The G7’s top leaders convene in Italy this week as the world swelters through its 12th hottest month on record. One key issue that needs to be addressed is G7 members’ continued bankrolling of coal, from fossil fuel subsidies to public financing and private investments.

The latest evidence shows that the world’s largest banks – the majority of which are headquartered in G7 nations – continue to pour fuel on the fire of coal expansion.

As the G7 summit approaches, there is a chance for countries to match their rhetoric with action. It is not enough for governments and regulators to “call on” private finance to end their support for coal power. The continued financing of coal by the private sector shows that countries must take concrete steps to implement policies that stem the global flow of funds that fuel the expansion of the coal industry and redirect them to clean energy investments.  

Bonn talks on climate finance goal end in stalemate on numbers

While attention is often directed at public fossil fuel subsidies for coal (which are a problem), the billions of dollars in commercial financing for the coal industry’s expansion cannot be ignored. Commercial banks provided a staggering $470 billion to the coal industry between 2021 and 2023 – money that could have otherwise been channelled into clean energy investments, grid infrastructure improvements, and energy efficiency. 

And the majority of this financing comes from financial institutions headquartered in G7 countries. Collectively, these banks provided $101 billion for coal development in the form of loans and facilitated bonds between 2021 and 2023.  

Worst offenders: US and Japan

Topping the list of offenders are US and Japanese banks, which are the largest coal lenders in the world. Bank of America, actually increased its funding of the coal industry by 30% between 2016 and 2023. It provided a whopping $6 billion in loans and facilitation of capital market issuances to the coal industry in the last three years. For perspective, $6 billion is the size of the entire GDP of the Maldives.

Japanese banks are not faring better.  Coal financing between 2021 and 2023 remained dominated by its megabanks, Mizuho ($8.1 billion), MUFG ($6.1 billion) and SMBC ($4.7 billion).  

Estimates suggest that the absolute greenhouse gas emissions associated with the activities financed by commercial banks in G7 countries are more than the combined emissions of Germany, Italy, the UK, and France. While banks do not directly produce all these emissions, they are borne out of their lending and investment activities of companies that they support.  

No shortage of public money to pay for a just energy transition

The ironic cherry on top is that this amount provided by commercial banks in G7 countries to the coal industry is more than twice the total pledged by the G7-led International Partners Group (IPG) to support the Just Energy Transition Partnerships (JETPs), an intergovernmental initiative intended to provide technical assistance and financial resources to help developing countries with their clean energy transitions. 

Coal phaseout unclear

Nor is the G7 showing great leadership when it comes to their own coal phaseout plans. The US alone still has over 200 gigawatts (GW) of remaining operational coal capacity alone. While this has been falling, there are also signs that this decline is stalling – 200 GW is more than the entire coal operating capacity of all the JETP recipient countries. And Japan has no clear coal phaseout plan despite its commitment.  

This shows that the capital required for the energy transition is available, but just poorly allocated. Financial regulations, such as stricter capital requirements and outright prohibitions, play a crucial role in redirecting capital and investments towards the energy transition. This must include setting international standards to stem the flow of funds towards the continued expansion of the coal industry and restrict financing to coal developers that continue to contribute to environmental degradation and air pollution.  

Financial regulation

The Italian presidency of the G7 2024 has a responsibility to prioritise climate-forward action across different sectors, including financial regulation. G7 Central Banks need to keep up the pressure on keeping climate action at the forefront of negotiations, and call for more international coordination and standard setting. 

Even if the G7 achieves its coal exit goal by the “first half of the 2030s”, this timeline falls short of what scientists say is necessary to limit global warming to 1.5°C, a critical threshold to avoid the most catastrophic impacts of climate change.

As UN Secretary-General Antonio Guterres said last week, “We are in control of the wheel that takes us off the highway to climate hell.” Individual G7 members must take an introspective look at changing outdated policies to adopt strong, binding regulations on private financing for coal.  

The data on private finance for coal is attributable to Urgewald and can be accessed at www.stillbankingoncoal.org.  

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Rich countries have a bill to pay. A study in the journal Nature says they will owe low- and middle-income countries an estimated $100 trillion-$200 trillion by 2050 since they have caused the climate crisis with their outsized emissions, while developing nations bear the brunt of the impacts. 

As negotiators gather in Bonn this week to prepare for November’s COP29 climate summit, wealthy governments have to face the music and pay their fair share of climate finance. With low-income countries struggling with rising seas and spiralling unjust debts, the stakes have never been higher. The good news? Rich countries can deliver the funds needed for climate action. What is lacking is the political will, as usual. But we can change this.

Bonn bulletin: Crunch time for climate finance

At last year’s COP negotiations, world leaders recognised for the first time that all countries must “transition away from fossil fuels” in energy systems. This year they must agree on a new climate finance goal for 2025, which will set a new benchmark for the quantity and terms of the money owed.

Year after year, wealthy countries have failed to pay up. While transitioning away from fossil fuels is technically possible and relatively low-cost, the failure to finance transformative climate solutions like 100% renewable-ready grids, energy access, and programs to support workers and community transitions is one of the key remaining obstacles to tackling the climate crisis. Meanwhile, the lack of funding to adapt and respond to climate impacts means fires, droughts and floods are already bringing devastating consequences.

As UN Climate Change Executive Secretary Simon Stiell has said, “A quantum leap this year in climate finance is both essential and entirely achievable.” But, as negotiations have begun to establish a new global climate finance target, wealthy countries are once again trying to shirk their responsibilities.

Loans and ‘private-sector first’

They have come to the table with only tiny amounts of money. Worse, they argue it should be delivered mostly as loans, investments and guarantees – which they profit from, while climate vulnerable ‘recipient’ countries rack up debt. The US, Canada, UK and their peers claim that there is not enough public money to do anything else. Yet we know they can come up with enormous sums, like for COVID stimulus plans and for bailing out the banks.

Wealthy countries say the private sector can cover most of the costs instead. This ‘private sector first’ approach is particularly emphasized for energy finance. The idea is that all that is needed is a bit of public finance to ‘de-risk’ energy investments and attract much greater sums of private finance.

But as a former World Bank Director has argued, this approach has consistently delivered far less money than promised and “has injustice and inequality built in,” while reducing the role of government action for creating the right market conditions to deliver profits to investors. We need much more public funding to be delivered as grants for a fair energy transition.

Developing countries suggest rich nations tax arms, fashion and tech firms for climate

Rather than relying on the private sector, rich countries can afford the grants and highly concessional finance required for a fast, fair and full phase-out of fossil fuels, which societies and communities want. There is no shortage of public money available to fund climate action at home and abroad. Rather, a lot of it is currently going to the wrong things, like dirty fossil fuels, wars and the super-rich.

The lack of progress is also a symptom of a larger global financial system where a handful of Global North governments and corporations have near-full control. This unjust architecture results in a net $2 trillion a year outflow from low-income countries to high-income countries, historic levels of inequality and food insecurity, and record profits for oil and gas companies.

Make polluters pay

To raise the funds, wealthy governments can start by cutting off the flow of public money to fossil fuels and making polluters pay. The science is clear that there is no room for any new investments in oil, gas or coal infrastructure if we want to secure a liveable planet. And yet governments continue to pour more fuel on the fire, using public money to fund continued fossil fuel expansion to the tune of $1.7 trillion in 2022. 

There is already momentum to stop a particularly influential form of fossil fuel support. At the COP26 global climate conference in Glasgow, 41 countries and institutions joined the Clean Energy Transition Partnership (CETP). They pledged to end all direct international public finance for unabated fossil fuels by the end of 2022 and instead prioritise their international public finance for the clean energy transition.

Rich nations meet $100bn climate finance goal – two years late

With the passing of the end of the 2022 deadline, eight out of the sixteen CETP signatories with significant amounts of international energy finance have adopted policies that end fossil fuel support – and we see international fossil finance figures dropping by billions as a result.

Making fossil fuel companies pay for their pollution through a ‘windfall’ tax on fossil fuel companies in the richest countries could raise an estimated $900 billion by 2030. Alongside taxing windfall profits, a progressive tax on extreme wealth starting at 2% would raise $2.5 trillion to 3.6 trillion a year. Brazil currently has a proposal to tax the super-rich globally, which is gaining momentum at the G20. 

Canceling illegitimate debts in the Global South can free up even more.

The public money is there for a liveable future for all. As leaders negotiate on the next climate target, we must ensure those most responsible for the climate crisis finally pay up.

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Many countries in the Global South are burdened with huge public debts. These rising debts are a drain on public resources that are urgently needed for sustainable development programmes, and further pressure Southern governments to prioritise debt service over climate actions. 

Global South countries allocate more funds for debt service – 65% in lower- income countries and 14% in lower-middle-income countries – than their combined budgetary spending for education, health and social protection.  

Included among the public debts of Global South countries are those from projects tainted with fraud and whose negative impacts on people, economies and the planet far outweigh the benefits, if any. Furthermore, many debts arose from projects that did not involve democratic consultations nor the free, prior and informed consent of affected communities including indigenous peoples. Prime examples of these debts are those arising from or related to fossil fuel projects. These debts should be seen and treated as illegitimate.   

World Bank climate funding greens African hotels while fishermen sink

For several decades, international financial institutions and public finance institutions have lent hundreds of billions of dollars to Southern governments to support fossil-fuel energy projects. Many of the loans extended by the World Bank, Asian Development Bank (ADB), and other public finance institutions such as the Japan Bank for International Cooperation (JBIC), remain part of the current outstanding public debts. 

There is already a clear consensus among governments and many public financial institutions that fossil fuel energy – from its extraction, production and consumption – is the main driver of climate change.  

This is evidenced by outcomes from the Conference of Parties (COPs) summits of the UN Framework Convention on Climate Change, calling for the phase-out or transition away from fossil fuels, as well as outcomes from G7 and G20 summits committing to the phase-out of fossil fuel subsidies. Individual governments including China and Korea, have announced decisions to stop their financing of overseas coal projects. Further evidence is in the decisions made by public financial institutions to stop or phase out financing of coal and fossil fuels.   

These decisions, commitments and policy shifts should be taken as acknowledgement of their co-responsibility in the promotion of fossil fuels and the harms fossil fuel projects have caused to people, communities, the environment and climate systems. 

Owning up to their co-responsibility for fossil fuel projects and their impacts, and consistent with their avowed commitments to combat climate change, governments and public financial institutions, including international financial institutions, should cancel all outstanding public debts that arose from fossil fuel projects. These outstanding debts may be transformed into grants for renewable energy systems.  

UN climate chief calls for “quantum leap in climate finance”

The same can be said for private banks, financial and investment institutions and corporations that have lent money to governments for fossil fuel projects. Many have also recognised fossil fuels as the main drivers of climate change and have shifted their policies towards reducing or phasing down their lending and investments in coal and fossil fuels.   

From April 17 to 19, the IMF and the World Bank (IMF-WB) will hold their Spring Meetings in Washington D.C. These meetings take place amidst an ever-worsening debt crisis, most harshly felt by 3.3 billion people living under governments that spend more on interest payments than education or health.  

Bankruptcy risk from climate spending  

A new report released on the eve of the meetings found that developing countries will pay a record $400 billion to service external debt this year. It said climate spending could bankrupt developing countries due to huge debt costs and called for debt forgiveness for those most at risk. The report from the Debt Relief for Green and Inclusive Recovery Project (DRGR) warned 47 developing nations would reach external debt insolvency thresholds in the next five years if they invested the necessary amounts to meet the 2030 Agenda and Paris Agreement goals.

Spring Meetings can jump-start financial reform for food and climate

It is deplorable that the IMF-WB continues to push loans as the solution to multiple crises facing developing countries, including loans for climate action. At the height of the COVID-19 pandemic, when financial resources were most urgently needed, they supported and promoted the debt relief schemes of the G20 and Paris Club for the mere postponement of debt payments. These have all but proven flawed and futile. The suspended payments fall due in 2025 – by which time debt accumulation will have sped up even more. Private and commercial lenders, who now hold over 60% of sovereign debt, remain free to refuse participation in debt reduction. 

Total public debt, domestic and external, reached $92 trillion in 2022, increasing five-fold since 2000. Southern governments account for almost one-third of the total debt and are accumulating debt much faster than their richer counterparts. The number of countries with public debt levels exceeding 60% of GDP continues to rise, from 22 in 2011 to 59 in 2022. The long-term public external debts alone of low- and middle-income countries, excluding China, amount to a staggering $3.3 trillion. 

The consequences of World Bank projects, coupled with IMF neoliberal, policies have been devastating for vulnerable communities in the Global South. Large-scale infrastructure projects financed by the World Bank have led to displacement of communities, loss of livelihoods and destruction of ecosystems, and in the process, deepened inequality and impoverishment. Its fossil fuel subsidies and project loans impacted communities already struggling to survive economic hardships and environmental degradation. It also continues to subsidise the fossil fuel industry through direct and indirect financing, estimated at $885 million in 2022 and at least $194 million in 2023.  

The World Bank and the IMF, now in their eighth decade of committing to fight poverty, have yet to account for loans that are clearly illegitimate and must be canceled outright, nor for harsh loan conditionalities that have deepened inequality and impoverishment.

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The green policy aims to boost both climate action and the heavily-indebted Zambian economy, but taxi drivers in Lusaka, the southern African country’s capital, told Climate Home they are suffering from rising prices for driving and food.

“We have been hit hard,” said 29-year old Masuzyo Kampamba, as he motored down a two-lane highway towards past crowds of children celebrating national youth day last month. 

Kampamba doesn’t feel able to get married and start a family as he would not be able to provide for them due to the high cost of living.

Waiting outside the upmarket East Park Mall, driver Stephen Musanda said he is struggling too. 

Filling up his regular Toyota taxi used to cost 17 kwacha ($0.70) a litre – for which he now pays 31 kwacha ($1.30). “It’s hard for a common driver like me to survive,” he said.

A Total petrol station near Lusaka’s Central Business District on March 10, 2024 (Photo: Joe Lo)

IMF’s global push

In debt-strapped developing countries like Zambia, the International Monetary Fund (IMF) is using its financial power to push for the removal of fossil fuel subsidies. Similar IMF-backed policies in Haiti and Ecuador have led to mass protests in the last few years.

At the Cop28 UN climate summit last December, governments agreed to contribute to a global effort to transition away from fossil fuels “in a just, orderly and equitable manner”. What that means in practice is still being worked out.

In Zambia and other places like Nigeria, many ordinary citizens feel the shift away from fossil fuel subsidies has not been done fairly so far, with the burden falling on those who cannot afford it. Even supporters of the reforms in Zambia admit they are “painful”.

On a global level, the IMF argues that subsidies incentivise the use of fossil fuels like oil and gas, making climate change worse, while also being expensive, wasteful and skewed towards helping the rich more than the poor.

My message at today’s @wef session on climate and nature: pull back on harmful fossil fuel subsidies and use those resources for climate action. With action, we can leave a heathy planet to our children and grandchildren. #wef24 pic.twitter.com/Uh7TcyafHI

— Kristalina Georgieva (@KGeorgieva) January 17, 2024

In a bid to boost sustainable development, the Washington-based lender has encouraged governments to spend the savings from reducing their support for fossil fuels on climate action, healthcare or education. Zambia has used the money it has freed up for paying down the national debt and making public schools free.

Richard Bridle, a subsidies expert at the International Institute for Sustainable Development (IISD), generally supports such reforms, but said proper analysis must be carried out to identify those most affected and compensate them.

“Generally, the poor don’t have cars,” he said, but there are “particularly affected groups” whose business costs are exposed to fuel prices – like taxi drivers – and they require special attention.

“You’ve got to have steps being taken to understand the impact, particularly on the most vulnerable groups, and – where possible – mitigate that impact,” Bridle said.

Education not petrol

When Zambian President Hakainde Hichilema was elected in August 2021, he inherited $800 million a year of spending on fossil fuel subsidies – 4% of gross domestic product (GDP) – and debt of almost $1 billion which the government was failing even to pay interest on. 

He turned to the IMF for another loan – and in December 2021, Zambia was granted a $1.4-billion extended credit facility. 

Announcing this credit, the IMF’s then mission chief for Zambia, Allison Holland, said the conditions were that Zambia should cut what the IMF sees as “inefficient” subsidies, reduce its debt level, and increase spending on education and health. 

ZAMBIA’S #IMF PROGRAMME: Message from the IMF Mission Chief for Zambia, Ms. ALLISON HOLLAND.@S_Musokotwane @KGeorgieva @IMFAfrica pic.twitter.com/j17kCKck8t

— Ministry of Finance & National Planning – Zambia (@mofnpzambia) September 4, 2022

The IMF sees subsidies as “inefficient” if they hinder economic growth, exacerbate air pollution and climate change, and benefit those with high incomes. Holland said fuel subsidies were an example of spending that is “wasteful” and “doesn’t help the poor”.

In response, the government completely removed direct fossil fuel subsidies for 2022 and, in October that year, it restored taxes on petrol and diesel which the previous government had cut.

Hichilema also announced that public school education would be made free from January 2022. “When we removed fuel subsidies, this is what we intended for our people,” he said in a post on X, formerly known as Twitter.

Ever imagined that you’d be entering January without worrying about school fees? Jan 2022, if you have a child in public school, you won’t pay anything.
This is what we promised & have delivered. When we removed fuel subsidies, this is what we intended for our people. #Zambia pic.twitter.com/b49D9CTigV

— Hakainde Hichilema (@HHichilema) December 29, 2021

The government is planning to boost spending on social protection too. In 2020, it spent just 0.7% of GDP on welfare programmes like giving money and food to poor people, but by 2025 it plans to raise this to 1.6%, bringing it in line with the African average.

“Overall, for low-income households, the benefits from increased social spending should outweigh the impact from the removal of fuel and electricity subsidies,” a 2022 IMF analysis said.

Painful but necessary

During a reporting trip this March, Climate Home asked Zambia’s environment minister, a farmer and a rural teacher about the fuel subsidy cuts. All said the measures had been painful, making driving, farming and eating more expensive – but they saw them as necessary.

Green economy and environment minister Collins Nzovu said “there is going to be pain” from removing subsidies, but asked “were we going to keep accumulating debt or we’re going to say this is where we end?” 

In the village of Katoba in Lusaka province, secondary school teacher Constancy Mbwenya said spending on subsidies had previously diverted money from health and education.

The subsidy cuts are “a good policy”, he said, but required a period of adjustment. “People need to acclimatise to the new situation,” he explained. “That’s where the hassle is a bit, but then eventually people will understand the importance of removing the subsidies.”

Is water provision in drought-hit Zambia climate ‘loss and damage’ or adaptation?

At the steering wheel, Musanda and Kampamba welcomed free education – although they questioned whether there are enough teachers per pupil, and whether the children can afford to eat at home because of food inflation.

“It’s right because those who were not going to school… are now going to school,” said Musanda. But, he added, “it is difficult for us who used to survive on subsidies”.

IISD’s Bridle compared the situation to France’s “gilets jaunes” (yellow vest) protests, sparked in late 2018 when the French government tried to hike taxes on petrol and diesel and spend the money on climate action. 

The rural working class felt the costs of green policies were falling unfairly on them, while they failed to see direct benefits, Bridle said. The large-scale opposition to the policy forced the government into a U-turn and hurt the popularity of French President Emmanuel Macron.

Taxi driver Musanda said similar social unrest was unlikely in Zambia: “We are not used to doing protests.” Instead, many voters might look to bring in a new government at the country’s next elections in 2026, he noted.

According to Bridle, that risk is why governments often rush through reforms well ahead of the next election. 

In Zambia, less than one in 20 people own a vehicle, so the vast majority are less affected by the subsidy increase than Musanda.

Corn and peanut farmer Benson Chipungu poses in his field on March 7, 2024 (Photo: Joe Lo)

Benson Chipungu, who spoke to Climate Home on his maize and peanut farm in Chongwe village, 50 km east of Lusaka, said it now costs him more to fill up his tractor with diesel – but he is willing to accept the change nonetheless.

“I think it’s fine because [the government] has made that decision knowing that maybe the subsidies were being a burden on the economy,” he said. “It can be painful – but if… they think it’s going to come out right, then it’s fine – you can try to hang in there.”

Travel for this story was funded by Catholic Relief Services.

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Activists have been protesting against this for years, and now we’re seeing the fight spill into courtrooms. In the face of climate breakdown, civil society is sending a clear message: governments that continue to use taxpayers’ money to fund fossil fuels should expect a lawsuit.

Litigation has the power to make or break fossil fuel expansion. With more than 2,000 cases filed across the globe since 2017, climate litigation has, so far, focused on the shortcomings of government or company policies, challenging inadequate emissions reduction targets or reparations linked to climate damages. Today, we’re seeing a new wave of climate litigation focused on institutions that channel public finance towards fossil fuels – with recent lawsuits in Australia, the UK, Mozambique, Brazil, South Korea and beyond.

These lawsuits allow citizens to take back control over their public finances and force public financial institutions – whose investments are notoriously opaque – to become more transparent. One critical step governments can take to avoid such lawsuits is to live up to their commitments and come to a global agreement on oil and gas export finance restrictions at an Organisation for Economic Cooperation and Development (OECD) meeting coming up in mid-March.

Clean, cheap or fair – which countries should pump the last oil and gas?

