Top U.S. bank phases out loans to dirty coal

Charlotte, N.C.-based Bank of America has responded to pressure from environmental groups to stop giving loans to companies that source coal be removing the tops of mountains.

Advocates of the push say the bank's decision could have a ripple effect, forcing other major lenders such as Citigroup to also deny funds to what's considered one of the dirtiest methods of coal extraction. The move could also put pressure on coal extraction companies such as Massey Energy, International Coal Group, Alpha Natural Resources and Patriot Coal to find cleaner methods of sourcing coal.

Mountaintop mining accounts for about 10 percent of U.S. coal production.

Bank of America also said it will give $1 million to the Harvard Center for the Environment to study the financial, legal and environmental implications of capturing the greenhouse gas emissions generated by burning coal and burying it deep in the earth, GreenBiz reports.

"Bank of America is particularly concerned about surface mining conducted through mountain top removal in locations such as central Appalachia," the bank said on its Web site. "We therefore will phase out financing of companies whose predominant method of extracting coal is through mountain top removal. While we acknowledge that surface mining is economically efficient and creates jobs, it can be conducted in a way that minimizes environmental impacts in certain geographies." 

It's not the bank's first boost to cleantech. In March 2007, BofA announced it was setting aside $18 billion over 10 years to help companies develop, finance and use green products, services and technologies (see Bank of America earmarks $18B for green technology). The bank also said it planned to spend $1.5 billion to green its own environmental footprint.

As environmental regulations become stricter, such policies from lending institutions could speed the adoption of new technologies.

Earlier this week, HSBC said it planned to scale back lending to Indonesian and Malaysian forestry customers involved in palm oil, soy and timber production because of environmental concerns. HSBC is also reconsidering loans to energy-intensive Canadian oil sands interests because impending regulations could destroy its commercial viability.

Reuters reports that the move comes as the U.S. government this week made it easier for coal companies to dump debris from mountaintop mining into nearby valleys and streams.

Coal companies have said the Bank of America policy will not affect them.

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