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JPMorgan Chase’s latest climate goals show the dangers of tricky carbon accounting

A new report finds that using ‘carbon intensity’ as a metric lets companies potentially pump out more emissions while still saying they’re reaching their goals. JPMorgan Chase, which has put lots of money into financing oil and gas projects, leans on it heavily.

JPMorgan Chase’s latest climate goals show the dangers of tricky carbon accounting
[Photo: jetcityimage/iStock, Bogdan Okhremchuk/iStock]
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JPMorgan Chase is not an oil and gas company, but to environmentalists, it may as well be: In 2020, it was deemed the world’s worst “fossil bank” by a group of climate organizations, having spent $51.3 billion in fossil fuel financing in that year alone. Now, JPMorgan Chase has announced new carbon reduction targets that it says are aligned with the Paris Agreement—but a report says these targets are meaningless, because it would be possible to hit them even if the company expands its financing of fossil fuels or increases its total emissions.

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The bank’s new 2030 carbon reduction targets, announced May 13, 2021, specify reductions not in absolute emissions but in “carbon intensity” for all sectors of JPMorgan Chase’s portfolio, including electric power, oil and gas, and auto manufacturing. Carbon intensity is a measurement of greenhouse gas emissions per unit of output, such as the amount of carbon emitted per kilojoule of oil and gas energy. The problem, says Jason Opeña Disterhoft, senior climate and energy campaigner with Rainforest Action Network, which published the analysis of JPMorgan Chase’s 2030 climate targets, is that different fossil fuels have different carbon intensities, which could let companies manipulate the numbers to lower intensity but not decrease emissions. “Broadly speaking, fossil gas is less carbon-intensive than oil, and certainly less carbon-intensive than coal,” he says. “So if you’re a big oil and gas company, you can keep the amount of oil you’re extracting relatively constant, and massively increase the amount of gas you’re extracting, and your carbon intensity goes down.”

In this way, JPMorgan Chase, though not an oil company itself, is “taking a page out of Big Oil’s playbook,” Disterhoft says. Exxon, for instance, announced a climate plan in December 2020 that only aimed to reduce emissions intensity by 15 to 20% by 2025, without a commitment to reduce oil production (in fact, Exxon plans to ramp up its oil production, which will increase its overall carbon footprint). In February 2021, Shell also announced the goal of reducing its net carbon intensity 20% by 2030.

Climate targets such as Exxon’s are especially harmful because they only concern the intensity of greenhouse gases emitted by extracting and refining oil and gas, not the intensity of emissions associated with the use of that oil and gas (this is a distinction between so-called operational emissions and scope 3 emissions, the emissions of the consumer). Shell’s targets do include scope 3, and JPMorgan Chase’s climate targets roughly mirror what Shell is planning to do, but, Disterhoft says, it’s still “just simply incompatible with limiting climate change to 1.5 [degrees], and it’s incompatible with cutting emissions in half by the end of this decade.”

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As a financial institution “uniquely responsible among its peers for fueling fossil expansion,” the analysis says (JPMorgan Chase financed 56 of the 75 companies that are doing the most to expand oil and gas), the bank has a responsibility to do better when it comes to climate goals. JPMorgan Chase has announced restrictions on coal financing, including that it won’t finance new coal-fired power plants or coal and gas drilling in the Arctic, but the analysis calls on the bank to do more, especially when it comes to oil and gas.

In response to a request for comment, JPMorgan Chase referred to its latest ESG report that explained the focus on carbon intensity is an easier way to make comparisons portfolio-wide, is less affected than absolute emissions by changes in a company’s production or market volatility, allows them to finance client transitions, and better shows the progress “that high-emitting companies and sectors are making in transitioning to lower carbon production and products.” A spokesperson added that its targets are based on the International Energy Agency’s Sustainable Development Scenario, though those goals are only designed to limit warming to below 2 degrees, not below 1.5, and don’t reach net zero until 2070—later than the 2050 deadline urged by many scientists and the Paris Agreement.

To “truly align” with Paris goals, the analysis suggests JPMorgan Chase immediately begin phasing out its fossil financing (it recommends a full exit by 2030 in OECD and EU-member countries and by 2040 in the rest of the world); make ending fossil fuel expansion a precondition for financing any client involved in coal, oil, or gas; and end support for projects implicated in human rights abuses. JPMorgan Chase has called its climate intensity targets Paris-aligned, “but they’re much less than meets the eye,” Disterhoft says. “They are fully compatible with fossil expansion and increases in absolute emissions. Science says we need to cut absolute emissions in half by the end of this decade, so intensity-only targets just aren’t going to cut it.”