The UK, Canada and EU already tabled a proposal for such restrictions which, with sufficient support, can succeed in limiting public finance for fossil fuels. This would free up billions of dollars that can be reinvested in reliable, affordable and secure renewable energy, efficiency measures, and facilitating a just transition.

To achieve this, getting the US on side is key, after which remaining OECD members will likely follow. If President Biden is serious about tackling climate change, it’s vital that he backs strong measures to stop international finance for fossil fuels.

Despite the US, as well as several G20 countries and major multilateral development banks (MDBs), committing to end international public finance for fossil fuel projects by the end of 2022, they continue to pour billions of dollars into international fossil fuel projects. Data also shows that far more public money goes into fossil fuels than renewables or energy efficiency measures.

G20 governments and MDBs provided at least $55 billion for fossil fuels each year from 2019-2021, while allocating only $29 billion to renewables. Bankrolling these toxic industries is fundamentally incompatible with limiting global heating to 1.5C, which, according to the International Energy Agency, requires an immediate stop to investments in new coal, oil, gas and Liquefied Natural Gas (LNG) infrastructure.

State support for gas exports

A crucial part of this fight is holding Export Credit Agencies (ECAs) and similar development institutions accountable. ECAs are government-owned or controlled institutions that provide financing, often at subsidised rates, to large infrastructure projects around the world. ECAs are the world’s largest public financiers of fossil fuels, providing seven times more support for fossil fuels ($34 billion) than clean energy projects ($4.7 billion) between 2019 and 2021.

Without government-backed finance, these projects may not otherwise go ahead. This is especially true for the expansion of more than 80% of new LNG exports over the last decade. While President Biden’s recent announcement of a pause in approvals for new LNG export terminals in the US is welcome, we need to make much more rapid progress to stay within safe planetary limits. A crucial part of this fight is holding ECAs to account and governments to comply with international law.

Civil society groups are turning to the courts. The NGO Jubilee is suing Export Finance Australia and the Northern Australia Infrastructure Facility for failing to adequately report the environmental effects and climate impacts linked to their financing activities, which play a crucial role in determining how ECAs disclose relevant information.

Last year, Friends of the Earth UK took the UK’s ECA to court over its investment in a major LNG project in Mozambique. Friends of the Earth argued that the $1.15 billion in export finance support was unlawful, inconsistent with the latest science, and incompatible with the Paris Agreement. Although the court ruled in favour of the ECA, the case exerted enough pressure to stop funding for new overseas fossil fuel projects. Without the publicised court battle flagging the issue for the UK public and policymakers, this result may never have been achieved.

In Brazil, the human rights NGO Conectas sued the Brazilian Development Bank for failing to assess the negative climate impacts of its investments. Similarly, South Korean ECAs were challenged over the funding they provided for the Australian Barossa gas pipeline project, which would run through a protected marine park, forcing the financiers to review the necessity of LNG imports, as well as their environmental impacts.

Despite Cop28 pledge, France keeps fossil fuel subsidies for farmers

At COP26, 34 governments, including a majority of OECD members, signed up to the Clean Energy Transition Partnership (CETP), pledging to end international public finance for unabated fossil fuels by the end of 2022. Despite this, governments are failing to keep their promises and continue to fund international fossil fuel projects.

The Jubilee case comes at a time when Australia announced its commitment to the CETP – we now need to see policies follow commitments. Put simply: when governments make promises, they need to keep them, or the courtroom awaits.

Maria Alejandra Vesga Correa is a legal officer in the global public finance team at Oil Change International. Leanne Govindsamy is programme head for corporate accountability and transparency at the Centre for Environmental Rights. Lorenzo Fiorilli is a lawyer working on public finance, energy markets and competition with ClientEarth.

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The US Export-Import Bank (Ex-Im) – a federal export credit agency – is pushing ahead with plans to back the drilling of more than 450 new oil and gas wells in one of the oldest extraction fields across the Middle East.

Ex-Im’s board voted on Thursday to notify US Congress about the potential investment, a required step for projects over $100 million. Observers told Climate Home the Bahrain financing is nearly certain to be secured as early as next month.

At Cop26, the US joined 33 other countries in pledging to end direct public finance for overseas fossil fuel projects by the end of 2022. While most other signatories respected the commitment, the US approved over $2 billion in international fossil-fuel finance last year, according to an analysis by Oil Change International. Exim has been responsible for just under half of it.

“The United States is stalling momentum to end international public finance for fossil fuels globally”, said Nina Pušić, export finance climate strategist at Oil Change International. While the country can help “lead a shift of billions of dollars” from fossil fuels to renewables, approvals like this one “are a huge step backward”, she added.

Oil and gas expansion

Ex-Im’s financing in Bahrain would go towards a $4.2 billion programme to boost production in a nine-decades-old field where new reserves were discovered in 2018.

State-owned company Tatweep Petroleum plans to drill up to 34 new gas wells and more than 420 new oil wells, in addition to the construction of processing facilities and transport networks.

The programme is expected to free up reserves containing 5.2 trillion cubic feet of gas – nearly six times the amount of gas the Kingdom currently produces every year, according to company filings. Oil production should see a more modest uplift.

No new oil and gas extraction project should go ahead if the world wants to keep global warming below 1.5C, according to the International Energy Agency (IEA).

Pumping oil and gas from the expanded Bahraini field is expected to spew over 1.4 million tonnes of CO2 a year in the atmosphere by 2026 – nearly double the emissions recorded there in 2022, according to an environmental assessment submitted by Tatweep.

That does not include emissions generated from end consumers burning the fuels (known as Scope 3), which generally account for up to 90% of the carbon footprint of fossil fuel companies.

Running tensions

Ex-Im’s continued support for fossil fuels overseas has been a source of ongoing tensions.

Two members of an advisory group set up by the Biden administration to bolster Ex-Im climate considerations resigned last week following discussions over the Bahrain project.

Last year former special envoy John Kerry reportedly phoned Ex-Im’s chair Reta Jo-Lewis urging her to delay a decision to fund a nearly $100 million oil refinery expansion in Indonesia, according to Politico. But the agency went ahead with the vote and greenlit the project.

As the US official export credit agency, Ex-Im is influential in directing investment towards specific sectors by offering exporters government-backed loans, guarantees or insurance. The agency acts independently, but its board members are appointed by the US president and confirmed by the Senate. Joe Biden picked the sitting chair Jo-Lewis.

No clear guidelines

When president Biden took office in January 2021, he issued an executive order calling on federal agencies, including Ex-Im, “to identify steps through which the United States can promote ending international financing of carbon-intensive fossil fuel-based energy”. Months later, the US government signed up for the UN pact in Glasgow.

However, the Biden administration stopped short of directly forcing Ex-Im to adopt a fossil fuel exclusion policy.

“A key issue is the lack of clear guidelines from the US government to Ex-Im and other US agencies to explicitly prohibit new public fossil fuel support”, said Sherri Ombuya, a researcher at Perspectives who wrote a report about Ex-Im policies.

In 2023, Ex-Im approved just under $1 billion worth of funding for projects including an oil refinery in Indonesia and a credit facility to help commodity trader Trafigura sell more US liquefied natural gas (LNG). Oil and gas investments account for nearly a quarter of the agency’s portfolio.

Ex-Im’s arguments

Ex-Im has repeatedly justified its fossil fuel financing by pointing to a “non-discrimination” clause in its charter. The provision prevents the agency from rejecting funding applications just because they concern specific industries, such as oil and gas.

But Ombuya said that “is not a fully valid argument”. She added that Ex-Im’s board could turn down applications “if they don’t align with the US climate commitments which would effectively lead to the rejection of oil and gas projects”.

Ecuador’s new president tries to wriggle out of oil drilling referendum

Campaigners also argue that the agency could expand the use of existing tools to screen projects against certain thresholds of greenhouse gas emissions without singling out specific sectors. Ex-Im already applies criteria to projects with “high carbon intensity”, effectively ruling out any funding for coal power plants.

Friends of the Earth filed last December a legal complaint against Ex-Im at the Organisation for Economic Co-operation and Development (OECD) arguing that the agency is breaching a requirement to draw up emission reduction plans and avoid causing environmental damage.

Win for American fossil fuel firms

Ex-Im says its mission is to support American jobs. It does so by helping US companies secure lucrative foreign contracts with its backing.

Last year Jo-Lewis met government officials and corporate executives in Bahrain to “expand ExIm’s footprint in the region and facilitate new opportunities for U.S. exporters in Bahrain.”

The Bahrain project will see the involvement of SLB (formerly known as Schlumberger), the world’s largest oilfield services provider.

The Houston-based company specializes in finding oil and gas deposits, drilling wells, and managing reservoirs to boost production. SLB was involved in the discovery of the new oil and gas reserves in central Bahrain and in March 2021 it won a $225 million contract for their development.

Ex-Im has been approached for comment.

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An avalanche of public money still supports production and consumption of coal, oil and gas, despite multiple pledges to phase out such subsidies.

The Netherlands is leading a “first-mover” initiative at Cop28 climate talks to tackle the issue, following a national assessment that its fossil fuel subsidies amounted €39.7 – 46.4 billion in 2022, and thousands of climate activists protesting in The Hague.

Two G20 countries (Canada and France) and ten smaller economies joined the launch of the coalition in Dubai on 9 December.

This is welcome, but it risks getting mired in the same methodological rationalizations that have always held back action.

The coalition has signed up to improve “transparency”, identify “barriers” and establish a “dialogue” to reform fossil fuel subsidies. Instead, they should change the defaults and push for a blanket phaseout of all government support to fossil fuels, unless subsidizers can prove such measures address energy poverty or just transition better than any other readily available policy tool.

A trillion-dollar issue 

In 2022, public financial support for fossil fuels, in the form of subsidies, investments by state-owned enterprises (SOEs), and lending from public financial institutions, exceeded $1.7 trillion globally — a record high according to IISD’s Burning Billions report.

Phasing out these subsidies is challenging because it cuts across all of the economy. It takes a whole-government commitment and broad-based support from various ministries, political groups, and businesses, not just diplomats and environment officials. For example, in the US, a subsidy reform package has been submitted by the Democratic party administration, then blocked by Congress many times.

There is a role for international cooperation on fossil fuel subsidy reform for two reasons. First, it is politically easier for some countries to make progress as a first movers’ collective than be “lone wolves”. Second, countries need expert advice and technical assistance for the reform design and implementation.

Credibility challenge after many failures

The new coalition members must up their game given the previous failures on fossil fuel subsidy reform commitments under G7, G20, and APEC (since 2009), Sustainable Development Goals, UNFCCC Cop26, and many other related efforts such as the Friends of Fossil Fuel Subsidy Reform, the Agreement on Climate Change, Trade and Sustainability (ACCTS), the ministerial statement at the WTO and the Global Biodiversity Framework.

To be credible reform champions, the new coalition members must take on commitments to phase out subsidies to both production and consumption of fossil fuels by 2025 in the OECD countries, and by 2030 deadline in the non-OECD countries (reflective of the G7 commitment and SDG 12.c timelines, respectively). They must convert these commitments into specific national policy frameworks and include fossil fuel subsidy reform in their national climate plans by next year’s Cop29 summit.

Such a model is key to the success of the Clean Energy Transition Partnership, under which some of the same governments and other signatories agreed to implement domestic policies to stop international financing of fossil fuels within one year of joining.

Bold and targeted moves needed 

The Dutch initiative’s current focus on reforming tax cuts for aviation and shipping is novel, but reference to such agreements should not serve as a distraction from the reforms that must be undertaken at the national level.

For example, tax breaks and other subsidies for oil and gas exploration and production have no justification given the scientific consensus that there is no room for new oil, gas and coal developments in a Paris-aligned world.

The countries that have reformed fossil fuel subsidies in past decades did not do it because of international climate commitments. Rather it was driven by fiscal pressure including conditional loans from the IMF and the World Bank (the Dominican Republic, Egypt, or Ukraine) or the political will to diversify their energy mix and support domestic renewable energy (India).   

These and other examples show that fossil fuel subsidy reform efforts are most effective when countries commit to reinvesting a share of saved expenditures and generated revenues. This helps build public support for reform efforts and can address negative impacts of fossil fuel price increases on households. Members of the new coalition must commit to reinvesting subsidy reform savings and revenues generated from fossil fuel taxation to clean energy and just transition programs.

Ivetta Gerasimchuk is director of the energy programme, leading international strategy work at the International Institute for Sustainable Development.

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The OECD is made up of a group of primarily wealthy countries, who collectively set their own standards around big global issues like tax, trade and the environment.

Despite being one of the world’s most influential trade bodies, decisions at the OECD often happen behind closed doors.

Members say that this allows them to get on with “building better policies for better lives” without distraction.

The problem is that channelling billions of dollars of public money into fossil fuels each year doesn’t square with that aim. 

Forests, methane, finance: Where are the Cop26 pledges now? 

The OECD regulates its members’ “export credit agencies”. These are government-owned institutions that provide loans, guarantees, credit and other forms of financial services – often at subsidised rates – to large infrastructure projects around the world.

Between 2018 and 2020, OECD export credit agencies (ECAs) also provided more international public finance for fossil fuels ($41 billion) than any other type of public finance institution, including multilateral development banks like the World Bank. They spent five times more on fossil fuels than renewable energy projects every year.

Too much LNG

Without ECA support, many new oil and gas projects would not go ahead. Over the last decade, these institutions have pumped over $80 billion into liquefied natural gas (LNG) projects, which receive the overwhelming majority of ECA support.

Projects include the Vaca Muerta gas pipeline in Argentina, a carbon bomb that threatens to release 50 billion tons of carbon dioxide over its lifetime; and $14 billion in loans and guarantees to a controversial LNG project in Mozambique. LNG is often cited as a bridge fuel in the clean energy transition, but the reality is the opposite. We already have more LNG infrastructure than we can use to stay within safe climate limits. 

Australia’s bid to host climate talks is welcome but must be matched with action

Every dollar spent on new fossil fuels puts the brakes on our clean energy transition. To keep global temperature rise to within 1.5C – as per the Paris Agreement goal – the International Energy Agency is clear there is “no need“ for investment in new supplies of coal, oil and gas.

Under the Paris Agreement, all countries promised to “make financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development“, but the opaque governance structure of the OECD provides a loophole for oil and gas finance to keep flowing, via ECAs.

Public money

This isn’t a good way to spend public money. With peak demand for fossil fuels now expected as soon as 2030, any investment in new fossil fuel projects risks failing to deliver a return. Economists have estimated that around $1.4 trillion in oil and gas assets are at risk of becoming stranded.

Far from delivering energy security, public investment in fossil fuels exposes us to huge economic risks, whereas channeling this money into clean energy could open up new economic opportunities. Every dollar of investment in renewables creates three times more jobs than investment in fossil fuels.

Poll after poll shows that voters in OECD countries don’t want their money going into fossil fuels either. Almost two thirds of British and Canadian voters want their governments to stop subsidising fossil fuels.

In the United States there’s majority bipartisan support for ending fossil fuel subsidies.

Using public money to prop up a twilight industry isn’t in the public interest – it makes us all worse off. 

At the Glasgow climate conference, Cop26, a majority of OECD member countries committed to ending public fossil finance for the unabated fossil fuel energy sector by the end of 2022, including by driving multilateral negotiations through the OECD.

Backtracking

Despite this, some OECD countries have backtracked on their commitment. Research from Oil Change International shows that since 2021, the United States, Germany, Italy and Japan have approved at least $5.2 billion in new public finance for international fossil fuel projects.

Avoid our mistake: Don’t let World Bank host loss and damage fund

This year alone, the US, via its ECA, the United States Export-Import Bank (EXIM), provided $740 million to oil and gas projects around the world. If President Joe Biden is to become the climate leader he wants to be, there is clearly much more to do. 

OECD members already signalled the beginning of the end for public fossil fuel finance, by ending ECA support to coal-fired power in 2021.

The UK, EU and Canada proposals on the table represent a rare moment of leadership that must help set the stage for forging agreement on a global phase-out of fossil fuels at the upcoming climate conference in the United Arab Emirates.

They must not be shut down and strung out by OECD members still clutching onto fossil fuels such as Japan, South Korea and the United States.

Countries should use this week’s meeting to reform export credit agencies for good, so they catalyse the clean energy transition and preserve our planet, rather than destabilise it.

Sandrine Dixson-Declève is the co-president of The Club of Rome and co-lead of the Earth4All initiative

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Nearly two years on, Climate Home News looks at how these commitments are holding up to the test of time.

• Methane Pledge
• Forest Pledge
• International Fossil Finance Pledge
• Glasgow Financial Alliance for Net Zero (GFANZ)

METHANE PLEDGE

WHAT: Reduce human-made methane emissions by 30% between 2020 and 2030. Cutting the amount of methane present in the atmosphere is important because it is a much more powerful greenhouse gas than carbon dioxide despite having a shorter lifespan.

WHO: 104 countries, led by the US and the EU, signed up to the pledge when it was first announced at Cop26 in Glasgow. The number of signatories has since risen to 150. However, they only represent about half of global methane emissions as China, India and Russia – three of the world’s top four emitters – have not joined the coalition.

HOW IT IS GOING: The raw figures paint a fairly grim picture. Since Cop26, the concentration of methane in the atmosphere has kept rising fast and it is now more than two and a half times its pre-industrial level.

Over half of the emissions come from human activities, like fossil fuel extraction, farming and landfills, with the rest caused by natural sources. Under current trajectories, total human-made methane emissions could rise by up to 13% between 2020 and 2030 – the pledge’s timeframe.

This graph shows the globally-averaged, monthly atmospheric methane concentration since 1983. Image credit: NOAA Global Monitoring Laboratory

Targeting the oil and gas sector is seen by many as the easiest and fastest way to bring down emissions in the near term. Experts say existing technologies already provide cheap and effective ways to plug leaky infrastructure like pipelines and gas storage tanks.

However, the technological developments have not yet been converted into real, widespread action. According to the International Energy Agency (IEA), methane emissions from oil and gas remained “stubbornly high” in 2022 even as the energy companies’ bumper profits made actions to reduce them cheaper than ever. “There is just no excuse”, the IEA chief Fatih Birol commented.

Raft of initiatives

But judging the pledge’s progress on current numbers only tells half the story, argued Jonathan Banks, global director of the methane programme at the Clean Air Task Force (CATF). “Emissions are not going to turn around immediately,” he told Climate Home. “If you look at the work going into the pledge, building the funding and technical resources to bring emissions down, I think it could potentially be on track for success”.

A series of initiatives have been set up to help countries deliver on the pledge. The UN’s Climate and Clean Air Coalition (CCAC) is helping over 30 developed and developing countries to establish plans to achieve the 2030 target.

Canada has set out a strategy that it expects to reduce domestic methane emissions by “more than 35%” by 2030, compared to 2020.

Methane leaking from Chelmsford compressor station, UK on 15 October 2021, picked up by a special camera (Photo: Clean Air Task Force/ James Turitto)

The Global Methane Hub (GMH), a philanthropic organisation, is also supporting signatories of the methane pledge with technical assistance and funding. Carolina Urmeneta, a director at the GMH, told Climate Home News that over the last year, the group has focused its work on developing systems to monitor methane emissions rates from oil and gas and landfill installations using satellites.

She said reaching the 2030 target “is possible and cost-effective, but it is not easy. We need to improve data transparency and increase funding for projects with methane targets.”

Regulations drive

Some progress has also been made on the regulatory front. The USA introduced new rules to address methane emissions caused by oil and gas companies through the Inflation Reduction Act. Using a carrot-and-stick approach, it provides $1 billion in public subsidies to take action, while charging a fee for excessive emissions.

In May the European Parliament agreed on tougher measures to tackle methane emissions in the energy sector. The approved text calls for binding emission reduction targets, stronger obligations for fossil fuel operators to detect and repair leaky infrastructure and the application of the same measures to exporting countries outside of the bloc.

While the final rules are still being negotiated with the EU’s national governments, CATF’s Banks believes they could have a “huge global impact” if introduced in their current form. “The methane emissions associated with the gas Europe buys from the rest of the world is quite large, so such measures could really drive some change”.

New announcements are expected at Cop28 in Dubai, after the summit’s president Sultan Al Jaber set the phaseout of methane emissions in oil and gas by 2030 as one of his priorities. “More than 20 oil and gas companies have answered Cop28’s call,” he said this week. “And I see positive momentum as more are joining”. But the UAE has been accused of double standards as it failed to report methane emissions to the UN for a decade, as the Guardian reported.

While it has not signed the pledge, China is expected to announce its long-awaited methane plan at Cop28.

FOREST PLEDGE 

WHAT: End and reverse deforestation by 2030. Country leaders pledged to conserve forests, tackle wildfires, facilitate sustainable agriculture, support indigenous populations and “significantly” increase the provision of finance towards achieving those goals.

WHO: More than 140 countries joined the coalition. Signatories of the pledge – including large forest nations like Brazil, Indonesia and the Democratic Republic of Congo – cover around 90% of the world’s forests. But major G20 powers such as India, South Africa, Saudi Arabia and rainforest nations like Bolivia and Venezuela did not join the group.

HOW IT IS GOING:  Countries remain off track to reach the goal of the Glasgow pledge and end deforestation by 2030, according to an assessment done by a coalition of NGOs.

Across the world, tree loss recorded in 2022 was 21% higher than the level needed to be on course to reach zero in seven years’ time, the report said.

