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American Focus > Blog > Environment > A UK energy company received $762M in ‘green loans’ despite years of pollution violations in the South
Environment

A UK energy company received $762M in ‘green loans’ despite years of pollution violations in the South

Last updated: January 26, 2025 1:07 am
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A UK energy company received 2M in ‘green loans’ despite years of pollution violations in the South
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The investigation conducted by The Examination, The Toronto Star, and Mississippi Today has revealed that Drax, a British energy company, has received over $762 million in “green” loans while facing millions in fines and settlements for violating pollution laws in Mississippi and Louisiana. This raises questions about the effectiveness of these sustainability-linked loans (SLLs) in promoting climate-friendly practices.

Despite receiving these loans, Drax has had to pay out over $5 million in penalties and settlements to the states of Mississippi and Louisiana over the past five years. The company ships wood pellets made in North America to other countries as a source of power to meet their carbon reduction goals. However, local regulators have cracked down on Drax for its air pollution violations in both states.

Since 2018, banks have issued $1.5 trillion in SLLs to large corporations to incentivize climate-friendly practices. Wood biomass companies like Drax received over $76 billion in SLLs between 2018 and 2023. Drax received two such loans, totaling $761 million, from banks like Bank of America, Barclays, and JP Morgan.

While Drax claims to have reduced its carbon footprint since receiving these loans, scientists argue that using wood pellets for electricity can actually increase carbon emissions compared to coal or gas. Burning wood pellets releases carbon into the air, and cutting down trees to make pellets also releases carbon, as trees store carbon and take years to regrow.

Despite these concerns, global industrial leaders like the United Kingdom have embraced biomass, including wood pellets, as an energy source. The U.K.’s Clean Power 2030 Action Plan sees biomass as a key part of its transition to clean energy. However, critics argue that using wood pellets for electricity may not be as sustainable as it seems.

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In response to questions, Drax defended the use of pellets for electricity, stating that when sourced sustainably, biomass is an important contributor to decarbonizing electricity generation. However, the company has faced scrutiny over how it sources its pellets, with the U.K. government issuing a fine last year for failing to fully disclose the sources of wood pellets made in Canada.

In Mississippi, Drax was fined $225,000 for releasing hazardous air pollutants above permitted limits from its plant in Gloster. This raises concerns about the environmental impact of Drax’s operations and the effectiveness of green loans in promoting sustainability. Drax, a British energy company, is facing scrutiny for its emissions practices as it applies to become a “major” source of Hazardous Air Pollutants (HAPs). This designation would allow Drax to emit greater levels of pollutants with added pollution reduction controls. Allison Brouk, a senior attorney for Earthjustice, criticized Drax for manipulating the regulatory system to its advantage.

Drax has a history of environmental violations, including a $2.5 million fine in Mississippi in 2020 for exceeding legal limits on volatile organic compounds (VOCs). In 2022, the company reached a settlement with the Louisiana Department of Environmental Quality for exceeding VOC limits at its plants in Louisiana, agreeing to pay a combined $3.2 million.

Despite these fines, Drax announced plans to invest $12.5 billion in developing its biomass operation in the U.S. with carbon capture and storage technology. However, critics like the Natural Resources Defense Council argue that this technology may lead to even greater emissions.

The company’s receipt of a Sustainability Linked Loan (SLL) has also raised concerns, with some questioning the accuracy of Drax’s emissions metrics. The intended goal of SLLs is to encourage sustainable practices in large corporations, but some recipients have been accused of framing their emissions data in misleading ways.

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As investigations into Drax’s environmental practices continue, it is clear that the company’s actions have sparked controversy and raised questions about its commitment to reducing emissions and protecting the environment.

TAGGED:762McompanyEnergyGreenLoansPollutionReceivedSouthViolationsYears
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