACSES)
Friends of the Earth Japan
On May 7, Sumitomo Corporation revised its “Policies on Climate Change Issues” (*1) and announced that it “will not be involved in any new coal-fired power generation business neither IPP (Independent Power Producer) nor EPC (Engineering, Procurement, Construction).” However, the policy also states that “as the only exception, we acknowledge the project of Unit 3 and 4 of Matarbari plant in Bangladesh, which is under discussion between the Bangladesh and Japanese governments, as a potential expansion project of the Unit 1 and 2 project which we participate as a contractor. We will judge the possibility of participating in the Unit 3 and 4 project based on dialogue with our various stakeholders and also after we confirm the project’s consistency with the Paris Agreement.” We, environmental NGOs, urge Sumitomo Corporation not to participate in the EPC bidding for Matarbari Units 3 and 4.
According to Climate Analytics, a European research institute, in order to achieve the 1.5 degrees Celsius goal of the Paris Agreement, developed countries need to completely stop the operation of coal-fired power plants by 2030 and developing countries by 2040, at the latest (*2). The Matarbari Units 3 and 4, which are scheduled to begin operation in 2028, are likely to be operated significantly beyond 2040. Thus, it is clear that Units 3 and 4 are inconsistent with the 1.5 degrees Celsius goal of the Paris Agreement.
It has been pointed out that Bangladesh is already facing an overcapacity of power, raising questions about the rationale for building new large-scale power plants. According to the “Revisiting Power System Master Plan (PSMP) 2016 (published in November 2018)” (*3) by the Bangladesh Ministry of Power, Energy and Mineral Resources, the actual reserve margin is anticipated to reach a maximum of 69% in 2026, and the actual reserve margin is projected to consistently exceed the target reserve margin until 2041. According to a report released in January 2021 (*4) by the U.S.-based think tank, Institute for Energy Economics and Financial Analysis (IEEFA), Bangladesh’s overall power capacity utilisation in the fiscal year 2019-2020 fell from 43% in the previous year to 40%, revealing the country’s worsening overcapacity. IEEFA estimated that the capacity utilisation will fall below 40% over the next five years unless power generation growth is maintained at or above 10% per annum, and said that the construction of a new power plant will have significant impacts on the financial burden and cost of power generation of the Bangladesh Power Development Board.
Moreover, In Bangladesh, due to the construction of Matarbari Units 1 and 2, more than 40 households were forced to relocate, many residents who made a living from salt and shrimp farms have become unemployed, and life has become more difficult for families who are experiencing delays in compensation payments as well as delays in providing alternative housing. Other problems include the worsening of floods due to the destruction of water channels and water gates, damage on community roads, an increase in traffic accidents, and an inflow and accumulation of sediment in surrounding rivers. Also, the construction of an access road has caused a river to fill up due to the dumping of dredged soil, leading to further loss of livelihoods for local fishermen who rely on the river. This is an impact that was not estimated in the environmental impact assessment report (*5) and therefore does not meet Japan International Cooperation Agency’s (JICA) Guidelines for Environmental and Social Considerations.
For these reasons, Sumitomo Corporation should not participate in the EPC bidding for Matarbari Units 3 and 4. In addition, JICA, which is currently conducting the feasibility study for Units 3 and 4, should stop considering financing both units.
Sumitomo Corporation should also recognize that its efforts to “end all the coal-fired power generation business in the late 2040s” is slow and should consider revising the policy again. The company is financing the Van Phong 1 coal-fired power plant, which is under construction in Vietnam, and the Tanjung Jati B coal-fired power plant Units 5 and 6, which are under construction in Indonesia. Sumitomo Corporation should end the construction for these projects. It should also shut down the operation of Tanjung Jati B Units 1~4.
On March 29, a representative from the environmental NGO, Market Forces, filed a shareholder resolution to Sumitomo Corporation calling for the disclosure of business strategies that align with the goals of the Paris Agreement (*6). Sumitomo Corporation and its shareholders should vote for the resolution at the annual general meeting in June, as the contents of this policy review are insufficient.
For more information, please contact:
Yuki Tanabe, Japan Center for a Sustainable Environment and Society (JACSES)