Source: Forest Declaration Assessment

In fact, the situation is getting worse. Global deforestation grew 4% last year, wiping out 6.6 million hectares of forest, according to the study. That’s a tree-covered area nearly as big as Ireland disappearing in one year.

“The world’s forests are in crisis. All these promises have been made to halt deforestation, to fund forest protection. But the opportunity to make progress is passing us by year after year,” said Erin Matson, a lead author of the Forest Declaration Assessment.

Saving the Three Basins means stopping fossil fuel expansion

There are important regional differences, however. While tropical Asia is faring better, with Indonesia and Malaysia on track to hit their targets, Latin America and the Caribbean are farthest off track.

The election of President Lula da Silva in Brazil has led to a reversal in the skyrocketing deforestation rates in the country, which hosts most of the Amazon rainforets.

But efforts to create a regional forest protection coalition have failed. At the Amazon summit in August, eight South American countries failed to agree on a pledge to end deforestation by 2030 following opposition from Bolivia and Venezuela.

An aerial view shows deforestation near a forest on the border between Amazonia and Cerrado in Nova Xavantina, Mato Grosso state, Brazil in 2021 (REUTERS/Amanda Perobelli)

While it included a larger number of countries, the Cop26 commitment was not entirely new: it repeated promises previously made in the 2014 New York Declaration on Forests, which by then had already failed to achieve some of its core targets.

Keen to avoid the same fate, self-declared “high ambition” countries launched a new initiative designed to deliver the pledge.

“High ambition” efforts

Chaired by the USA and Ghana, the Forest and Climate Leaders’ Partnership (FCLP) has promised to spur global action and provide accountability.

Only a fifth of the original 140 signatories have joined the group so far, with Russia and Indonesia among the most notable absentees.

Christine Dragisic, who leads the forest team at the US State Department, said the goal is to create a “high-level community” that brings together governments, indigenous people, philanthropies, civil society and the private sector to drive action forward and hit the 2030 target.

“Can we do it? Yes. Is it going to be hard? Definitely. Does it require everybody to be at the table? For sure”, Dragisic told Climate Home.

An Indonesian ranger patrols a forest protected through a carbon credit project. Photo: Dita Alangkara/CIFOR

Since its launch last year, the FCLP has worked on a number of initiatives offering technical and financial solutions to forest nations, looking at the role of carbon markets and the forest economy in averting tree loss.

Finance gaps

As with most climate actions, however, it ultimately comes down to the question of money. “The delivery of climate finance is very important to achieve a lot of these targets and that is still very much lacking”, Roselyn Fosuah Adjei, director of climate change at Ghana’s forestry commission and co-chair of the FCLP, told Climate Home.

“The kind of finance we need is not finance for today or tomorrow, it’s finance for yesterday. We are already behind schedule. If it gets delivered fast there’s lots that we can do to close the gap that is now quite wide,” she added.

The Cop26 pledge was accompanied by a commitment from a group of rich nations to provide $12 billion in forest-related climate finance between 2021 and 2025. The money should be channeled to developing countries enacting concrete steps to halt forest loss.

The donor countries reported last year that they had provided $2.6 billion – over a fifth of the target amount – in 2021. They are expected to provide an update at Cop28.

INTERNATIONAL FOSSIL FINANCE PLEDGE

WHAT: End new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement.

WHO: 34 countries and five development banks – predominantly from wealthy cuontries – signed up to the pledge at Cop26. These included the G7 nations – with the exception of Japan – and most EU member states.

HOW IT IS GOING: Among the signatories that give lots of money to the energy sector, the vast majority have introduced policies in line with the promise made in Glasgow.

The United Kingdom, France, Denmark, New Zealand, Canada, Finland and Sweden have stopped providing loans and guarantees for oil and gas extraction and processing overseas through their export credit agencies.

Their actions have shifted at least $5.7 billion per year in public finance out of fossil fuels and into clean energy, according to analysis by Oil Change International and E3G.

On the other hand, however, the USA, Italy and Germany have continued funding international fossil fuel projects in 2023 in breach of the pledge.

They were supposed to stop funding foreign fossil fuels by December 2022. But since then, they collectively approved over $3 billion in financial support to oil and gas overseas programmes.

Most of the funding comes in the form of state-backed guarantees provided by export credit agencies. These products limit the risk taken by companies selling services and goods in other countries, influencing investment.

Among the projects receiving backing from the US and Italy was the expansion of an oil refining facility in Indonesia’s Borneo.

The US Export-Import Bank justified its backing of the project by claiming it would allow Indonesia to reduce its reliance on imported fossil fuels. The Italian agency did not provide a motivation for the decision.

Germany and the US have also poured hundreds of millions of dollars into projects aiming to boost the production and trade of liquified natural gas (LNG), which has been more sought after since Russia invaded Ukraine and Europe cut back on Russian gas.

Political splits and carve-outs

In the US, efforts to comply with the Glasgow pledge have caused a split among senior officials in the Biden administration and in the federal agencies charged with disbursing the money, as Politico revealed.

The White House has drafted guidance underpinning the investments - without making it public -, but the final decisions are made by agencies like the US Export-Import Bank (Exim).

“It is a struggle to get US Exim to comply, so far they’ve ignored the Cop26 commitment”, says Nina Pusic from Oil Change International. “It will require a lot of political weight from the Biden administration and Congress.”

Indonesia delays coal closure plans after finance row with rich nations

Italy looks likely to keep funding fossil fuels overseas for years to come. Its policy guidance lays out a "gradual dismission of public support to new requests of fossil fuel projects", seeing support for gas extraction and production run into 2026. Oil processing and distribution projects should be excluded from the beginning of next year.

But Italy has also carved out a wide range of exceptions that allow its export credit agency to keep greenlighting support for fossil fuel projects on "national energy security" and "energy efficiency" grounds.

The FSRU Toscana LNG regasfication platform off the coast of Italy (Photo: OLT Offshore LNG Toscana)

Germany's main export credit agency has just introduced this month new policies restricting support for fossil fuel projects. However, it allows for financing the development of new gas fields and related transport facilities until 2025 when justified by "national security and in compliance with the Paris Agreement targets".

Investment in new coal, oil and gas production is regarded as incompatible with limiting global warming to 1.5C, according to the International Energy Agency (IEA) and a large number of climate scientists.

"Germany has a vast amount of fossil fuel transactions pending approval", says Oil Change International's Pusic. "The success of the new policy will be judged on the decisions made on those projects".

GLASGOW FINANCIAL ALLIANCE FOR NET ZERO (GFANZ)

WHAT: Commit to achieving net zero emissions by 2050 at the latest by aligning their portfolios and investment practices with the goals of the Paris Agreement.

WHO: Over 650 institutions across the financial sector, including banks, insurers, asset owners, asset managers, financial service providers, and investment consultants. Gfanz members represent 40% of global private financial assets. They are grouped together under eight independent net-zero financial alliances focused on specific branches of finance.

HOW IT IS GOING: It is not easy to gauge the progress of a wide-ranging initiative with loosely defined targets and a constellation of constituent parts.

GFANZ says it has made progress over the last two years by raising the ambition of financial institutions and by providing tools and guidance to turn commitments into action.

"Two years ago, not a single bank had set a science-based 2030 target. Now nearly all global, systemically important banks have voluntarily and independently set 2030 targets for oil and gas", a GFANZ spokesperson said.

Above all, the mere fact that the alliance still exists at all is a first - albeit limited - marker of success, after an especially tumultuous year.

The prospect of ending up in legal hot waters in the US, where Republicans have driven an anti-climate investment backlash, has dampened the enthusiasm of many leading signatories. The result is that parts of the alliance have been hemorrhaging members, while other components have resorted to watering down their requirements to assuage concerns.

Mark Carney, former Bank of England governor, launched GFANZ at Cop26. Photo: World Economic Forum/Valeriano Di Domenico

Troubles started brewing in mid-2022 when a group of leading US banks threatened to pull out over fears of being sued because of having decarbonisation policies imposed by external parties. That's after US Republican politicians had accused financial institutions of breaching antitrust rules by grouping together in a climate cartel that limits opportunities for investors.

A month later, in October 2022, Gfanz dropped a key requirement for its members to sign up to the UN Race to Zero initiative - a verification body for corporate and financial sector pledges - which had been seen as a way to prevent greenwashing.

GFANZ told Climate Home that the alliances are still working with Race to Zero and "continue to note" its advice and guidance.

Heading for the door

Those US banks eventually ended up staying in but, despite the less stringent criteria, other influential members began heading for the door in droves soon after.

Vanguard, one of the world's biggest asset managers, quit the Net Zero Asset Managers' initiative - part of Gfanz - saying it wanted to "provide clarity to investors" and "speak independently on matters of importance" to them.

But it's the insurers' coalition, known as NZIA, that has suffered the biggest - nearly fatal - wounds. The group has lost nearly two-thirds of its members since the start of the year, with leading firms like Allianz, Zurich, Munich Re and Lloyd's of London throwing in the towel.

Again a major driver for the mass exit was a letter written in May by 23 Republican attorney generals accusing signatories of advancing "an activists climate agenda" with "serious detrimental effects on the residents" of their states. The spark for this was the alliance's initial obligation to its members to set emission reduction targets by the end of July.

Staring at the real prospect of shutting down, the insurers' alliance again watered down its requirements, becoming effectively toothless.

To triple renewable energy, the Global South needs finance

"NZIA member companies have no obligation to set or publish targets", wrote the UN Environment Programme (Unep) - convener of the initiative -  in a clarification letter. "Each company who chooses to be a member of the NZIA unilaterally and independently decides on the steps on its path towards net zero."

Meanwhile, GFANZ says its members have submitted over 300 interim targets "representing clear progress in implementing commitments" to divert finance in line with net zero goals.

But while plans have been announced, many GFANZ members are also being accused of not putting their money where their mouth is. 161 members of the coalition have collectively invested hundreds of billions of dollars into the expansion of the coal, oil and gas industries since they joined the group, according to research by campaigning group Reclaim Finance.

A GFANZ spokesperson said "it’s clear a lot of work still needs to be done to ensure the world is deploying capital consistent with a 1.5C pathway".

"GFANZ is helping to support financial institutions to each set their own sectoral targets and develop transition plans and release guidance on their plan for a managed phaseout of fossil fuels," they added.

The article was amended on 6/11 to add comments from GFANZ received after publication

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During a meeting of the bank’s steering committee in Marrakech, Morocco, they voiced opposition to reforms which are expected to channel more money into clean energy projects.

Mohammed Aljadaan, the Saudi finance minister, said “hydrocarbons will continue to play an important role in balancing the energy mix for the foreseeable future”, calling on the World Bank to reflect “these realities” in its financing.

He added that the lender should prioritise supporting universal electricity access, which requires “tapping all energy sources”.

His calls were echoed by Bahrain’s finance minister, Sheikh Salman Al Khalifa, who intervened at the meeting on behalf of a group of countries including neighbouring United Arab Emirates and Qatar.

“All sources of energy are essential and needed for economic growth and development,” he said before going on to make the case for the “indispensable role” of fossil gas as a source of “reliable and affordable” energy during the transition process.

Gulf states are among the world’s biggest producers and exporters of fossil fuels, which contribute to the vast majority of their national incomes.

Carbon capture pitch

Both Aljadaan and Al Khalifa also urged the World Bank to boost investment in carbon capture and storage (CCS) to allow for “a wide and reliable energy mix”. Saudi Arabia is a major proponent of CCS and has a history of promoting it in international summits, including talks over the IPCC scientific reports and UN climate talks.

Countries that produce or rely on fossil fuels particularly advocate the use CCS to trap their emissions, rather than ending the use of such fuels completely. However, the technology remains expensive and unproven at large scale.

According to the IPCC’s scientists, stopping a tonne of carbon dioxide with CCS costs between $50 and $200. Replacing fossil fuels with renewables usually saves money.

The International Energy Agency recently downgraded the role of the techno-fix in its net zero scenario, saying the history of CCS “has largely been one of unmet expectations”, marked by slow progress and flat deployment.

Green agenda attacked

Another voice in favour of fossil fuels around the World Bank committee table was that of Alexey Overchuk, Russia’s deputy prime minister. In a not-so-thinly veiled attack on the lender’s new agenda, he hit out at “unbalanced” energy and climate policies.

“An accelerated ‘greening’ of the global economy without considering the social effects and economic efficiency of decarbonization measures, along with massive underinvestment in fossil fuels, undermines energy security globally,” Overchuk said.

He added that the World Bank should recognise “the potential advantages of other energy sources, including gas and nuclear”. Russia is the second world’s largest gas producer, accounting for 18% of the global gas output in 2021.

World Bank and fossil fuels

The World Bank has reduced its financial backing of fossil fuel projects over the last few years. But last year it still provided over $1 billion of direct support to oil and gas, according to research by campaigning group Oil Change International.

A separate study found the lender’s private finance arm supplied $3.7bn in trade finance to oil and gas projects in 2022. Trade finance refers to a complex set of financial instruments in which money flows through intermediaries, like commercial banks, before reaching governments and businesses.

The World Bank – along its fellow development banks – recently agreed on principles to align its activities to the goals of the Paris Agreement, which aims to limit global warming to well below 2°C and to “pursue efforts” to keep it under 1.5°C.

But analysts raised concerns over the framework which does not explicitly prohibit financing for fossil fuel activities.

Climate finance leader

The World Bank says it is the largest provider of climate finance to developing countries. In 2022, it delivered $31.7 billion for climate-related investments – 36% of its lending.

At the meeting on Thursday in Marrakech, the World Bank’s shareholders endorsed its new vision, which puts a sharper focus on climate change.

The bank has expanded its historical objective to “end poverty” by adding that this should happen “on a livable planet”.

The reason for evolving the statement is to widen the aperture through which the bank looks at its task in the future, its chief Ajay Banga said on Wednesday. “If you can’t breathe and cannot drink clean water, there is little point in eradicating poverty,” he added.

The post Saudi Arabia, Russia urge World Bank to keep funding fossil fuels appeared first on Climate Home News.

Governments around the world currently spend over half a trillion dollars a year on making the use of fossil fuels cheaper and the bank wants some of this to be spent on tackling climate change.

In response to calls from the wealthy governments that fund it, the bank is pivoting to focus more on climate change, alongside its traditional goal of eradicating poverty in the developing world.

The bank’s new president Ajay Banga told reporters on Wednesday that accounting tweaks like changes in its equity-to-loan ratio would help with this, as they would allow it to lend about a fifth more than it does now.

But, he told the bank’s annual meeting in the Moroccan city of Marrakech, “it is not going to be enough for the kind of challenges the world has ahead”.

So, he said, the bank would also “look at every other place where pools of money exist which could be used or redirected – whether it is subsidies in the world on fuel and agriculture that cause environmental issues or whether it is voluntary carbon markets.”

MDBs push against subsidies

The World Bank does not have the power to force governments to remove these subsidies but it can advise and pressure them.

Following coup, Gabon climate officials face corruption allegations

Banga’s comments follow a September 2021 International Monetary Fund (IMF) report which said governments spent about $577 billion a year making fossil fuels cheaper.

This was followed in July 2023 by the World Bank’s “detox development” report on “repurposing environmentally harmful subsidies”.

On the release of the report, the bank’s second-in-command Axel Van Trotsenburg said: “People will say that there isn’t money for climate but there is – it’s just in the wrong places.”

He added: “If we could repurpose the trillions of dollars being spent on wasteful subsidies and put these to better, greener uses, we could together address many of the planet’s most pressing challenges.”

UN puts climate ‘course correction’ on Cop28 negotiating table

The report said that fossil fuel subsidies increase the use of fossil fuels, reduce the incentives to cut energy use and make it harder for renewable energy to compete.

Petrostates worst offenders

The countries that provide the most subsidies for fossil fuels are economies reliant on fossil fuel production like Russia, Saudi Arabia, Iran and Venezuela.

Big Western fossil fuel producers like the US, UK and Canada also provide billions of dollars of subsidies, as do major emerging economies like India, China and Indonesia.

IMF research shows that in countries like Saudi Arabia and Iran, fuel subsidies mean that filling up cars is far cheaper than it would be if left to the free market.

The same research shows that subsidies are making gas much cheaper in a broader group of nations which includes India, Brazil, Canada and Russia.

If the social costs of fossil fuels – like their impact on climate change and air pollution – were included then the price would be even greater than their free market price, the research says.

Reforms spark protests

The G20 group of the world’s biggest economies agreed in 2009 to phase out “inefficient” fossil fuel subsidies and have repeated that promise at every G20 summit since – without major efforts to put it into practice.

The World Bank says that the subsidies benefit the rich more than the poor. But removing them has often proved politically controversial, as it pushes up living costs for many.

Green Climate Fund ambition at risk after ‘disappointing’ pledges

A 2022 study found that over 40 countries have had riots over fuel prices in the last 20 years including France, Zimbabwe in Iran.

The study’s authors found that fossil fuel exporters are more likely to fix domestic fuel prices with subsidies.

“When these can no longer be sustained, much bigger domestic price adjustments are needed, often leading to riots,” they found.

Banga and the July 2023 World Bank report also call for the removal of fishing subsidies and $500 billion a year of environmentally-damaging agricultural subsidies.

The post World Bank targets dirty subsidies to fund climate action appeared first on Climate Home News.

Export credit and development agencies from six developed nations have approved $4.4 billion in funding for oil and gas projects overseas since the start of 2023, research from campaigning group Oil Change International shows.

More than half of the total financing has been provided by the United States ($1.5 billion) and Italy ($1.2 billion), followed by Germany, Japan, the Netherlands and Switzerland.

Claire O’Manique from Oil Change International said the countries are “going rogue by backtracking on their commitment to end international public finance for fossil fuels”.  “Public money that should be going to support a just transition to renewable energy is instead being pumped into more climate-wrecking fossil fuel projects”, she added.

One pledge, many interpretations

Twenty countries signed up to the Glasgow Statement at Cop26 pledging to end new direct public finance for overseas fossil fuel projects by the end of 2022.

However, the signatories have interpreted the promise in different ways.

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The United Kingdom and France have stopped all public subsidies going to international fossil fuel projects. Italy carved out a wide range of energy security exemptions for the continued support of fossil fuel projects. Germany published a draft policy for its export credit agency last July planning to support new gas projects overseas until 2025. The US has not made its guidelines public.

The Glasgow pledge allowed exceptions in “limited and clearly defined circumstances that are consistent with a 1.5C warming limit”. The International Energy Agency warned last year that investment in new coal, oil and gas production was incompatible with limiting global warming to 1.5C.

LNG and oil expansion

The US and Germany have backed projects aiming to boost the production and trade of liquified natural gas (LNG), which has been in heightened demand since Russia’s invasion of Ukraine.

The expansion of an oil refining facility in Indonesia’s Borneo has received support from the Italian and US export credit agencies. The US Export-Import Bank justified its backing of the project by claiming it would allow Indonesia to reduce its reliance on imported fossil fuels.

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Analysts and campaigners told Climate Home News that expansion of oil refining falls within the scope of the Glasgow agreement.

The majority of the $4.4 billion greenlit in 2023 comes in the form of state-backed guarantees provided by export credit agencies. These products limit the risk taken by companies selling services and goods in other countries, influencing investment.

Climate Home News has contacted the export credit agencies of Germany, Italy and the US for comment.

The post Rich countries sink billions into oil and gas despite Cop26 pledge appeared first on Climate Home News.

The government’s export credit agency has released its draft policy for the provision of guarantees in the energy sector in what it described as an attempt to tie them to climate protection targets.

The guidelines were expected to belatedly align the German agency’s operations with a pledge made at Cop26 in Glasgow to end funding for coal, oil and gas projects overseas by the end of last year.

Under the proposal, the German government will no longer support coal and oil operations except when needed to decommission infrastructure or reduce methane emissions.

But the inclusion of a series of exceptions for fossil gas has come under heavy criticism.

‘Anti-science’ policy

Adam McGibbon from campaigning group Oil Change International said Germany’s claims to be a climate leader are “laughable” after the release of this new policy.

“This policy is anti-science, it runs against everything that the world’s scientists are telling us. No new fossil fuel infrastructure can be built if the world is to meet climate targets”, he added.

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The agency would continue supporting the development of new gas fields and related transport facilities until 2025 when justified by national security and in compliance with the Paris Agreement targets.

The pledge to end international finance for fossil fuel allows exceptions in “limited and clearly defined circumstances that are consistent with a 1.5C warming limit”. The International Energy Agency warned last year that investment in new coal, oil and gas production was incompatible with limiting global warming to 1.5C.

There is similarly a “large consensus” among climate scientists that developing any new gas fields is “incompatible” with limiting warming to 1.5C, according to a study by the International Institute for Sustainable Development (IISD) reviewing energy pathways.

Germany, which relied on Russia for a third of its gas, has opted for alternatives overseas, even equipping itself with new LNG importing capacity with new floating terminals.

In late 2022, the country even signed a 15-year deal to import gas from the UAE’s North Field, deemed a carbon bomb for its large untapped supplies.

2025 deadline

The German guidelines would also allow for the provision of export guarantees for the maintenance of existing gas extraction and transport projects until 2025 in industrialised nations and until 2029 in developing countries. This would only apply to activities that do not extend the lifetime or the production capacity of the projects.

The retrofitting of existing gas power plants with carbon capture and storage (CCS) technologies would also be eligible for public financing.

