Amid Years of Pollution Violations in the Deep South, Drax Received Over $700 Million in ‘Green’ Loans

Drax, the British owner of wood pellet plants in Mississippi and Louisiana that has paid millions in fines and settlements for violating state pollution laws in recent years, has received at least $762 million in “green” loans during that same period, an investigation by The Examination, The Toronto Star and Mississippi Today found. 

The energy company ships out wood pellets made in North America for other countries to use as a power source to meet their carbon reduction goals. But state regulators in both Mississippi and Louisiana have come down on Drax over its local air pollution. Between penalties and settlements over the last five years, Drax has had to pay out over a combined $5 million to the two states. 

Since 2018, banks have issued $1.5 trillion in low-interest “sustainability-linked loans,” or SLLs, to large corporations to motivate climate-friendly practices. Wood biomass companies, such as Drax, alone received over $76 billion in SLLs between 2018 and 2023, the investigation found using data from the London Stock Exchange and the Environmental Paper Network.

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Drax received two such loans: one in 2020 that became the equivalent of $553 million — issued by a group of banks including Bank of America, Barclays and JP Morgan — and another in 2021 equal to $208 million.

While companies have environmental benchmarks that go with the loans, there’s little oversight or public disclosure over what those goals are or whether the companies accomplish them. Drax maintains it has reduced its overall carbon footprint since receiving its SLLs; according to its most recent annual report, the company lowered its carbon emissions by 27% from 2020 to 2023. 

However scientists around the world have argued for years that using wood pellets for electricity actually creates more carbon emissions than using coal or gas. Not only does burning pellets release carbon into the air, but so does cutting down the trees — which store carbon and take years to regrow — to make the pellets.

“As numerous studies have shown, this burning of wood will increase warming for decades to centuries,” hundreds of professors and other experts wrote in a 2021 letter to world leaders including then-President Biden. “That is true even when the wood replaces coal, oil or natural gas.”

Despite the wide-ranging contentions, global industrial leaders like the United Kingdom have embraced biomass, including wood pellets, as an energy source. The U.K.’s 2024 “Clean Power 2030 Action Plan” says biomass could be an important part of its transition to clean energy, and in 2023 a quarter of the country’s renewable energy generation came from “biogenic” sources such as biomass.

In a written response to questions for this story, Drax defended the use of pellets for electricity.

“While we recognize that there is an on-going debate with respect to the range of solutions required to most effectively combat the climate crisis, we believe that energy from biomass, when sourced sustainably, is an important contributor to the decarbonization of electricity generation,” the company said via e-mail.

But Drax, which mostly uses wood from the United States and Canada, recently came under fire over how it sources its pellets. Last year, the UK government issued a 25 million pound fine to the company, in part because Drax failed to fully detail where it sourced wood pellets made in Canada. 

In Mississippi, environmental regulators fined the company $225,000 last year for releasing 50% over its permitted limit of hazardous air pollutants, or HAPs, from its plant in the small town of Gloster. But meanwhile, the company is applying to become a “major” source of HAPs, a designation that allows greater emissions with added pollution reduction controls. 

Allison Brouk, a senior attorney for EarthJustice, said it doesn’t make sense that Drax gets to graduate through the regulatory system the way it has.

“They applied for a minor source permit, emitted at major source levels until they were fined and (state regulators) made them change that,” Brouk said. “It’s a pattern Drax has taken, somehow, just to work with the system.”  

Last year’s fine was Drax’s second in Mississippi for violating air pollutant limits. In 2020, the state fined Drax $2.5 million, one of the largest such penalties in state history, for emitting over three times the legal limit for volatile organic compounds, or VOCs. Shortly after the fine was announced, Drax announced receiving its first SLL. 

State regulators found that Drax also exceeded its legal limit of VOC releases at its two plants in Louisiana. While the company didn’t have to admit to any wrongdoing, Drax agreed to pay a combined settlement of $3.2 million in 2022. It was the largest amount paid to the Louisiana Department of Environmental Quality in the last decade, the Times-Picayune reported. 

In September, Drax announced plans to invest $12.5 billion to develop its biomass operation in the U.S. with added carbon capture and storage technology, Reuters reported. Groups like the Natural Resources Defense Council, though, argue that the technology will only lead to greater emissions.  

While the intended goal of SLLs is to encourage sustainable practices in large corporations, loan recipients in some cases have framed their emissions metrics in misleading ways, The Examination found. To read the outlet’s full investigation into the world of SLLs, click here.