The German economy ministry said the sector guidelines implemented international commitments and that conditions for gas were very strict and very limited, Reuters reported.

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The policy is expected to come into force towards the end of the year after undergoing a consultation process.

Export credit agencies, like the German agency, are influential in directing investment towards specific sectors. They do this by offering exporters government-backed loans, guarantees or insurance.

Thanks to those benefits, companies selling services and goods in countries or industries considered high-risk can offset them.

Cop26 pledge

Germany was among 39 countries and financial institutions that signed a pledge at Cop26 in November 2021 to stop public finance for overseas fossil fuel projects by the end of 2022.

Among the biggest signatories, the United Kingdom, France and Canada have published policies that meet the promise made in Glasgow.

Italy has already u-turned on its commitment, carving out a wide range of exemptions for the continued support of fossil fuel projects on energy security grounds.

The United States has not yet published its policy. Last May its export credit agency approved a loan worth nearly $100 million for the expansion of an oil refining facility in Indonesia.

The post Germany plans to keep funding new gas projects overseas despite pledge appeared first on Climate Home News.

Ten multilateral development banks (MDBs) – including the World Bank – have defined a multi-step process to establish whether projects meet the goals of the Paris Agreement, which aims to limit global warming to well below 2°C and to “pursue efforts” to keep it under 1.5°C.

The principles, which make good on a commitment first made by MDBs in 2017, require projects to line up with national climate plans and include a list of acceptable activities.

But analysts and campaigners are sceptical whether the rules will divert public money away from polluting activities and prevent global warming. A key criticism is that the framework does not explicitly prohibit financing for fossil fuel activities.

Focus on national plans

For a proposed investment to be considered under the new principles, it needs to align with countries’ climate strategies submitted to the UN, known as nationally determined contributions (NDCs).

If an activity – even a highly polluting one – appears in the relevant NDC, it will be waved through to the next step. The exceptions to this are support for coal mining, coal power plants and peat extraction, which are not considered Paris-aligned in any circumstance .

Laura Sabogal, policy advisor at E3G, considers it “very likely” that the banks’ portfolios will actually overshoot the Paris Agreement threshold because of the heavy reliance in the decision-making process on national climate plans that are “not robust enough”.

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“These documents are extremely vague, not uniform or comparable,” Sabogal told Climate Home News. “Many NDCs are not aligned with a 1.5C, or even 2C, trajectory. If you aggregate all of these investments it is very likely the banks are not actually aligning with the goals of the Paris Agreement.”

According to Climate Action Tracker, no country’s NDC is compatible with 1.5C of global warming.

The UN Environment Programme says the current pledges made collectively by countries in their NDCs put the world on track for a temperature rise of between 2.4C and 2.6C by the end of the century.

First step in reforms

MDBs hold over $1.8 trillion in assets, giving them an outsized influence over the direction of funding flows toward developing countries in particular. They have long been accused of continuing to fund polluting projects and not doing enough to support climate-friendly ones. A growing coalition of nations, gathered in Paris last week, has been calling for deep reforms.

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The new principles were agreed on by the African Development Bank, Asian Development Bank, Asian Infrastructure Investment Bank, Council of Europe Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank Group, Islamic Development Bank, New Development Bank and the World Bank Group.

Each lender will now have to adopt them into their own methodologies and use them in vetting investment proposals.

Across the ten lenders, the work to turn high-level principles into something tangible is at very different stages. At one end, the European Investment Bank says all its new investments have been Paris aligned since the start of 2021. Meanwhile, the African Development Bank hopes to reach that target by 2025.

If fully implemented, the new framework could mark a degree of progress toward more climate-friendly operations for some lenders.

Although mining and electricity generation from coal and peat are in an exclusion list of projects considered incompatible with the emission reduction goals of the Paris Agreement, this does not amount to an outright ban on investing in these activities. But experts believe it should further discourage development banks to fund them.

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Of the MDBs that signed up to this initiative, the Islamic Development Bank and the African Development Bank are the only ones without an explicit commitment to end coal finance. The African lender’s president Akinwumi Adesina pledged to scrap coal funding in 2019, but this has yet to be formally reflected in the bank’s energy policy.

Aki Kachi, an analyst at the New Climate Institute, told Climate Home News that “inevitably, it was always going to be the lowest common denominator between all the banks”.

“Some may go further and interpret it in a more ambitious way, others will use all of the flexibility to carry on almost with business as usual,” he added.

Campaigners pushing for MDBs to stop funding all fossil fuel operations were also left disappointed by the exclusion of any mention of oil and gas in the framework. “As they are not part of the exclusion list these will continue to be assessed on a case-by-case basis,” said Sabogal.

Political considerations

The document agreed on by the development banks draws a scenario in which a country is seeking funding for a fossil-fuel-powered technology. If, for instance, the country’s climate strategy states specifically that technology needs to be phased out by 2035, a project with a ten-year lifetime submitted in 2025 would not be considered aligned. But, if the NDC does not mention that fossil fuel activity at all, it will be allowed to progress to the next stage of assessment.

The other steps in the process look at the consistency with sector-specific decarbonisation pathways, the feasibility of cleaner alternatives and the risk of creating stranded assets.

Kachi said ultimately a lot would depend on the interpretation given by the banks’ officers, which is often driven by the political dynamics of their governance.

“We can’t assume this is merely a technical exercise,” he said. “It is very much a political one. The strategies are driven by political agendas within the banks’ management and shareholders. It’s only going to have an impact if the shareholders want that result.”

The post Public banks agree to check investments against countries’ climate plans appeared first on Climate Home News.

Financial support from the Export-Import Bank (Ex-Im) will help a state-controlled plant on the island of Borneo turn 40% more oil into products like jet fuel and diesel.

In a closed door meeting last Thursday, Ex-Im’s board approved $99.7 million in support for the Balikpapan oil refinery run by Indonesia’s national oil company Pertamina. Ex-Im said the loan would enable an expansion of the facility, alongside fuel efficiency and safety upgrades.

‘Untenable’ decision

But the plan has been criticised for seeming to contradict a climate finance commitment.

At Cop26, the US and 19 other countries signed the Glasgow Statement pledging to end new direct public finance for overseas fossil fuel projects by the end of 2022.

Since then the US has been accused of backsliding on its promise. Unlike other signatories, the White House has not released publicly any policy explaining how the pledge would be implemented.

Shruti Shukla from advocacy group the Natural Resources Defense Council (NRDC) said the lack of transparency is allowing for “untenable” decisions to slip through.

“To spend the limited public finance available on the upgrade of an oil refinery is not the best use of those resources which should go towards clean energy alternatives,” she said.

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Adam McGibbon, a campaigner at Oil Change International, said president Joe Biden risks not being trusted to keep climate promises by “breaking” the Glasgow pledge.

A senior Ex-Im official told Climate Home News that the agency is trying to align with the Biden administration’s climate agenda while still respecting its statutory limitations, including the prohibition against discrimination based solely on industry, sector or business.

Biden’s appointees

Ex-Im is the official export credit agency of the US. It operates as an independent authority but its board members are appointed by the US president and confirmed by the Senate.

The sitting president, Reta Jo-Lewis, was picked by Biden in February 2022. The current government selected three of the board’s members, while the other two were appointed by Donald Trump.

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Like other countries’ export credit agencies, Ex-Im is influential in directing investment towards specific sectors by offering exporters government-backed loans, guarantees or insurance. This limits the risk taken by companies selling services and goods in countries or industries considered high risk.

Production boost

The new loan will allow the Balikpapan refinery to increase its capacity by nearly 40%, with the production of up to 360 million barrels of oil per day.

According to Ex-Im, the project will unleash 2.9 million tonnes of carbon dioxide emissions every year. That is as much as the annual carbon footprint of Iceland or Guyana.

A petrol station operated by oil and gas company Pertamina in Indonesia. Photo: tian yake/Flickr

Pertamina claims the project “not only aims to increase the refinery capacity but also realises a green refinery”. This is because the facility plans to switch to the production of a more energy-efficient type of gasoline.

Indonesia relies mostly on oil and coal for its energy supply. In November 2022, the US and Japan led a group of rich nations and banks in pledging $20 billion to speed up the country’s transition from coal to clean energy. But the plan has no provisions for phasing out other fossil fuels.

Support for US jobs

Ex-Im justified its backing of the project by claiming it would allow Indonesia to reduce its reliance on imported fossil fuels and said it would support hundreds of jobs for US manufacturers.

The project previously received much greater support from the South Korean export credit agency, which committed $1.19 billion to finance the oil refinery expansion in December 2022. Korea Eximbank said its support helped Korean engineering giant Hyundai win a construction contract on the project.

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Unlike the US, however, South Korea did not sign the public finance pledge at Cop26 in Glasgow.

Analysts and campaigners told Climate Home News that the Indonesian oil refinery expansion falls within the scope of the Glasgow agreement to end public subsidies for fossil fuels projects overseas.

The UK stopped direct government support for the fossil fuel energy sector overseas in March 2021. Its guidance explicitly includes oil refining within its scope. France also put an end to providing public finance to international fossil fuel projects, including oil refining, last November.

Pledge backsliding

The US – together with Germany – has not yet published its public finance policies to meet the Glasgow agreement, according to a recent report by Oil Change International.

Ex-Im’s support for the oil refinery appears to contradict a claim made last month by G7 climate ministers that public support for unabated fossil fuel energy overseas had ended in 2022.

The NRDC’s Shukla said any more financing of fossil fuel projects would send the wrong message ahead of Cop28. “We hope there are no more similar projects that slip through.”

Oil and gas projects accounted for around 27% of Ex-Im’s portfolio in the fiscal year ending in September 2022, rising by one percentage point compared to the previous period. The agency is currently considering financing other fossil fuel projects, including an oil and gas field in Bahrain.

The post US backs Indonesian oil refinery despite pledge to end fossil fuel finance appeared first on Climate Home News.

A group of 13 nations and the European Union agreed to give those developing projects like renewable energy, electricity infrastructure and low-emission transport longer to pay back loans and charge them less for insurance.

The Organisation for Economic Co-operation and Development (OECD)’s head Matthias Cormann hailed the deal as a “great milestone to help increase the impact of trade and finance flows on securing our climate objectives”.

But campaigners claim there is no clear definition of green projects and criticised the inclusion of technologies like hydrogen and carbon capture and storage.

They claim that, as many hydrogen and CCS projects are driven by fossil fuel companies, that sector will be among the beneficiaries of the reform, potentially for polluting projects.

The agreement is part of a package of reforms secured within a group of the OECD responsible for setting rules for the export credit agencies (ECAs) of member states.

ECAs influential role

Participants are the USA, France, Germany, Italy, Canada, the United Kingdom, Japan, the European Union, South Korea, New Zealand, Australia, Norway, Switzerland and Turkey.

The reform is expected to come into effect later this year once national ECAs have implemented it.

ECAs are highly influential in directing investment towards specific sectors by offering exporters government-backed loans, guarantees or insurance. This limits the risk taken by companies selling services and goods in countries or industries considered high-risk.

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Under the new agreement, maximum repayment terms will be increased from 15 years to 22 years for investments including ‘environmentally sustainable energy production’, carbon capture storage and transportation, clean hydrogen and ammonia, low-emissions manufacturing, zero and low-emissions transport and clean energy minerals and ores.

The reforms will introduce further flexibilities on repayment schedules and adjust the minimum premium rates charged for insurance cover.

Uncertain ‘climate-friendly’ label

The statement released on Monday does not give any more detailed explanation of what specific type of projects will be given favourable treatment.

A definition for ‘clean hydrogen’, for example, could range from green hydrogen produced with renewable energy to gas-derived blue hydrogen.

An OECD spokesperson said the member states are still in the process of negotiating the final text, which will incorporate the agreement in principle and make all the details public.

OECD boss Matthias Cormann said the reforms will allow the scaling up and better targeting of public and private finance to support climate-friendly investments.

The European Commission said this is “the culmination of more than two years of negotiations”.

‘Incentives for fossil fuel sector’

The reforms have been met with disappointment by campaigners who had pressured governments for more far-reaching changes, including the end of public export finance for fossil fuel projects.

Nina Pusic of Oil Change International told Climate Home the group is worried this will enable benefits to fall into the lap of oil and gas industries that are already heavily supported by export credit agencies.

“Better incentives for truly climate-friendly projects are needed at OECD level, but we are concerned about the definition used here,” she added. “It is still subject to further refinement but the scope has now been set”.

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Steven Feit, a senior attorney at the Center for International Environmental Law, said carbon capture, hydrogen or ammonia are the primary avenues through which the fossil fuel industry seeks to legitimise itself in the wake of climate action. “Labeling these projects as ‘green or climate friendly’ perpetuates a false narrative,” he added.

Carbon capture and storage is where carbon dioxide is sucked out of the air, often directly from a polluting smokestack. Hydrogen and ammonia are products used for a wide variety of purposes. They can be made using clean electricity or polluting fossil fuel electricity.

Bankrolling fossil fuels

In recent years, ECAs have come under fire for being a prominent source of public funding for fossil fuel projects worldwide.

The ECAs of G20 nations provided seven times as much export finance to fossil fuel projects ($33.5 billion) than for renewable energy ($4.7 billion) between 2019 and 2021, according to data compiled by campaigners.

In 2021 the OECD group agreed to end ECAs’ support for unabated coal-fired power plants.

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But campaigners and some countries urged it to go further. The Council of the European Union called for an agreement to end officially supported export credits for projects in the fossil fuel energy sector, including oil and gas projects.

Backsliding on pledges

Additionally, at Cop26 in Glasgow 20 countries – including the biggest EU members, the UK, the US and Canada – signed onto a commitment to end public finance for overseas fossil fuel projects by the end of 2022.

But countries have subsequently been accused of watering down the terms of the pledge, by inserting exemptions.

Italy has U-turned on its promise. Its ECA’s new funding policy carves out a wide range of exemptions for the continued support of fossil fuel projects beyond the deadlines on energy security grounds.

Germany and the United States have yet to publish their policies outlining how their pledge will work in practice.

The post OECD reforms set to give “green” projects better export finance appeared first on Climate Home News.

Friends of the Earth is challenging the decision by the UK’s export credit agency to contribute funding towards the $20 billion development in one of the world’s poorest and most climate vulnerable countries, which is gripped by an Islamic insurgency.

Campaigners will argue the UK government’s support for the project is inconsistent with its obligations under the Paris climate agreement.

They say the development by French oil major Total will emit 116 million tonnes of CO2 each year when the methane gas is burnt – equivalent to the annual emissions of the EU’s aviation sector. Construction alone is anticipated to increase Mozambique’s greenhouse gas emissions 10% by 2022.

The government of Mozambique hopes the development will generate billions of dollars in revenue and catapult the country to middle income status by the mid-2030s – a big gamble at a time when the coronavirus pandemic has hit gas demand.

Residents told Climate Home News last year they hoped the project would bring jobs and investment to the area, but instead came instability and violence.

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Campaigners say the UK government’s decision to support the project undermines its leadership credentials as host of the Cop26 climate summit in Glasgow in November. 

“How can Boris Johnson expect the rest of the world to pull the plug on fossil fuels when his government is giving such enthusiastic support to a development that could have the same climate impact as the entire EU aviation sector?” asked Will Rundle, head of legal at Friends of the Earth.

“The UK government should be supporting the building of a cleaner, safer future – not projects that will continue to fuel the climate emergency for many years to come,” Rundle added. 

Last month, the UK government ended overseas fossil fuel subsidies, ruling out support for another Total project – a $3.5 billion oil pipeline in East Africa. 

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Lawyers at Friends of the Earth recently claimed that the gas development has worsened conflict in Cabo Delgado, northern Mozambique, where armed militants have killed an estimated 2,500 people and displaced almost 700,000 since 2017.

The construction stage of the project alone displaced more than 550 families from their land, destroyed the local fishing industry and attracted radicalised militants looking to cash in on the development, the lawyers said. 

Total was forced to suspend work on the project in March following an attack near the town of Palma. The company shut its operations in early April and evacuated all workers due to ongoing violence in the region. Earlier this month, Mozambique’s military recently said they had regained full control of the coastal town. 

Contractors fear it could be more than a year or more until work resumes at Total's Mozambique LNG site at Afungi.

One adviser warns the evacuation of the site may prevent drawdowns on the $15bn project finance debthttps://t.co/BFpx2D0hCX

— Leigh Elston (@LeighElston) April 14, 2021

The US is also backing the $20 billion methane gas development. The US Export-Import Bank (Exim) has provided a $4.7bn loan to the project.

President Joe Biden confirmed at the leaders’ climate summit on Thursday that the US will end public finance investment for “carbon-intensive fossil-fuel based energy projects”.

Campaigners have expressed concern that the phrase “carbon-intensive” leaves the door open to continue funding methane gas projects and the plan is silent on how the policy applies to Exim. 

The post UK faces legal action over public finance for Mozambique gas project appeared first on Climate Home News.

In one in a series of executive orders aimed at tackling the climate crisis in the US and abroad, Biden committed his government “to identify steps through which the United States can promote ending international financing of carbon-intensive fossil fuel-based energy while simultaneously advancing sustainable development and a green recovery”.

The order stated the secretary of state together with the treasury and energy secretaries would work with the US Export–Import Bank and the head of the Development Finance Corporation to achieve this.

Biden also directed federal agencies to eliminate fossil fuel subsidies. “Unlike previous administrations, I don’t think the federal government should give handouts to big oil to the tune of $40 billion in fossil fuel subsidies,” he said in a speech before signing the executive order.

A few hours earlier, presidential climate envoy John Kerry told a panel discussion organised by the World Economic Forum that Biden had asked his administration to develop “a plan for ending international finance of fossil fuel projects with public money”.

The announcement brings the US in line with the EU, where foreign ministers have called this week for an end to fossil fuel finance abroad. Last month, the UK committed to ending its financing of oil and gas projects, but the policy is yet to come into force.

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The US International Development Finance Corporation (DFC) and its predecessor, the Overseas Private Investment Corporation, approved around $4 billion for overseas fossil fuel projects over the past five years, according to climate group Friends of the Earth. Since 2018, the US Export-Import Bank greenlit over $5bn for fossil fuel investments abroad. 

This included a $4.7bn loan for a natural gas project in northern Mozambique, $400 million in financial support for Mexican oil company Pemex, and an $18m loan for oil and gas production in Vaca Muerta, western Argentina.

The US Export-Import Bank also provided a $805m loan for the Kusile power plant, a 4,800MW coal-fired station that is currently under construction in South Africa. 

Many of these projects were approved under Donald Trump, Han Chen, international energy policy manager at the Natural Resources Defense Council, told Climate Home News. 

“You had a lot of fossil fuel promoters, trade associations and interest groups really using the Trump administration and the apparatus of US diplomacy to push deals in a lot of countries. There was a lot of pressure for countries to agree to LNG deals – they were part of the trade and economic negotiations,” said Chen.

In October the DFC said it planned to invest in fossil fuel projects in several countries in southeast Asia to “help expand access to secure and reliable energy.”

One project under consideration by the DFC involved the construction of a 2,250MW gas plant in Binh Thuan province, southeast Vietnam.

“Without that very pro-fossil fuel export agenda, what [will] happen to all of these projects that, frankly, financially weren’t really viable?” Chen added. 

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Campaigners welcomed Biden’s announcement but said questions remained around when the policy could be implemented and whether the order included ending funding for methane gas. 

“The executive order leaves the door open to only covering coal, rather than all fossil fuels with the questionable language ‘carbon-intensive fossil fuel-based energy’,” Kate DeAngelis, international finance manager at Friends of the Earth, told Climate Home.  

Gas is commonly touted as a cleaner fuel than coal, because it emits around half the carbon dioxide when burned for energy. But methane leaks or flaring during extraction, processing and transport leads to fugitive emissions which can significantly worsen the fuel’s climate impact. 

Chen said there have been indications that the Biden administration is set on moving away from financing gas projects. “Kerry has really been hammering down the point that there is no time left for doing gas,” she said. 

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Speaking at the World Economic Forum, Kerry commented: “The problem with gas is if we build out a huge infrastructure for gas now to continue to use it as the bridge fuel, when we haven’t really exhausted the other possibilities, we’re going to be stuck with stranded assets in 10, 20, 30 years.”

Kerry announced this week that the US would draft a climate finance plan and pledged to “significantly increase” international finance for adaptation and resilience initiatives. 

In his executive orders, Biden said he would reconvene the Major Economies Forum. Launched by the Obama administration, the forum brings together the world’s 17 largest emitters to discuss high-level leadership and collaboration on climate action.

“Fossil fuel financing is definitely going to be a big issue [at the forum]. Coal financing in particular will be at the forefront. There will be a lot of countries that are heavily reliant on coal [attending]. That is one of the major conversations [that needs] to happen first – getting commitments to end financing on coal,” said Chen.

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The Japan Bank for International Cooperation (JBIC) announced last month it would invest $636 million in the controversial Vung Ang 2 project, through its Growth Investment Facility.

In response to questions from opposition lawmaker Mizuho Fukushima, seen by Climate Home News, the finance ministry revealed the loan came from a part of the facility targeted at “environmental preservation”.

Launching the facility in May 2018, Japanese finance minister Taro Aso told a meeting of Asian Development Bank governors it would “provide support for a variety of infrastructure projects that contribute to environmental preservation” like public transport and wind power.

However, the bank’s press releases show the “development of quality infrastructure for environmental preservation and sustainable growth” (QI-ESG) fund has supported five gas-fired power projects, compared to two in wind power and one in solar panel manufacturing. A total of 220 billion yen ($2bn) had been allocated to 11 projects as of November 2020, the finance ministry told Fukushima.

A policy presentation dated August 2020 by a senior JBIC official lists gas and high-efficiency coal-fired power generation as eligible for “environmental” funding, despite the fact burning fossil fuels is the main driver of global warming.

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Vung Ang 2 is a planned 1,200 MW plant in central Vietnam. It will be built next to the existing Vung Ang plant. According to local media, in 2017 local residents blocked coal trucks leading to this plant in protest at the pollution and road damage they cause.

The plant will emit several times more sulphur dioxide, nitrogen oxide and fine particulate matter than would be allowed if it were in Japan, according to analysis from the Center for Research on Energy and Clean Air.

Ayumi Fukakusa, a campaigner from Friends of the Earth Japan, said: “It is, in the first place, unacceptable that JBIC support new coal projects, moreover with the fund which was advertised as ‘green and quality infrastructure'”. She said there was a “double standard”, with Japan pledging to reach net zero emissions domestically by 2050 but financing coal abroad.

JBIC finances its activities partly through issuing bonds, which are guaranteed by the Japanese government, making them a safe investment.

Ulf Erlandsson, a former pension fund manager who set up the Anthropocene Fixed Income Institute as a climate watchdog for international bond markets, called on investors to boycott JBIC.

He told Climate Home News: “We already have argued for JBIC to be excluded from international bond portfolios due to its coal financing. With the information that JBIC explicitly uses funds indicated as ‘ESG’ to provide such funding, we are comfortable putting JBIC in a frontrunner position for the ‘most egregious greenwashing of the decade’ award.”

Zsolt Lengyel, secretary of the Institute for European Energy and Climate Policy, said this “outrageous” case showed a need for more accountability from sovereign issuers to bond buyers.

“Finance streams must show real life impacts including their climate impacts. These must be verifiable and verified independently. This transaction is a proof that we lack such systems. Unless we build them fast, we will cripple the energy transition and be swept away by gargantuan greenwashing,” said Lengyel.

Japan net zero pledge puts coal in the spotlight

Analyst Simon Nicholas, from the Institute for Energy Economics and Financial Analysis, said that Vietnam does not need more coal power. “JBIC is encumbering Vietnam with old power technology at a time when the country is reducing focus on coal and seeing renewable energy installation skyrocket,” he said. “Vietnam installed almost 5GW of utility-scale solar power in 2019 and an astonishing 9GW of rooftop solar in 2020. Wind power is also expanding fast in Vietnam. Such renewable energy growth undermines the rationale for further coal-fired power development.”

Japanese public banks have previously counted coal power projects towards the country’s climate finance pledges. Japan International Cooperation Agency (JICA) loaned $1.4bn to support a coal plant in Bangladesh, claiming this funding was “contributing to the mitigation of climate change” because the plant was less polluting than other coal plants.

Japanese “climate finance” has also backed coal plants in India, Indonesia and Vietnam, Associated Press revealed in 2014. The Japanese foreign ministry at the time defended using climate funds in this way. “We don’t have anything to hide or disguise,” the official said.

A JBIC spokesperson declined to comment.

The post Exclusive: Japan uses ‘environmental’ fund to finance Vietnamese coal plant appeared first on Climate Home News.

China finances around a quarter of coal plants under development outside its borders and has invested $43 billion in coal through its “belt and road initiative” (BRI) since 2000, a spree that threatens to blow global climate goals.

Green development guidelines for the BRI published this week, if fully implemented, would halt the coal push and boost renewable energy. Under a traffic light system, wind and solar power projects are rated “green”, while coal and gas-fired power projects are “red”. Environmentally risky projects should be subject to stricter regulations, it argued.

The report further proposed drawing up an exclusion list for the most harmful types of investment. “That would essentially put a ban on coal in China’s overseas investments,” said Dimitri De Boer, report co-author from Client Earth’s China office.

Analysis: Who will build the world’s last coal plant?

Government guidance is important, De Boer said, because the “vast majority” of Chinese coal investments have a state-owned company involved through financing, development, construction or a guarantee from the Sinosure bank.

“If this system is adopted, the real world effects would be very significant,” De Boer said. “The main question is whether and [to] what extent the system will become official government policy, and the rigour of implementation. On both fronts I have some confidence that we’ll see progress in the coming months and years.”

Ye Wang, a co-author and researcher with the World Resources Institute, told Climate Home she was “positive” the report would be taken seriously. She cited China’s recent pledge to work towards net zero emissions by 2060 and a reform of “green bonds” standards to exclude fossil fuels as signs of commitment to the climate agenda.

However, independent experts cautioned that opposition from the coal industry, other government ministries and financial institutions could blunt the impact of the recommendations.

Coal, oil and gas production to blow climate targets despite pandemic dip, report warns

The report, commissioned by the BRI Green Development Coalition in 2019, was produced by five researchers from China’s environment ministry and six from international NGOs.

Its launch on Tuesday was addressed by senior officials from the environment ministry, the foreign affairs ministry and the National Development and Reform Commission (NDRC), which reviews big BRI projects and has veto power over them – but not the commerce ministry (Mofcom).

Thomas Hale, from the Blavatnik School of Government at Oxford University, said the report showed a way for China to make good on its promise to “green” the BRI.

He said: “We have not seen more concrete steps in this direction thus far because of both general inertia in the system and vigorous opposition from incumbent economic actors — particularly the coal sector, its value chain, and bureaucratic and financial interests linked to it.”

These interests, he said, include (mostly state-owned) coal mining and power companies, banks like China Development Bank which fund these companies, provinces like Shaanxi where the coal economy is located, Mofcom which promotes Chinese business abroad and the Exim bank which underwrites overseas projects.

“We can see the [environment ministry]-associated report as a bid to increase the role of environmental regulators in overseas activities (which would be very welcome),” Hale said. “Ultimately, greening BRI will require building sufficient political support within the Chinese policy system. This report represents a key line in the sand in that debate.”

China-backed coal plants on EU’s doorstep hide huge carbon costs

Tyler Harlan, a geographer specialising in the green BRI at Loyola Marymount University, expressed scepticism Chinese financial institutions and key government ministries would embrace big steps like an exclusion list covering coal.

Recommendations like holding red and yellow projects to Chinese or international standards of environmental impact assessment, on top of local requirements, are more likely to be adopted, he said.

“Even adopting some of [the report’s] recommendations in a voluntary capacity would be progress. But I don’t foresee any major recalibration of actual investments in BRI countries any time soon.”

The post China’s environment ministry floats ‘ban’ on coal power investment abroad appeared first on Climate Home News.

The EU agreed to “endorse” Riyadh’s “circular carbon economy” concept in a joint statement, despite objecting that it shifts the emphasis away from cutting emissions to unproven carbon capture, reuse and storage models.

In return, it reinstated language dating back to 2009 on phasing out fossil fuel subsidies. The final text said: “We reaffirm our joint commitment on medium term rationalization and phasing-out of inefficient fossil fuel subsidies that encourage wasteful consumption, while providing targeted support for the poorest.”

Mention of fossil fuel subsidies had been opposed by Saudi Arabia and was left out of an earlier joint declaration of energy ministers.

G20 countries have collectively committed $235 billion to fossil fuels in coronavirus recovery measures, according to analysis from Energy Policy Tracker. That amounts to 55% of energy-related spending, compared to 35% on clean energy.

UN chief Antonio Guterres noted the disparity on Twitter, saying “fossil fuel subsidies should have no place in any rational Covid-19 recovery plan”.

As of September, the rescue packages of #G20 countries have committed 50% more funding to support fossil fuels than to low-carbon energy.

Fossil fuel subsidies should have no place in any rational #COVID19 recovery plan.

— António Guterres (@antonioguterres) November 22, 2020

Canada sets out to enshrine 2050 net zero goal in law

Analysts said the display of unity at the Saudi-chaired summit set the groundwork for progress to be made when Donald Trump exits the White House and Italy hosts the G20 next year.

“Given the history of Saudi Arabia on the climate issue over the years and the nihilistic approach of Donald Trump towards multilateral diplomacy, expectations for this G20 summit were understandably quite low,” said independent consultant Alden Meyer, of Performance Partners. “The leaders statement didn’t signal any major steps forward on climate and energy issues, but despite Trump, it did reaffirm the need for collaborative action to confront the climate crisis.”

That “provides a solid basis for action by the incoming Italian G20 presidency, which will not have to deal with a dysfunctional and confrontational US president,” Meyer added.

Alex Scott, a senior policy adviser at E3G, said “While the outcomes of this G20 summit itself may not have been the most progressive on the climate front, there was a clear priority given to climate in many of the speeches. There’s been a mindset change around how leaders recognise the need to improve their climate policy particularly over the last few months since we’ve seen the net zero dominos starting to fall.”

The Saudi hosts promoted the circular carbon economy (CCE) approach at a side event, where it was praised by Japanese and Chinese leaders. Australia, India, the US and Italy (as the next G20 host) also attended.

Eddy Perez, international policy lead at Climate Action Network (CAN) Canada, told Climate Home: “The fact that [CCE] is in the text and the word ‘endorse’ has been used, tells you that the Saudis really fought hard to get that in there.”

In order to get the US to join the statement, it used language pioneered at last year’s Osaka summit which places responsibilities on all “signatories to the Paris Agreement”. This includes all the G20 nations except the US, which officially left the pact earlier this month. President-elect Biden has pledged to re-join the deal on his first day in office.

Perez said that Trump “did not disrupt” the summit as he has in previous years. The outgoing US president attended some of the meetings but was pictured playing golf during a pandemic preparedness event. In the circular carbon economy side event, he defended his environmental record, attacked the Paris Agreement and boasted that the US was the biggest oil and gas producer in the world.

Correction: The figures for the G20 countries’ fossil fuel bailouts were corrected on 24/11/20.

The post Saudis and Europeans reach compromise on climate as G20 projects unity appeared first on Climate Home News.

On behalf of those who already bear the biggest costs of climate breakdown right now and will do for years to come, we demand world leaders protect our environment from all forms of pollution and exploitation. 

They must ensure we breathe clean air and drink clean water and uphold our right to a healthy environment as we continue to fight for climate justice.

We refuse the presence of multinational companies that exploit our natural resources and bring no benefit to our communities in the Philippines, India, Colombia, Argentina, across the African continent and beyond. 

We refuse to silently watch as corporations prioritise temporary economic wealth over the future of the planet and the well-being of billions of people.

While our nations focus on the economic recovery to Covid-19, we must ensure that environmental and social criteria are not left behind.

UK climate champion: Oil majors can join the ‘race to zero’ – if they align with 1.5C

First, countries of the global North need to understand that they are the most responsible for the climate crisis, which is also a social crisis — a cruel one which will hit the most vulnerable people in the global South the hardest. 

It is time to change the narrative and put the focus on those most affected people and areas (Mapa). 

It is high time that the global North unconditionally pays reparations to the most affected people for the historic injustices we have suffered. Those least affected by the climate crisis are often those who have contributed to it the most and have fueled climate denialism throughout history.

To prevent the climate crisis from becoming the worst catastrophe in the history of the planet, we must make a complete transition to sustainable and egalitarian economic systems, with energy grids based on renewable sources and the preservation of nature and ecosystems at their core. This is not an option.

Public financial institutions and development banks that help finance fossil fuel projects are a double insult to people. Instead of paving the way towards the sustainable future we all need, they are exacerbating climate chaos and creating more illegitimate debt that our generations will have to pay for with our lives. 

We are fed up with having to pay for their deliberate greed. 

OECD: One-fifth of climate finance goes to adaptation as share of loans grows

Typhoon Goni, the strongest typhoon on the planet this year, affected hundreds of thousands of people in the Philippines, leaving many homeless, hungry, and cold. The flooding in Bihar, India displaced seven million people. 

While having to cope with a pandemic, 783 million people in Africa and 76 million people in India don’t have access to safe water supply. And most recently, hurricane Eta has brought devastation upon Central America. 

Our demands for social and environmental justice must be heard. 

We have been threatened by anti-democratic regimes, but we refuse to let the oppressors win. We need people-centered climate action. We need to put people over profit. We are rising to say never again to financial and ecological terrorism from governments, corporations or international finance organisations. 

And we will not stop until we win a more sustainable future for our generation and the next.

This year needs to be a turning point. We must use the response to this pandemic to transition to a just and sustainable future. This must include debt cancellation for the poorest nations, an immediate end to fossil fuel subsidies and investments and locally-adapted green recovery measures.

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Until the current exploitative and hyper-extractive system is changed, we will keep fighting for climate justice, for our lives and for those that have been taken away.

Firm commitments from public financial institutions at the Finance in Common Summit this week are critical to manage the transition risks to a low-carbon economy and to unleash private investments towards the clean energy future we all want.

To the ones controlling our money, we say: if you don’t want to do what is just, then do what is necessary. We are not fighting for the planet, we are fighting for our lives. World leaders, take us seriously: we need climate justice today, not tomorrow. 

Help us build our future. Do not destroy it. We are counting on you.

Mitzi Jonelle Tan — Youth Advocates for Climate Action Philippines

Disha A Ravi — Fridays For Future India

Laura Veronica Muñoz — Fridays For future Colombia

Eyal Weintraub — Jóvenes Por El Clima Argentina

Nicole Becker — Jóvenes por El Clima Argentina

Kevin Mtai — Africa Continental Coordinator Earth Uprising

The post As young people, we urge financial institutions to stop financing fossil fuels appeared first on Climate Home News.

IMF chief Kristalina Georgieva has repeatedly called on countries to ensure spending is directed to green investments to weather the economic impact of the pandemic. Doing so, she said, could boost global GDP by 0.7% on average in the first 15 years of the recovery.

The IMF has made a quarter of its total lending or $280 billion available to countries, with more than a third of the funds accessed by nations since March to respond to the economic impact of Covid-19. So far, it has helped 81 countries, including 79 with emergency funding, with most of the payments made through short-term programmes with no conditions attached.

But in advice the IMF is offering alongside its financial support, it implicitly backs fossil fuel subsidies that risk putting countries on a polluting pathway.

Analysis by the Netherlands-based group Recourse, which campaigns for green finance, found the IMF failed to systematically recognise the macroeconomic risks the energy transition posed to countries: that is, fossil fuel infrastructure could lose value because of carbon-cutting policies and competition from clean technology.

At a meeting of 52 finance ministers on Monday, Georgieva said climate change was a “macro critical” issue — a term use by the fund to describe issues that are critical to ensure countries’ macroeconomic stability, which is at the core of the IMF’s mandate.

“Even while we are in the midst of the Covid crisis, we should mobilise to prevent the climate crisis,” she said. “Climate change is a profound threat to growth and prosperity… And macroeconomic policies are central to the fight against climate change.”

She urged governments to tax carbon to support those most affected by the shift away from fossil fuels and called on major emitters to adopt a carbon price floor to build global consensus on climate action.

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However, in review of the IMF’s most recent economic policy advice to India, Indonesia, the Philippines, Mozambique and South Africa – five countries with ongoing coal expansion – Recourse found the fund was endorsing financial assistance that could be used for fossil fuels.

It found the IMF encouraged governments to increase public spending for priority infrastructure projects, which in India, Indonesia and Mozambique include coal power plants and export infrastructure.

And it backed tax incentives for new infrastructure investments without differentiating between low and high-carbon projects, the analysis showed.

In India, for example, the IMF suggested the government increased the rate of its existing carbon tax as a way to generate revenues but made no mention of the tax breaks India recently introduced for coal production.

Meanwhile in Mozambique, a World Bank and IMF debt sustainability assessment for accessing Covid-19 emergency funds found the country’s debt was “sustainable” based on anticipated revenues from a controversial mega project to produce and export LNG.

“If the IMF is serious about the green recovery and a clean and climate-resilient transition they need to start walking the talk themselves,” said Nezir Sinani, co-director of Recourse. “An easy start would be by ending tax breaks for fossil fuel producers, including for coal,” he said.

IEA outlines how world can reach net zero emissions by 2050

In a Q&A session with NGOs, James Roaf, coordinator of climate change policies in the IMF’s fiscal affairs department, said the fund was “not in any way supportive of producer subsidies for fossil fuels” which he described as “bad policy”.

He added the IMF was “not going to be able to tell countries what to do on climate” but worked through dialogue with governments, capacity building and peer pressure.

In a separate IMF briefing with civil society representatives last week, Jon Sward, environment project manager at the UK-based NGO Bretton Woods Project, put Recourse’s findings to Georgieva.

“It is of particular concern to civil society that the IMF has constantly been overestimating future growth from oil and gas discoveries in Africa,” he said, citing a recent World Bank working paper that compared revenues from petroleum projects in 12 countries with initial IMF projections.

Georgieva admitted the IMF had overestimated the benefits of past investments in fossil fuels. She said the fund wanted to be at the forefront of linking risks caused by the energy transition and by climate shocks, such as extreme weather events, with financial stability.

“We are asking ourselves… what we can do in this crisis to make sure we come out on the other side as a greener, fairer and more sustainable, more inclusive, more resilient world,” said Georgieva. The IMF had established a “very strong research” stream on the issue and was working to integrate climate risks into its stress tests.

A Biden victory could spur global climate action, but the US has much to prove

“And I can tell you that it has not been an easy discussion,” she said, hinting at divisions within the IMF about the role the fund should play in addressing climate change.

“There are still some pushing that this is not for the fund, that the fund needs to focus on financial stability and that’s it. And so I spent a lot of time explaining that you cannot have financial stability without environmental and social sustainability.”

Dileimy Orozco, a senior policy advisor on sustainable finance at think-tank E3G, told Climate Home News the IMF needed to review the way it assesses countries’ economic and financial policies and the sustainability of countries’ debt to integrate climate risks. “These are the most important instruments the IMF has” to shift investments, she said.

She added the IMF should “give countries the confidence” to pursue longer term low-carbon investments opportunities without the threat of being penalised for not being able to repay growing debt immediately.

Sward, of the Bretton Woods Project, agreed the IMF’s work on climate change could “not be easily distangled” from its efforts to provide emergency relief.

“Many countries receiving IMF Covid-19 emergency assistance are being asked to carry out austerity as soon as next year. You cannot ask countries to implement their [climate plans] and transition to a low-carbon future if they have no fiscal space to do so.”

The post Campaigners confront IMF chief over green recovery contradictions appeared first on Climate Home News.

A joint statement from the group of major economies on Monday focused on stabilising energy markets disrupted by the coronavirus pandemic. After a two-day virtual meeting, ministers pledged to collaborate “to encourage dialogue to help mobilize public and private investment in various energy sectors”.

Discussion of energy efficiency and renewables was put in the context of a “circular carbon economy”, with equal weight given to reusing and removing carbon dioxide from the air.

Saudi energy minister Prince Abdulaziz bin Salman insisted when he set out the circular carbon strategy earlier this year: “Carbon is not the enemy.”

The G20 communique described it as “a holistic, integrated, inclusive, and pragmatic approach to managing emissions that can be applied reflecting country’s priorities and circumstances”.

Countries promise green recovery at Japanese virtual summit, keep quiet on fossil fuel bailout

Climate campaigners criticised the emphasis on commercially unproven technology, saying it was a way for oil-rich Saudi Arabia to justify unsustainable use of fossil fuels.

“Circular carbon economy is clearly a Saudi priority,” said Enrique Maurtua Konstantinidis, G20 campaigner at Climate Action Network (Can). “While the concept looks noble, the idea puts a particular attention to the use of the carbon capture use and storage, geoengineering practices that are heavily criticized by civil society due to the yet unknown environmental impacts and the distraction it creates from the real solution, which is reducing emissions.”

Eddy Perez from Can Canada told Climate Home this year’s G20 chair Saudi Arabia was “stuck in the past and unable to accept the green and just transition [to clean energy] that is already well under way”.

He added: “At a moment where decisive action is expected from leading economies to respond to the health, economic, social, climate and biodiversity crises, Saudi Arabia has managed to make the G20 irrelevant and disconnected from the reality of this year.”

Ivetta Gerasimchuk, of the International Institute for Sustainable Development, said the G20 has become less and less ambitious since it started hosting summits in 2008. The energy ministers’ joint statement, she said, “just lists what countries are doing anyway, rather than what they should be doing”.

Saudi Arabia censors fossil fuel subsidy discussion as G20 host

Arab News, which is closely linked to the Saudi government, reported some European countries pressed for a stronger stance against fossil fuels but the Saudis’ “more inclusive stance on hydrocarbon resources” was supported by Russia and the USA.

At G20 meetings on agriculture and the environment, ministers failed to agree a joint statement due to similar divides over climate change.

Commenting on this, Germany’s agriculture minister Julia Klöckner, said by email: “The younger generations expect the agriculture ministers to speak out about climate change. No other sector has been hit as hard by climate change as the agricultural sector.”

According to Energy Policy Tracker, G20 nations have committed $206 billion to sectors linked with fossil fuel production and consumption in coronavirus stimulus packages. Only $137bn has been earmarked for sectors linked with the production and consumption of clean energy.

Since 2009, the G20 has repeatedly pledged to remove fossil fuel subsidies. That was not mentioned in the latest statement.

In July, Climate Home revealed that the Saudi authorities were uncomfortable with the word “subsidies” and sought to remove it from policy briefs produced by ostensibly independent research groups. They preferred a phrase with no established definition – “fossil fuel incentives”.

The G20 leaders’ summit will be held online in November 2020 before Italy takes over the G20 Presidency. Perez said he “look[s] forward to an Italian G20 presidency who will seize its opportunity to preside over the forum representing 80% of the global economy to present a much more relevant, ambitious and safer vision for a world responding to multiple subsequent crises.”

The post Saudi-led G20 energy statement backs fossil fuel bailouts appeared first on Climate Home News.

The International Energy Agency (IEA) – perhaps the world’s most influential energy forecaster – gave the company an easy defence.

In its climate strategy, Total cites the IEA’s most “sustainable development scenario”, which sees methane gas consumption soaring between now and 2040 to meet a quarter of global energy demand.

Gas, Total insists, “is the best option currently available for combating global warming”. This is just one example of how oil and gas companies use IEA forecasts to justify investments in fossil fuels.

Under the direction of Turkish economist Fatih Birol, the agency has become increasingly supportive of clean energy. Yet it continues to appeal to its oil-producing funders, ducking hard questions about the endgame for dirty energy.

“The IEA is an organisation that was set up and designed for a different era and it needs a radical transformation if they are still to have relevance in the modern era,” Kingsmill Bond, an energy strategist at Carbon Tracker, told Climate Home News.

With a reputation for having excellent analytical skills and a deep understanding of the energy system, the IEA could be repurposed to show the full cost of fossil fuels and drive the energy transition, Bond said. That would be “a game-changer”.

Seven countries back Africa’s biggest investment, a $20 billion gas project

The Paris-based energy agency was established in the wake of the 1973 oil crisis to ensure the security of oil supplies. Oil security remains central to the IEA’s mission. It is best known for its in-depth analysis and data on the energy market, which provides reference material for companies and governments alike.

The coronavirus pandemic confronted the IEA with the opposite problem: over-supply. The price of oil tumbled and even turned briefly negative in the US, as demand collapsed – a foretaste of shocks that could be in store if and when action to cut emissions accelerates.

As lockdown measures to contain the pandemic started to take a toll on the economy, Birol led the narrative on putting clean energy at the heart of stimulus packages. In an interview with Climate Home News in March, he said recovery packages offered governments “a historic opportunity” to accelerate the clean energy transition.

The IEA then set out its vision for a sustainable recovery in a special report last month, providing governments with a guide for how short-term energy investments could reboot the economy and create jobs while cutting emissions.

It’s a message many leaders have yet to heed. Major economies in the G20 have so far spent more recovery money supporting fossil fuels than clean energy, according to initial findings of the Energy Policy Tracker launched by 14 research groups earlier this month.

Speaking to CHN this month, Birol said the first tranche of recovery money had been focused on “creating firewalls around the economy, helping businesses and maintaining employment”. He expected stimulus in the second half of the year to focus on renewable energy, energy efficiency for buildings and the modernisation of power grids.

“Even countries that do not put climate change as a key priority in their political agenda need to focus on these energy policies because they will boost economic growth and create jobs. Energy efficiency is a job machine – it is very labour intensive and it will reduce emissions,” he said.

Long read: This oil crash is not like the others

Notably absent from the IEA’s “sustainable recovery” report is any reference to the temperature goals of the Paris Agreement. Under the pact, governments aim to hold global warming “well below 2C” and aim for 1.5C, the tougher target seen as critical to the survival of some vulnerable nations.

Oil Change International said this reflected a chronic failure of climate ambition at the agency. “Given the IEA’s rhetoric and calls for leadership, omitting 1.5C is a pretty significant oversight,” said campaigner Hannah McKinnon.

Then there is a certain evasiveness around what those goals mean for fossil fuels.

On the “mission” page of its website, the IEA says it takes an “all-fuels, all-technology approach”.

In November 2017, the IEA launched a Clean Energy Transition Programme to support clean energy deployment in emerging economies such as Brazil, China and India.

A few months earlier, Birol told an oil and gas conference in the US: “Our message to the oil industry here in Houston is invest, invest, invest”.

Renewables overtake fossil fuels in EU electricity generation

At the World Energy Forum this year, Birol called for “building a grand coalition” to bring down global emissions. He later said 2020 was “the year for the clean energy transition“.

In May, he told an online energy event: “I don’t think it’s the end of oil yet. We still need oil for years to come,” citing ongoing demand from the transport and petrochemical industries.

“There is a strong rhetoric and desire by the IEA to lead on [the clean energy transition],” said Peter Wooders, senior energy director at the International Institute for Sustainable Development (IISD). “But the agency hasn’t always provided all the tools and clear signalling of the way forward…

“By sitting on the fence and backing all forms of energy, there is a danger that they will perpetuate the unsustainable pathway we are on rather than showing what could be achieved in the future.”

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In an interview with CHN this month, Birol called for a phase-out of inefficient fossil fuel consumption subsidies that give citizens cheap petrol or cooking gas, for example. Such subsidies create “a major distortion in the market” and “an artificial challenge for the clean energy transition,” Birol said.

But he avoided questions about subsidies supporting the production of coal, oil and gas, such as the public finance poured into the Mozambique gas project by seven other countries.

Nor would he comment on whether a managed decline of oil and gas production was needed to meet international climate goals.

Claudia Strambo, a research fellow at the Stockholm Environment Institute, said ignoring the supply side of the equation was “extremely problematic”.

The lack of attention to fossil fuel production subsidies misrepresents the relative costs of coal, oil and gas compared with other energy sources, making them appear more competitive than they really are, she said.

By failing to provide policy guidance for a managed transition away from fossil fuels, Strambo said the IEA was doing “a disservice” to producers. “History shows that failing to manage this process can have severe long-term economic, social and political implications.”

Comment: World Bank policy advice boosts oil and gas, undermining climate goals

Business leaders, scientists and investors have urged the IEA to make a 1.5C-compatible scenario central to its flagship annual publication, the World Energy Outlook, opening up a debate over the IEA’s role in setting norms around global energy use.

In response, the IEA last November extended its Sustainable Development Scenario, which sets out what would need to happen for the world to limit global temperature rise to “well below 2C”, to reach the 1.5C goal.

However, it relied on using unproven negative emissions technology towards the end of the century, rather than accelerating a shift away from burning coal, oil and gas.

The campaigning coalition, led by former UN Climate Change head Christiana Figueres, is not impressed.

Guterres confronts China over coal boom, urging a green recovery

Sue Reid, principal advisor on finance at Mission 2020, which convened the campaign, said companies and investors lacked the data they need to align their business plans and investment portfolios with international commitments.

In its 2019 annual report, Italian oil company Eni said it had not tested its investment plan for compatibility with 1.5C because the tools to do so were not yet available.

Reid suggested investors and businesses could seek alternative sources of analysis on 1.5C if the IEA failed to meet demand.

“The more time elapses with the IEA not developing a 1.5C scenario, the more time it gives for other models to emerge that could supersede the IEA’s tools,” Reid told CHN. “It risks losing its influence if it doesn’t catch up with the world’s direction of travel towards 1.5C.”

If the IEA is serious about wanting to accelerate the clean energy transition, McKinnon said it will have to develop a central 1.5C scenario and address fossil fuel production. Its approach to the issue in its next major report in November “could make or break the legitimacy of its climate rhetoric,” she said.

The post For all its green talk, the IEA still gives comfort to oil and gas producers appeared first on Climate Home News.

Speaking at Tsinghua University, in Beijing, on Thursday, Guterres said the economic recovery to the coronavirus pandemic was a “make-or-break moment” for the planet. China’s actions, he said, could determine whether the world limits warming to 1.5C – the tougher target of the Paris goal on which the survival of vulnerable nations depends.

“As an economic superpower, the way in which China restores growth will have a major impact on whether we can keep 1.5C within reach,” he said during a lecture series titled “Climate governance in the post-pandemic world”.

Guterres, who has championed a green recovery to the economic fallout from Covid-19, said the trillions of dollars being spent on the economic recovery to the coronavirus pandemic could “either serve as a slingshot to hurtle climate action forward, or it can set it back many years”.

Governments have “a narrow window, but a vast opportunity” to rebuild a cleaner and fairer world, he said, urging them to end fossil fuel subsidies and the funding of coal.

“There is no such thing as clean coal, and coal should have no place in any rational recovery plan. It is deeply concerning that new coal power plants are still being planned and financed, even though renewables offer three times more jobs, and are now cheaper than coal in most countries.”

Poland bails out coal, yet wins access to EU climate funds

Coal consumption has bounced back in China, after a period of decline 2014-16. The amount of coal power capacity under development increased before the Covid-19 outbreak and the trend has since accelerated.

A province-led boom in coal planning means China currently has more coal-fired capacity under construction and in planning stages than the entire coal fleet of the United States. So far this year, the Chinese power industry has proposed to add more than 40GW of new coal plants – the equivalent of South Africa’s coal capacity.

According to data compiled by the Global Energy Monitor and the Centre for Research on Energy and Clean Air, China’s provinces approved more new coal-fired capacity between 1 January and 15 June this year than during all of 2018 and 2019 combined.

As the world’s largest emitter of greenhouse gases, China’s coal capacity surge risks pushing emissions beyond pre-pandemic levels.

Last month, six Chinese ministries stated the need to prevent excess coal production and give priority to clean energy but no concrete actions were proposed to rein in the surge of new project approvals.

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Guterres warned “poorly coordinated policies risk locking in, or even worsening” a high emissions future.

To prevent this, countries need to cut emissions by 45% by 2030, achieve net-zero emissions “well before 2050” and submit tougher climate plans aligned with the 1.5C goal ahead of the critical Cop26 climate summit in Glasgow, UK, next year, he added.

Beijing has vowed to publish its long-term decarbonisation strategy before the end of this year. It also committed to enhance its climate plan but avoided providing a timeline for doing so.

Guterres said China has the capacity to lead on climate action. It deployed more solar and wind capacity than any other country in the past five years, half of world’s electric vehicles are sold in China and it produces virtually all electric buses.

By “seizing the mantle of leadership” and taking bold action quickly, Guterres said China could reap “vast competitive advantage” creating more jobs, boosting growth and providing cleaner air and better health to its citizens.

The post Guterres confronts China over coal boom, urging a green recovery appeared first on Climate Home News.

The deal is being hailed as the largest project financing ever in Africa. It involves 19 commercial banks and public finance from 8 export credit agencies (ECA) and the African Development Bank.

What has not been widely reported is the important role of World Bank public assistance that enabled such a large, unprecedented gas investment to go forward.

In Mozambique, the World Bank has provided  $87 million in Technical Assistance with the stated aim of improving governance in order to increase gas and mining investments to bring about broad-based growth.

Seven countries back Africa’s biggest investment, a $20 billion gas project

Much of the Bank’s assistance has focused on supporting Areas 1 and 4, which turn Mozambique into one of the world’s largest LNG exporters. The giant LNG development is at the center of growing concerns over displacements, loss of fishing livelihoods, Islamist insurgencies, and the climate crisis. For many reasons, it is important to understand the role of the World Bank 

In practice, the World Bank’s technical assistance funds consultants to advise the government on such things as tax and regulatory policies and the facilitation of large complex financial agreements. Bank-funded consultants have been supporting the government for years to lay the legal groundwork and negotiate the agreements to secure the $14.9 billion finance package.

During the World Bank-sponsored advisory, a new law covering LNG Areas 1 and 4 activities was published in December 2014. According to the law firm Shearman and Sterling, among many concessions, this law includes that no preference needs to be given to Mozambican suppliers for procurement of goods and services required due to financing from ECAs. 

This concession greatly increased opportunities for companies from the countries with participating ECAs at the expense of Mozambican firms.  The Export Import Bank of the United States (US Exim) announced its $5 billion loan to Area 1 LNG involves 68 American suppliers and will support an estimated 16,400 American jobs. It is hard to believe this financing agreement structured with the help of World Bank-paid consultants is the optimal outcome for job creation in Mozambique.

Gas curse: Mozambique’s multi-billion dollar gamble on LNG

ECA concessions are not the only concern. Since 2012, the World Bank has funded over $14 million in contracts to at least 12 consulting firms to assist the government on the financial package negotiations involved in LNG Areas 1 and 4. Many of these firms have ties to oil companies and at least two of these firms raise substantial conflict of interests. In addition to advising the government of Mozambique, the law firm SNR Denton also advised multiple oil companies involved in Mozambique’s LNG Area 1, including Total, ONGC Videsh Limited (OVL), and Bharat PetroResources. 

Furthermore, in 2016 ExxonMobil acquired a 25% interest in Mozambique’s LNG Area 4. In 2018, the World Bank funded a $2.4 million contract for LNG transaction assistance involving a group of consultants, including ExxonMobil’s favored law firm Hunton Andrews Kurth. During this same period, ExxonMobil paid the law firm $500,000 in lobbying fees in the US. It seems instead of promoting governance that would shield the government from the oil industry’s influence, the World Bank’s assistance is facilitating it.

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In addition to advancing governance that appears to favor oil companies and financiers over the interests of Mozambique, the World Bank’s public assistance may be undermining its commitment to the goals of the Paris Climate Agreement, which include limiting global warming to 1.5C.  

In November 2019, researchers from several expert organizations, including the UN Environment Program, determined the world was on track to produce 120% more fossil fuels in 2030 than would be compatible with a 1.5C pathway. Simply put, there is already far too much investment going into fossil fuel production.

Seeming to recognize this fact, in 2017, the World Bank announced it would end direct finance of upstream oil and gas (exploration and production) by the end of 2019.  However, this pledge excludes the Bank’s technical assistance and development policy loans.   

One particularly important area the Bank’s assistance continues to support is tax incentives for fossil fuel investments.  In Mozambique, to attract new investments beyond Areas 1 and 4, the World Bank’s $110 million development policy loan in 2014 required the government to approve a new petroleum tax law. The new tax law includes several investment incentives, such as accelerated rates of depreciation for oil and gas exploration.

Accelerated depreciation of new capital investments allows oil companies to quickly write down capital investments that would otherwise depreciate more gradually. In other words, larger tax reductions are taken at the start of the operation, thus making new projects more economic and increasing cash flows that can be put towards more drilling.   

Currently, the World Bank has technical assistance aimed at increasing upstream oil and gas investments in many countries, including: Afghanistan, Brazil, Guyana, Suriname, Mozambique, Kenya, Mauritania, and Ghana.

The World Bank states that in order to advance the energy transition from fossil fuels to renewable energy, we need to get economic incentives right.

In the case of technical assistance and development policy loans, it appears the World Bank continues to get the incentives wrong.

Heike Mainhardt is a senior advisor at Urgewald.

The post World Bank policy advice boosts oil and gas, undermining climate goals appeared first on Climate Home News.

This month, Japan’s government addressed one of the leading causes of the climate crisis. Rising political star Shinjiro Koizumi had convinced Japanese officials to review the government’s policy on financing new overseas coal-fired power plants.

Koizumi, the charismatic Japanese environment minister and son of former Prime Minister Junichiro Koizumi, raised hopes that Japan would finally stop spending billions exporting the dirty, climate-wrecking technology. Coal is one of the dirtiest fossil fuels and is responsible for nearly one third of the global rise in temperatures.

However, the Japanese government came up short.

Last week, the government issued a policy stating that, “in principle,” it will not finance overseas coal plants for any country that does not have a decarbonization policy. While recognizing that it is new for the Japanese government to say no to coal finance, the policy contains dangerous exceptions allowing financing for so-called “highly efficient” coal technologies and will not apply to coal plants already under consideration.

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According to climate experts, building any new coal plants is inconsistent with meeting the goals of the Paris Agreement and averting catastrophic climate change. Rising sea temperatures have led to more frequent and severe rainstorms, like the current deluge that has left at least 68 people dead in Japan’s southern Kumamoto prefecture.

Last year, UN Secretary General Antonio Guterres called on governments in Asia to end their “addiction to coal” and stop fossil fuel subsidies. Guterres recently renewed his calls, urging countries to stop financing coal and pledge to stop building new coal-fired power plants to facilitate a shift towards clean energy.

Instead of taking bold action in line with the global exodus away from coal and taking action to avert the worst impacts of the climate crisis, the Japanese government chose to maintain loopholes that allow continued financing of coal projects. The projects in Japan’s coal financing pipeline have also come under fierce scrutiny for human rights violations, impacts on health and livelihoods and problems with economic viability.

Consider Vung Ang 2 in Vietnam, Indramayu in Indonesia and Matarbari 2 in Bangladesh.

Portugal ends coal burning two years ahead of schedule

Vung Ang 2 drew the consternation of Koizumi who initially called on Japan to reject financing for the project earlier this year. According to financial think tank Carbon Tracker, it is already cheaper in Vietnam to invest in new solar panels than new coal plants. New onshore wind power is expected to become cheaper than coal power by next year.

Groups in Japan and Indonesia recently launched a petition calling on the Japanese International Cooperation Agency (JICA) to reject financing for the Indramayu coal plant in Indonesia. The project threatens the livelihoods of thousands of farmers and fishermen and is associated with serious human rights violations. The petition says, “the project must not be pushed through at the expense of the livelihoods and environment of the local community, or in exchange for future generations’ opportunities and choices, and global climate”.

The Matarbari 2 coal plant in Bangladesh is also facing opposition. 44 groups in 18 countries issued a letter calling on JICA to reject support for the project. In light of the devastating impacts of Covid-19 and supercyclone Amphan on Bangladesh, groups stated “Simply put, Bangladesh cannot afford another coal-fired power project which is likely to be a stranded asset and need a huge amount of government subsidy.”

Saudi Arabia censors fossil fuel subsidy discussion as G20 host

JICA’s involvement in the Matarbari coal-fired power plants contravenes its climate strategy, which says JICA will support the transformation to a low-carbon society in developing countries in line with the Paris Agreement.

We are deeply disappointed that the Japanese government’s policy on coal still falls short of what is needed to prevent catastrophic climate change. Japan must stop ignoring the demands of communities across Asia and calls across the world to completely and immediately end its overseas coal finance.

Over the last few months, government and corporate officials have signaled their intent to stop financing overseas coal power plants. This is no time for signals. No time for exceptions. The urgency of the climate crisis requires bold leadership and action from governments like Japan. It is time for a swift and just transition to renewable and clean energy that is not only possible but is urgently needed.

The Japanese government has been, and will continue to be, the subject of international criticism until it categorically ends its support for coal-fired power plants.

Lidy Nacpil is the coordinator of the Asian People’s Movement on Debt and Development. Susanne Wong is the coordinator of the No Coal Japan coalition.

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The move seems to go against a 2009 commitment by the club of major economies to phase out “inefficient fossil fuel subsidies that encourage wasteful consumption”. Leaders have reaffirmed this pledge at every summit in the past decade.

Sources close to the G20 preparations told Climate Home News the Saudi authorities were uncomfortable with the term “subsidy” and asked for the word to be removed from policy proposals.

Instead of “fossil fuel subsidies” ­– an established concept in the energy literature – they inserted “fossil fuel incentives” – a term with no commonly agreed definition.

The edits came in the final stages of Think20, which engages researchers and academics from the international community to thrash out policy recommendations on a range of G20 priorities. Their work is meant to be independent from national governments.

Researchers expressed concern the term “incentives” would muddy the waters at a time when countries need to move away from supporting coal, oil and gas and accelerate the transition to clean energy.

“The word incentives takes the idea of fossil fuel subsidy in a very different direction,” one person close to the process told CHN. “Let’s make sure that we are not defining loopholes for the continued use of fossil fuels.”

A spokesperson for the G20 secretariat told CHN the “independent participation of engagement groups in G20 discussions is important for the Saudi G20 Presidency and we are fully committed to an independent, open, transparent and inclusive process”.

Gas curse: Mozambique’s multi-billion dollar gamble on LNG

Last week, UN secretary general António Guterres ramped up his rhetoric urging leaders to end fossil fuel subsidies and use the recovery to the pandemic to accelerate the clean energy transition.

“Fossil fuels are increasingly risky business with fewer takers,” he said during an International Energy Agency conference. “We need to stop wasting money on fossil fuel subsidies and place a price on carbon.”

Although definitions of what constitutes a “subsidy” varies between global institutions, the term “fossil fuel subsidy” is widely used to describe any government support for oil, gas or coal activities that lowers the price paid by consumers, raises the price received by producers or lowers the cost of production.

“The definition of a subsidy has always been a problem for Saudi Arabia,” Tom Moerenhout, an associate at the International Institute for Sustainable Development (IISD) told CHN.

As the world’s largest oil exporter, with low production costs, Saudi Arabia has been able to sell its oil below international price benchmarks.

At home, the Kingdom provides cheap energy to its citizens as part of a social contract whereby Saudis cannot choose their leaders but benefit from generous welfare provision.

The Kingdom denies subsiding petrol, arguing it is selling its oil at an “internal price” above production costs.

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In recent years, Crown Prince Mohammed bin Salaman has been leading efforts to diversify the economy and move the country away from its oil dependency. To pay for an ambitious economic programme known as “Vision 2030”, Riyadh has embarked on an energy subsidy reform, raising energy prices closer to world market prices.

“Saudi Arabia has always been concerned not to destroy oil demand and keep its market share,” said Glada Lahn, a senior energy and resources research fellow at Chatham House. Saving a major domestic crisis, “their easy-to-produce oil has a longer shelf life than most”.

As G20 host, Saudi Arabia has been using its platform to promote the idea of a “circular carbon economy” which would reduce emissions but still allow for fossil fuel production by using technologies such as carbon capture, utilization and storage, and hydrogen.

Lahn described it as an attempt to “clean up the image of oil and gas”. “There is going to be much more scrutiny on the support for fossil fuels globally and the Saudi government is desperate for foreign investment,” she said. But the plan should not be promoted as a one-size fits all, she added.

In the 10 years since the G20 promised to phase out “inefficient fossil fuel subsidies”, limited progress has been made to meet the goal. The latest expert stocktake shows G20 countries subsidised coal, oil and gas to the tune of $150 billion in 2016, including both production and consumption subsidies.

In 2019, government support for fossil fuels totalled $478 billion in 77 countries, according to more recent analysis by the OECD and the IEA. While consumer subsidies had fallen slightly, the data showed a 38% rise in support for the production of fossil fuels across 44 advanced and emerging economies compared with 2018.

Big nations aid fossil fuels more than clean energies amid pandemic, researchers find

And despite talks of a “green recovery”, the coronavirus pandemic has done little to reverse the trend. A study by 14 research groups found G20 nations collectively spent at least $151 billion on supporting fossil fuels in their Covid-19 recovery packages, with only 20% of the relief conditional on green requirements.

In contrast, the world’s richest economies committed $89 billion to clean energy. The findings will be regularly updated on the Energy Policy Tracker, which launched on Wednesday.

As part of efforts to weather the economic impacts of the pandemic, Riyadh announced a $240 million package to provide electricity price relief for commercial, industrial and agricultural sectors.

“Money is not going in the right direction,” said Ivetta Gerasimchuk, an energy expert at IISD who led the Energy Policy Tracker project.

“The Covid-19 crisis and governments’ responses to it are intensifying the trends that existed before the pandemic struck. National and subnational jurisdictions that heavily subsidised the production and consumption of fossil fuels in previous years have once again thrown lifelines to oil, gas, coal, and fossil fuel-powered electricity.”

The story was updated on 15/07/20 to include the findings of the Energy Policy Tracker. 

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One of the biggest investments in Africa, the project to extract, liquefy and export gas raises the hope of catapulting Mozambique, one of the poorest countries in the world, to middle income status by the mid-2030s.

But it is a gamble, coming as the coronavirus pandemic hits gas demand and economic growth worldwide. The bet can only pay off on a dangerously overheated planet.

High rollers from around the world are backing Total, including would-be climate champions. The UK is reportedly set to support the project through its export credit agency, even as it urges leaders to bring more ambitious climate pledges to the Cop26 summit it hosts next year.

The World Bank and International Monetary Fund (IMF) have given technical support and encouragement to the Mozambique government.

Residents of the province have already had a taste of the perils of pegging the economy to a volatile commodity.

“I expected to see the growth of job opportunities for local youth and the implementation of public and private infrastructure,” said Abudo Manana, a university student in the provincial capital Pemba. “This did not happen – quite the opposite. We are now watching a horror movie.”

Since October 2017, an Islamic insurgency has killed at least 600 civilians and clashed with mercenaries that have been brought in, first from Russia, and then from South Africa, to support the Mozambican armed forces. Analysts see grievances around the unfulfilled promise of gas wealth as a driver of the violence.

In Palma, the small town closest to the gas discovery, illiteracy levels are high and residents did not immediately understand the scale of the project.

“Access to information was not exactly easy,” said Julio Ernesto, a representative of the Provincial Union of Peasants. “In the beginning, civil society was seen as an agitator and there were arrests and expulsions from meetings.”

Families were moved from their homes and fields to make way for gas infrastructure, and have still not been given compensation or alternative land to farm.

“They were given a basic basket of goods, but that only lasted six months, and now they have nothing,” Ernesto said. Young people were offered training, but no jobs at the end of it.

There have been some improvements, Ernesto noted: a better road from Pemba to Palma, energy access and a hospital for the village of Quitupo. But that did not make up for the insecurity. “People say this gas brought a curse,” he said

Ali Hassane, a Palma resident, was told workers were needed and joined a short training course. But at the end of it, the bosses “called their nephews” for jobs and he was left unemployed. “We are no longer hopeful for the future.”

The government remains bullish, forecasting revenues from the Rovuma Basin gas sector totalling $35 billion to $63.6 billion over the projects’ lifetimes. It is a prize that would tempt any country, not least one where nearly half the population lives in poverty.

Abebe Aemro Selassie, the IMF’s director of the African department, told a national conference in November 2019: “LNG can be a game changer for economic transformation, development and inclusive growth, potentially lifting millions out of poverty if the right policies are put in place.”

But there are no guarantees that wealth will materialise, nor that it will be shared equitably among Mozambicans.

The public revenue forecasts are based on oil prices of $60-80 a barrel in the mid-2020s, rising to $80-150/bbl by 2050, according to a document from Mozambique’s Ministry of Finance dated June 2018. Most of the gas supply contracts are indexed to global oil prices, rather than gas prices in the destination markets.

In the wake of the coronavirus pandemic, oil prices slumped to around $37/bbl. Analysts and oil majors lowered their price forecasts. First BP, then Shell wrote down the value of their reserves by billions of dollars, based on assumed oil prices over the coming decades of $55 and $60/bbl respectively.

Sources told Climate Home News the Total-led project needs an oil price of $50/bbl to break even.

“From the government circles and almost all the Mozambique elite, natural gas is seen as a really important potential source of revenue,” said Jonathan Gaventa, senior associate at the think-tank E3G, who was living in Mozambique pre-pandemic. “The problem is, that is based on oil and gas prices that we may never see again.”

The price uncertainty increases the further out you look. Under the government scenarios, cash flow to the public purse starts low in the mid-2020s and doesn’t ramp up until the mid-2030s.

“Mozambique is being landed with a pretty serious debt burden for at least the next 15 years, with a big question mark over whether these projects will ever cover their outlay,” Gaventa added.

It depends, in large part, how serious world leaders are about tackling the climate crisis.

The hydrocarbon industry has long promoted gas as a “transition fuel” to a clean economy, citing its lower carbon emissions than coal when burned. But a growing body of research shows methane leaks during the extraction and transport process are worse for the climate than previously thought. And the carbon budget to hold global warming to 2C, the upper limit in the Paris Agreement, is running out.

Collectively, governments are planning to extract 47% more gas by 2040 than is compatible with a 2C warming limit, the 2019 Production Gap report warned.

The number of LNG terminals under construction doubled in the past year, driven by the US and Canada seeking new export markets for their gas, Global Energy Monitor reported.

At least 11 major LNG terminal projects worldwide have stumbled since the coronavirus pandemic hit and oil and gas prices collapsed. Others had already stalled, in the face of organised opposition and challenging economics.

“The economics of this [Mozambique] project are really unfavourable and it is remarkable that they are going ahead with it,” said James Browning, co-author of the Global Energy Monitor report. He accused the gas industry of taking advantage of “chaos” in Mozambique to push the deal through.

The Mozambique case highlights how many financial institutions are entangled in fossil fuels – including some that aspire to climate leadership.

Export credit agencies, which support domestic businesses operating abroad, play a key role. Six countries are understood to be supporting the Total-led deal through their export credit agencies: US, Japan, UK, Italy, Netherlands and South Africa.

Announcing a $5 billion loan to the project in September 2019, US Exim Bank bragged it had elbowed Russia and China out of the deal. “The project now will be completed without their involvement and instead with ‘Made in the USA’ products and services. This is a win for our nation,” said Exim president Kimberly Reed.

Japan’s support, through two different agencies, forms part of an LNG spree. It is coupled with domestic policy to reduce reliance on nuclear power since the 2011 Fukushima disaster.

The UK’s involvement is more surprising. As host of the next UN climate summit in 2021, it is urging countries to submit more ambitious climate pledges. These should ultimately align with the Paris Agreement goals to hold global warming “well below 2C” and aim for 1.5C.

“It shows that they don’t believe in the future they are selling,” said E3G’s Gaventa. “These investments are only going to pay back in a world where demand for fossil fuels is very high. In a 1.5C world, we already have more gas than we can burn.”

Reuters reported last month that UK Export Finance (UKEF) will commit $800 million to the project, citing an anonymous source. At time of publication, that had not been confirmed. A spokesperson declined to comment.

It would be a bigger investment than anything UKEF supported in 2019 and 14 times UK aid spending in Mozambique.

UK government sources said it was the subject of an inter-departmental controversy, with the business and energy department objecting on climate grounds. There was talk of using carbon offsetting to paper over the contradictions, but that brings its own problems. It is hard to reliably estimate emissions from the end consumer and the offsetting bill for the UK share would run into hundreds of millions of pounds.

The World Bank announced in 2017 it would end direct support to oil and gas extraction by 2019. Yet it continues to offer technical assistance to governments opening up for exploration, with the stated aim of improving governance.

The priority appears to be attracting private investment, Urgewald campaigner Heike Mainhardt told Climate Home News. Success is measured by how fast permits are issued, not whether the public benefits.

In Mozambique, two law firms contracted by the Bank to work for the government also advised oil companies involved in the Rovuma Basin. The law firms, SNR Denton and Hunton Andrews Kurth, were in a position to secure tax breaks and government guarantees for clients including Total and Exxon Mobil, respectively. “It is, to me, a

Even Total has climate goals, aiming to become carbon neutral by 2050, in line with EU targets and the Paris Agreement. Conveniently, though, outside Europe the target only applies to operational emissions, not the carbon dioxide generated when customers burn the gas.

Total did not respond to emailed questions about climate and human rights concerns associated with the project.

Justiça Ambiental, a branch of Friends of the Earth, is one of the most vocal opponents of the project in Mozambique.

Daniel Ribeiro, a campaigner with the NGO, pointed to the experience of other African countries. “The history clearly shows that the extractive industry on the continent contributes little or almost nothing to the economy mainly due to corruption,” he said. “It is a small group of people who benefit from the implementation of these projects, while the public remains in misery.”

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Little did we or anyone else expect that, just four months after that first Production Gap Report, major oil-producing regions would be reeling from the consequences of over-investment in and over-dependence on fossil fuels, exposed by a virus that has wreaked havoc across sectors and livelihoods.

Of course, our report did not predict a pandemic.

The risks we examined were of a different, more predictable, and less immediate nature. We looked ahead to 2030 and found that governments’ zeal to extract every possible drop of oil, lump of coal, and cubic meter of gas could lead to twice the levels of fossil fuels than would be consistent with the Paris Agreement’s 1.5°C limit on warming.

Now, the tide has turned. Calls to “keep oil in the ground” are typically a mainstay of environment and human rights activists. Now this message has seeped into some of the world’s most conservative institutions, even if for different reasons, amounts, and timescales.

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In an effort to stabilise the market, members of Organisation of the Petroleum Exporting Countries (Opec) and their allies agreed to unprecedented production cuts last month. Even this could not prevent the price of oil dropping, a few days later, to below zero dollars for the first time ever.

This historic moment is largely the consequence of the drop in oil demand due to Covid-19-related lockdowns. But it certainly didn’t help that up until recently, many fossil fuel producing countries were angling to boost output and increase market shares.

Our research put specific numbers on the scale of the problem, finding that by 2030, governments are planning to extract 60% more oil, 70% more gas, and 280% more coal than would be consistent with a 1.5°C pathway.

This is not a trajectory we can go back to.

If the world is to recover better from the pandemic, we must avoid a scenario where efforts to overcome one crisis lock us into another. That is why this year’s Production Gap Report will examine how government bailouts, stimulus measures and strategies are delaying – or accelerating – the transition away from dependence on fossil fuel production.

In the immediate future, the key priority is to support vulnerable groups around the world, including fossil fuel workers, who face significant hardships as the economy suffers and jobs are lost. Even at this stage, it’s possible to support both fossil fuel workers and the environment, as Canada’s recently announced programme to clean up orphaned and abandoned oil and gas wells demonstrates.

Five ways for governments to green airline bailouts

But we can’t stop there. We also need to address our longer-term future. Unabated extraction is incompatible with a safe climate – as is government support that props up an industry that needs to be winding down.

As governments marshal stimulus funds, bail out industries and nationalise stranded assets, they should make their support to industry conditional on diversification beyond fossil fuels. Now is also the time to invest in green industry and clean energy, to ensure the long-term viability of communities that currently rely on fossil fuels.

Reforms to subsidies for coal, oil, and gas consumption – which amounted to at least $400 billion in 2018 – are also overdue. The present moment represents an opportunity to drop subsidies for consumers in particular, with oil and gas prices at record lows.

Moreover, there is an opening for countries to increase taxes on oil and gas consumption to mobilise funds for the Covid-19 crisis response, as India and Costa Rica have already done.

Renewables most resilient to Covid-19 lockdown measures, says IEA

As they emerge from the Covid-19 crisis, countries need to pursue equitable transitions away from fossil fuels – ones that do not echo the chaos and volatility of recent energy market behaviour.

This means social dialogue and inclusive just transition planning processes that ensure the needs of workers and communities are met, that alternative livelihoods are made available, and that those affected by change are not left behind.

Multilateral and bilateral cooperation is also of paramount importance, including support for countries with fewer resources to achieve a just transition.

At this crucial time in history, the world finds itself at crossroads. The path towards a safer, greener and more resilient future involves a just and planned wind-down of fossil fuels.

Cleo Verkuijl is a research fellow at the Stockholm Environment Institute, Ivetta Gerasimchuk is the lead for sustainable energy supplies at the International Institute for Sustainable Development and Niklas Hagelberg is the coordinator of the UN Environment Programme’s subprogramme on climate change. 

The post After the oil crash, we need a managed wind-down of fossil fuel production appeared first on Climate Home News.

State-owned Korea Development Bank (KDB) and the Export-Import Bank of Korea, the country’s export credit agency, have agreed the package of emergency loans for Doosan Heavy Industries & Construction over the last month.

Campaigners have expressed concerns the loans would incentivise Doosan Heavy to sell more coal plants to other countries, locking in high carbon emissions. On Tuesday, four environmental groups filed a request for an audit into the bailout.

They say no social or environmental conditions have been attached to the relief, which amounts to more than double the company’s market capitalisation of less than $1 billion.

The bailout is a response to a liquidity crisis that has been exacerbated by the global fall in coal demand caused by the coronavirus pandemic. But the company’s credit rating was downgraded and its share price collapsed before the Covid-19 outbreak.

The bailout stands in contradiction with Green New Deal plans outlined by South Korea’s ruling Democratic Party to achieve carbon neutrality by 2050. Under the plan, the party promised to phase out domestic and overseas coal financing by public institutions.

South Korea to implement Green New Deal after ruling party election win

Greenpeace, Solutions For Our Climate, Gyeongnam Korea Federation for Environmental Movements and  Machangjin KFEM filed a request for a public audit into the bailout at the Board of Audit and Inspection.

Doosan Heavy is South Korea’s flagship coal plant manufacturer. The company also makes equipment for nuclear and desalination plants and in recent years has sought to grow its gas turbine development business.

Campaigners requested the Board of Audit carry checks over whether the company’s future cash flow potential and business outlook had been sufficiently scrutinised before the bailout was agreed.

“The government has been providing a massive chunk of money to a coal-reliant company,” Joojin Kim, attorney and managing director of Solutions For Our Climate, told Climate Home News.

Kim said the bailout was “unwise” both in terms of the company’s continued impact on the climate and the financial risk of its coal assets becoming stranded as demand falls. “The company should not receive government financing as long as its business model focuses around coal,” he said.

Mari Chang, climate and energy campaigner at Greenpeace, said the no-strings loans “played a role in preventing the company, which needs restructuring, from cutting off its losing businesses”.

Renewables most resilient to Covid-19 lockdown measures, says IEA

In the longer-term, Kim said the company was aspiring to grow its gas business despite the fact the market was predicted to shrink and was already saturated with well-established competition.

The approval of relief loans “has been very opaque,” Kim told CHN, insisting on the need for a third party review. The groups are also waiting on the outcome of a freedom of information request in the hope of obtaining more details about the terms of the deal. Doosan Heavy’s own plan for recovery was not made public.

South Korea remains largely dependent on coal, which represents about 40% of the country’s energy mix. While the governments has signalled its intention to move away from coal-fired power plants, there is currently no national phaseout deadline.

The Democratic party’s decisive victory in last month’s parliamentary election gave President Moon Jae-in a mandate to press ahead with the country’s decarbonisation. Campaigners are anticipating more details about the country’s short to medium-term targets.

The Board of Audit and Inspection is required to respond to the audit request within a month of the filling. Kim told CHN he expected the decision over whether the request was accepted to be, “to some extent, politically directed”.

That decision, “will show how much the government is ready to take the risk and support the company,” he said.

Jongkwon Park, of Machangjin KFEM, said in a statement: “Trillions of won [South Korea’ currency] spent on large corporations with opaque futures have been used to expand coal power. This is a complete disregard for the people and future generations who will suffer from the climate crisis.”

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Economic activity has slumped worldwide amid travel restrictions to prevent the spread of Covid-19. More than 100 countries have applied to the IMF for emergency finance.

Money to rebuild after the public health crisis should be directed into green investments and not subsidise fossil fuels, according to IMF chief Kristalina Georgieva.

It would be a mistake to “pause” action on climate change while responding to coronavirus, she said. “We are about to deploy enormous, gigantic fiscal stimulus and we can do it in a way that we tackle both crises at the same time… If our world is to come out of this [coronavirus] crisis more resilient, we must do everything in our power to make it a green recovery.”

Georgieva urged governments to consider taxing carbon to raise revenue for the recovery and incentivise the private sector to cut emissions.

She was speaking at a virtual summit on climate finance, supported by the German and UK governments and Climate Policy Initiative, on the sidelines of the Petersberg Climate Dialogue.

Merkel: don’t neglect climate finance to the world’s poor

Mark Carney, a UN special envoy on climate finance and advisor to the UK hosts of the next UN climate negotiations, elaborated on the theme.

“To build back better, we need to learn from our current predicament,” he said. “We cannot wish away systemic risk.”

In his previous role as governor of the Bank of England, Carney warned climate change impacts and the shift to a clean economy could destabilise financial markets. He promoted initiatives to make corporations come clean about climate-related threats to their business models, so money could be more wisely invested.

As economies adapt to post-coronavirus conditions there will be a “massive reallocation of capital,” he said. For example, health and education services may move online, shifting investments from bricks and mortar into telecomms.

Endorsing Georgieva’s advice, Carney added that governments should “use this opportunity to implement a new financial framework that is centred around the transition” to a clean economy.

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Among the latest recipients of IMF emergency relief is Nigeria, which as an oil exporter is suffering from plummeting oil demand.

The country got a $3.4 billion loan to mitigate the impact of the oil crash on the wider economy. At the same time, the government ditched an expensive petrol subsidy.

Climate Home News has asked the IMF whether financial support will come with binding green conditions.

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With people staying at home to slow the spread of the disease, global oil demand has slumped by a third, hitting producers hard.

Climate campaigners are calling on governments to make relief for the fossil fuel industry dependent on tougher climate action. In the rush to protect businesses and workers from the impacts of the public health crisis, though, some polluters are being bailed out with no strings attached.

In a historic deal, a group of major oil-producing countries, Opec, and allies including Russia, on 12 April agreed the biggest ever cut to oil supply to stabilise energy markets and end a price war between Moscow and Saudi Arabia. Yet prices continued to slide.

A report by Influence Map, which analyses corporate lobbying on climate policy, found the oil and gas sector to be the most active globally in lobbying governments for financial support and deregulation in response to Covid-19. 

This, it found, was particularly the case in the US, Canada and Australia.

Which governments gave them what they wanted? Here is a round-up of the various types of support to polluting sectors introduced by the world’s largest economies.

US 

Donald Trump has been determined to support the energy sector ravaged by oil prices and falling demand, putting pressure on Opec members to agree to cut production. 

At home, the Trump administration instructed the Strategic Petroleum Reserves to be filled to the maximum of its 30 million barrels capacity to “alleviate financial hardship” on the energy sector.  The Department of Energy said it intended to make an additional 47 million barrels of storage capacity available. 

The Covid-19 bill clocked up a gigantic $2 trillion to help workers and industries impacted by the pandemic. 

It includes $61bn in relief for airlines, including $50bn  for passenger airlines, split evenly between loans and grants to pay employees, and $8bn for air cargo carriers.

The bill includes $17bn for companies deemed critical in maintaining US national security – largely set aside for one company, Boeing, which was already under pressure over two deadly crashes before the pandemic.

Solar and wind power businesses did not get the access to tax credits they had sought under the package. Right-wing US organisations lobbied against proposed tax incentives for green programmes. “Climate change is not an immediate threat to humanity,” they wrote. 

Oil and gas companies do not directly qualify for economic support under the bill.

Elsewhere, the Environmental Protection Agency (EPA) announced a sweeping relaxation of environmental rules in response to the pandemic. This follows lobbying from the American Petroleum Institute. 

Oil and gas lease sales are going ahead as usual while three states – Kentucky, South Dakota and West Virginia, have passed legislation increasing criminal penalties on protests disrupting or damaging fossil fuel infrastructure.

China 

Provinces across China have taken measures to keep people in work and prop up small businesses but nationwide relief measures have been on a much smaller scale than in other major economies. 

As the number of new reported cases in China came closer to zero, five new coal-fired power plants totalling 7,960 MW were approved for construction between 1 and 18 March – more than than the total for 2019 which saw the approval of 6,310MW, according to Global Energy Monitor. 

Coal consumption has bounced back in China in recent years and the amount of coal power capacity under development increased even before the Covid-19 outbreak. 

At the end of February, provinces gave the green light to 34GW of new coal power, despite existing overcapacity. It is not yet clear if all the new approved plants will be built.

While early indications suggest Chinese officials could be turning towards heavy-industries to reboot the economy, Beijing is also considering “new infrastructure” investments such as 5G, high-speed railways and electric vehicle charging points as part of the recovery efforts. 

Environmental supervision of firms could be simplified and in some circumstances temporarily suspended to help companies resume production, according to an official from the ministry of environment. 

Russia

Russian prime minister Mikhail Mishustin announced a $4 billion fund to support the economy and key industries. 

The package includes tax breaks for hardest-hit sectors including air transport and tourism and the expansion of subsidised loans to businesses.

Oil and gas state-controlled companies, Gazprom and Rosneft, could be allowed to delay paying dividends, Radio Free Europe reported. 

The collapse of the price of oil, Russia’s main export, has left the economy particularly vulnerable. The government is aiming to subsidise the shortfall in oil revenue. Mishustin said the central bank would compensate the currency market if the price of Urals oil dropped below $25 per barrel. 

The mechanism has previously been used to compensate oil companies for the shortfall in export revenue when oil was sold domestically below global prices. “It should now also compensate for the decrease in federal budget revenue,” Mishustin said. 

Despite the contraction in oil demand and continued cheap supply, Mishustin insisted the Russian oil industry was prepared for volatility. 

Canada 

The province of Alberta, home to extensive tar sands extraction, has been leading Canada’s bailout of the oil and gas sector. 

The provincial government handed out tax relief measures for its struggling industry, suspending fees collected by the industry regulator to the tune of $79 million.

A ministerial order also suspended a number of environmental reporting requirements until mid August. 

Meanwhile, the Business Council of Alberta and oil and gas companies have demanded the federal government postpone a planned increase of the carbon tax and the Canadian Association of Petroleum Producers lobbied for a suspension of nationwide environmental rules.

However the Trudeau administration chose relief measures with an environmental slant.

On 17 April, Justin Trudeau announced $1.2bn to clean up orphan and inactive oil and gas wells in Alberta, Saskatchewan, and British Columbia to maintain jobs. 

The federal government is creating a $750 million emissions reduction fund to support oil and gas sector investments in reducing emissions, particularly methane. 

Environmental campaigners have warned oil and gas could get stealth subsidies through relaxed rules to Canada’s export credit agency, the Export Development Canada (EDC). 

As part of its response to the pandemic, the Canadian government significantly extended the scope of EDC’s work. 

Under the new rules, EDC will be able to support transactions domestically as well as abroad. The agency’s liability limit, previously capped at $32 billion, has also been lifted. 

EDC has a record of supporting Canada’s oil and gas sector export abroad. It provided an average $10.6 billion a year to oil and gas projects from 2016 to 2018, according to Oil Change International.

The Canada Account, which supports export transactions deemed of national interest including the Trans-Mountain pipeline, is also benefiting from the liability cap lift.

The government also waived ground lease rents for 21 airports authorities until the end of the year as part of a support package for air travel.

Australia 

The federal government is pushing for the expansion of coal mines to keep people in work during the coronavirus-induced economic slowdown. 

Resources Minister Keith Pitt said the expansion of Acland thermal coal mine, in Queensland, was “even more” more important now the coronavirus pandemic is hammering the economy. 

The Queensland government has so far refused to approve the expansion despite pressure from mine operator New Hope, which is expected to exhaust coal reserves by September. 

In South Australia, the government suspended exploration and licence fees for the mining, oil and gas sectors. The relief will extend the licence fee deadline to 31 December. 

Energy and mining minister Dan van Holst Pellekaan announced a 12-month waiver of committed expenditure for all mineral exploration licence holders. 

UK

The UK government is resisting calls from the aviation sector for a bespoke bailout package. 

Airlines trade association Iata has led a global lobbying campaign demanding governments immediately reduce all charges and taxes and provide airlines with specific support funds. 

Iata has also been pushing regulators to relax rules so airlines can issue travel vouchers instead of refunds, allowing for a surge of passengers when travel restrictions are lifted. 

In a letter to airlines and airport executives, UK chancellor Rishi Sunak said bespoke government support would only be available as “a last resort” and after companies had exhausted other funding options, such as raising money from shareholders. 

But on 6 April, British low-cost airline group EasyJet received a $737 million loan from the UK government after warning it was running out of cash – although it managed to pay £60 million in dividends to its largest shareholder.

Despite strong commitments to climate action, the Bank of England has allowed the debt of BP, Shell and Total’s subsidiary companies to be eligible for support under the banks’ boosted corporate bond purchase scheme.

European Union 

EU member states have agreed that the union’s response to the pandemic must be aligned with the green transition and its European Green Deal.

Writing in Climate Home News, 17 environment ministers called for the Green Deal and its carbon neutrality goal to provide the pathway for economic recovery. But across the union, carbon-intensive sectors are still benefiting from relief. 

The European Central Bank rolled-out a €870 billion ($781bn) emergency bond-buying programme to stabilise the euro zone economy until the end of the year – the equivalent of 7.3% of the euro area’s GDP.

Initial analysis of the bonds purchased in the last three weeks by Influence Map shows the programme included bonds issued by oil majors including Shell, Eni and Total – with some of the bonds purchased maturing between 2024 and 2034. 

The EU Commission has also started to approve airline bailouts aimed at easing companies’ liquidity crunch. 

Loan guarantees have been made available in Sweden. Belgium deferred concession fee payments for its major airports. The French and Dutch governments are in talks with Air-France KLM for state support. Germany is also in talks with Lufthansa to provide state aid with loans and equity investments. 

In Austria, the government is also in talks with Lufthansa, the parent company of Austrian Airlines, to provide state aid for the airline only if the money supports emissions cuts.

Meanwhile in France, the National Assembly has approved a $21.4bn package to rescue its strategic industries, largely focused on aviation and automobile majors such as Airbus, AirFrance and Renault.

The text requires recipient companies to include social and environmental objectives in their business models in line with the Paris Agreement, but gives no further conditions.

Environmental NGOs have accused the government of writing “a blank cheque” to some of the country’ largest polluters.

The powerful European automotive lobby group, ACEA, has called on EU institutions to provide liquidity support for companies, suppliers and dealers.

The automotive sector is also lobbying for the union to drop a tightening of CO2 regulations aimed at raising fuel efficiency. “This not the time to think about further tightening of the CO2 regulation,” VDA president Hildegard Müller told the Süddeutsche Zeitung.

India 

India’s minister of petroleum and natural gas Dharmendra Pradhan struck a deal with the Abu Dhabi National Oil Company (Adnoc) to deliver more cooking gas supplies as part of a scheme to support women living below the poverty line. 

Pradhan said he had given Adnoc its assurances India would buy crude oil from the company to replenish the country’s strategic petroleum reserves.

Brazil 

The Brazilian government has opened negotiations on an emergency loan package for energy distributors, according to Reuters. 

The government has also postponed all electricity auctions in 2020, including for renewable and green power. Experts say this could benefit the country’s natural gas plants, which will become more competitive in the next auction rounds.

Argentina 

The Argentinian government has pledged an additional $100 billion for public work investments for road works, construction and large infrastructure projects. 

Argentinian newspaper Perfil reported the government had entered negotiations with oil-producing provinces and companies to reinstate a support price per barrel to halt a production collapse. 

South Korea 

Despite plans for a Green New Deal and an objective to reach net zero emissions by 2050, the government is opening an $825 million emergency credit line to the country’s biggest coal plant manufacturer, Doosan Heavy Industries & Construction Co.

Environmental groups are seeking an injunction against the bailout, seeking to make the relief contingent on the company’s transition away from coal.

The post Coronavirus: which governments are bailing out big polluters? appeared first on Climate Home News.

Around the world, millions became unemployed practically overnight and millions lost a huge portion of their savings.

These events will have catastrophic consequences for people’s well-being and will shape economic and political trends for years, if not decades. This doesn’t even account for the impacts of the Covid-19 pandemic on human health and the tragic situation unfolding in hospitals around the world.

Much will be written about this historical event as society takes stock of what just occurred, but one thing is clear: resilience must be a driving force in the policy response.

As investors of last resort, governments have the key role to play. The central bank playbook in 2008 and 2020 is similar, as liquidity evaporated and financial contagion spread, central banks had to step in as buyers of last resort with increasingly larger rescue packages.

Zoom climate diplomacy: ‘Technology doesn’t help build trust’

At the same time, governments are working desperately on the fiscal front to provide economic stimulus to the real economy and prevent an economic depression. Estimates of bailout packages are in the order of $10 trillion globally and growing.

 So where does this leave us?

Governments and taxpayers bear the ultimate risk and thus have the mandate and responsibility to reduce these risks.

There will be a cost but as we clearly see with the Covid-19 pandemic, the cost of prevention pales in comparison. The same could be said about climate change. 

A working paper from the US National Bureau of Economic Research found that by 2100, the costs of climate change would reduce global GDP by 7.22% while the costs of prevention – by meeting the goals of the Paris Agreement – are substantially less, around 1.07% of global GDP.

For the US, the cost of inaction is even higher at 10.5% of GDP. To put things into perspective, this is roughly in line with the costs of a Covid-19 pandemic every year.

Japan sticks to 2030 climate goals, accused of a ‘disappointing’ lack of ambition

As we move forward past this crisis, policymakers should have resilience in the front of their minds. Below are some practical steps that can be taken in our policy response not only to enable us to boost green growth and reduce greenhouse gas emissions but also to create a more resilient financial system.

Rebalance incentives for publicly traded companies to reward long-term sustainability over short-term profits

Companies are too focused on the next quarter at the expense of their long-term financial viability. Fiscal and monetary policies need to reward long-term investment and risk reduction. Executives should not be compensated based on stock performance but broader metrics.

Company boards should emphasise long-term stability and survivability. Inherent in this is the need to address climate risk. Stock buybacks financed with debt should be forbidden.

Better safety nets

Our world is moving towards greater disruptions from climate change, but also other types of crises driven by greater interconnectedness, which generates systemic risk. As we see with Covid-19, a crisis in one place can quickly spread to the rest of the world and this is not limited to communicable diseases.

Financial crises in one corner of the globe can impact our supply chains, and our financial markets as trading in various financial products is linked in incredibly complex arrangements, again, generating systemic risk. A world with more risks needs better safety nets and more resilient systems. There is a need to improve safety nets for all citizens whether these are economic, health and climate-related shocks.

Eliminate fossil fuel subsidies

An estimated $5.2 trillion is spent annually on fossil fuel subsidies. This is wasteful and damaging to the environment. It leads to inefficient use and unnecessary greenhouse gas emissions, creates rent-seeking in the economy and presents a huge opportunity cost for taxpayers.

Trillions should, instead, be invested in industries of the future which have the potential to provide for our energy needs while eliminating the risk of climate change. With oil at around $25 per barrel, consumer subsidies could be eliminated now with very little consequences.

Embrace telework trends 

As companies and consumers race to adapt to the massive disruptions from Covid-induced shutdowns, we have seen how millions of workers have adapted to working from home and used new technologies to collaborate in ways that were unimaginable a decade ago.

A distributed workforce can increase the resilience of business operations, can massively reduce transport-related emissions from commuting and work-related travel and can even increase the affordability of cities and generate distributional effects as there is less need to concentrate workers in one place.

Embrace the public sector 

View the public sector not as an investor of last resort but as a leader, shaping future investment trends in a way that is aligned with societal goals. Public investment shapes markets and creates benefits to society that the private sector cannot provide.

Through publicly-funded research and development programmes, scientists have developed the core technologies behind the internet and modern medicine. Similarly, the revolutions taking place in renewable energy production, electric storage and electrified transportation would not have been possible without early-stage investments made by the public sector.

Investments for public benefit in areas like new energy technologies, public health and urban infrastructure are critical to reducing long-term risks and can ultimately lower public outlays when disasters strike.

Green bailouts? – Climate Weekly

While there is still hope for this public health threat to be minimised and, hopefully, eventually eliminated, our economic response will have repercussions for decades.

It’s the right time to focus on a vision for a resilient, inclusive, and sustainable economy.

Donovan Escalante is a manager at Climate Policy Initiative, an analysis and advisory organisation that works with governments and investors to drive economic growth while addressing climate change. 

The post Coronavirus: investors and policymakers must shift to increase resilience appeared first on Climate Home News.

As trillions of dollars pour into the global economy to mitigate the impacts of Covid-19, resounding calls have been made to governments and financial institutions to ensure longer term climate action is a condition for relief.

With carbon-intensive sectors lining up for economic support to protect the jobs of millions of people, calls are also intensifying for workers to benefit over corporations.

In a statement, G20 countries said they were injecting more than $5 trillion into the global economy to counteract the social, economic and financial impacts of the pandemic. The virus has killed more than 24,000 people worldwide.

In the US, the Senate unanimously passed a gigantic $2-trillion bill aimed at helping workers and industries impacted by the rapid economic slowdown. This includes a $500 billion fund to help hard-hit industries and more than $60 billion for airlines with some strings attached.

Speaker of the House Nancy Pelosi praised Democrats’ efforts to “flip the bill over” from a “corporate trickle-down Republican version to bubble-up workers first, families first legislation” with conditions that money given to the airlines for example “are given to the workers directly”.

In Canada, academics, labour and environmental organisations have warned Prime Minister Justin Trudeau’s administration that any bailout to the oil and gas sector should benefit the workers, not the corporations, and that the economic stimulus should be green.

In Europe, there are clear calls for any economic stimulus package to be consistent with the continent’s pledge to become climate-neutral by 2050 and pinned to the Green Deal framework.

While many agree the pandemic has opened a window to accelerate the transition to a green economy, the question of timing remains key.

As governments scramble to reinforce health services to save lives and put cash in the hands of hard-hit families and businesses, some analysts warn the immediate crisis will need to pass before investments can be directed to the clean energy transition. When and how this happens could determine climate action for years to come.

Eyes in the sky 

Scientists at Mauna Loa observatory in Hawaii are monitoring the atmosphere for signs the economic slowdown linked to the coronavirus pandemic could reduce the rise in atmospheric carbon concentrations.

Alister Doyle spoke to Ralph Keeling, son of Charles Keeling, the founder of the Keeling Curve, which has been tracking increasing carbon dioxide concentrations in the atmosphere since 1958.

“There has never been an economic shock like this in the whole history of the curve,” he said.

This month, the data hints at a slight slowdown in the rate of CO2 rise. But the scientists will need more time to know whether this possible trend is linked to the pandemic.

‘Baby steps’ 

Russia has published draft plans to slightly toughen its 2030 climate targets that would still allow its emissions to rise in the next decade.

The UN is demanding countries make deep cuts to their greenhouse gas emissions in line with the scientific findings to achieve the Paris Agreement temperature goals.

But the world’s fifth biggest emitter projected its emissions would rise in coming years to 67% of its 1990 level by 2030 – a slight improvement on its current 75% target. Russia’s emissions plunged after the collapse of the Soviet Union in 1991 and are still about half the levels they were in 1990.

Environmental NGOs have criticised the plan as inadequate in a time of climate crisis. “It’s only baby steps,” said Vladimir Chuprov, of Greenpeace in Moscow.

Electric drive 

Electric cars are a greener alternative to petrol and diesel vehicles in almost every part of the world.

Researchers have found that plug-in cars emit less greenhouse gas emissions over their lifetime than other vehicles, even when including the mining of metals for batteries, the manufacturing process and scraping.

This is true everywhere but in countries where the electricity used to recharge electric vehicles is generated from coal-fired power plants, the study found, noting blackspots in India, Czech Republic, Estonia, Poland and Bulgaria.

This week’s top stories

• Coronavirus: in Hawaii’s air, scientists seek signs of economic shock on CO2 levels
• Russia’s plans to tighten 2030 climate goal criticised as ‘baby steps’
• Electric cars help limit climate change despite blackspots in India, Poland
• Governments urged to attach green strings to long-term coronavirus recovery plans

And in climate conversations

• Coronavirus pandemic shows we need new ways to look after the Earth and each other
• From summits to stimulus: Nature-based solutions can help

The post Green bailouts? – Climate Weekly appeared first on Climate Home News.

In an interview with Climate Home News on Tuesday, Fatih Birol said stimulus packages to prop up economic recovery marked a critical moment for governments to “shape policies” in line with climate action.

“I am talking with several governments and international financial institutions leaders because they are all busy designing stimulus programmes for the economy – the plans they will put together will be extremely important,” he said.

“This is the reason I am telling them that we can use the current situation to step up our ambition to tackle climate change.”

Birol said he had urged political and global financial leaders to design “sustainable stimulus packages” that focus on investing in clean energy technologies and accelerate the transition away from fossil fuels.

“This is a historic opportunity for the world to, on one hand, create packages to recover the economy, but on the other hand, to reduce dirty investments and accelerate the energy transition,” he said.

Coronavirus: China’s economic slowdown curbs deadly air pollution

The health crisis has hammered the economy in the week since the World Health Organisation declared coronavirus a pandemic. Stock markets have seen some of their toughest days of trading, sparking fears of a global economic recession.

The aviation industry has come under particularly strains in recent weeks, with a number of airlines announcing a dramatic scale-back of their operations and executives calling for government bailouts to avoid bankruptcy.

“The global economy is going through very difficult times and the energy sector is disproportionately affected,” said Birol. “Aviation represents 1% of the global economy but it’s 8% of global oil consumption.”

“I understand that when I talk to governments, they are very much preoccupied with the current economic turmoil but we should keep the eye on the ball that is addressing climate change,” he said.

Birol was speaking before reports in US media that President Donald Trump would be seeking an $850 billion stimulus package, including $50 billion for airlines.

Last year, a report by UN Environment found the world needed to cut emissions by 7.6% per year until 2030 to limit global warming to 1.5C by the end of the century – the tougher temperature goal countries committed to under the Paris Agreement.

Coronavirus may toughen airlines’ goals for curbing emissions in 2020s

In most recent years, global emissions have increased but they stagnated in 2019, according to an IEA analysis.

Birol insisted 2019 could mark a definite peak in emissions, but only if governments seized interventions to recover from the impacts of the coronavirus as the moment to gear the economy towards a green transition.

“It may well be the case that we will see 2020 emissions decline. In my view, this is not a reason to celebrate because emissions reduction should be the result of right energy policies,” he said.

In a statement last week, Birol wrote that such policies could include large-scale investments in clean energy technologies such as solar, wind, hydrogen and carbon capture and storage technologies.

The massive investment plan outlined by Birol echoed proposals such as the EU Commission’s “green deal for Europe” aimed at accelerating the shift of capital towards the green economy while creating climate-proof jobs.

The IEA has previously come under criticism for underplaying the speed of renewable energy deployment and for not considering the Paris Agreement’s more ambitious target of 1.5C in its influential World Energy Outlook scenarios.

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Birol also advocated for countries to capitalise on low interest rates to boost innovation on hydrogen and carbon capture and storage technology, and use the opportunity of steep reductions in oil prices to cut fossil fuel consumption subsidies.

The IEA estimates annual fossil fuel consumption subsidies are worth $400 billion worldwide, 40% of which are used to make oil products cheaper.

Birol expressed optimism governments could bend the emissions growth curve this year because of a number of favourable factors.

An IEA analysis found that 70% of global energy investments is driven by governments directly or indirectly as a response to policy. Meanwhile, the low cost of clean energy strengthens the economic case for the clean energy transition to drive stimulus packages.

“This is a huge opportunity we cannot miss,” he said. “Here the issue is not only the level of money [dedicated to stimulate the economy] but the direction of the money,” he said.

The post Governments have ‘historic opportunity’ to accelerate clean energy transition, IEA says appeared first on Climate Home News.

Climate Analytics, a non-profit science and policy research institute based in Germany, said South Korea now has 60 coal fired plant units, accounting for a third of the nation’s greenhouse gas emissions, and another seven units under construction.

With expected lifetimes of 30 years, the new plants could be in operation into the 2050s.

“Korea must phase out coal power by 2029 in order to do its part to limit climate change under the Paris Agreement,” Climate Analytics said in a study, urging a far more rapid shift to renewable energies such as solar and wind power.

With only the existing plants, the country will overshoot its fair budget for greenhouse gas emissions by 2.5 times, it estimated.

‘Mysterious’ seasons harm Nigeria’s farmers who need help with climate change

The 2015 Paris Agreement seeks to limit the rise in average global temperatures to well below 2 degrees Celsius above pre-industrial times, while aiming for a tougher limit of 1.5C. Worldwide, the UN´s Intergovernmental Panel on Climate Change says the 1.5C goal would mean cutting coal use  “close to 0%” of power generation by 2050.

Paola Yanguas Parra, an author of the report at Climate Analytics, told Climate Home News that South Korea should also halt its international role in backing coal in Asian nations including Vietnam and Indonesia.

“This is having a huge carbon footprint in other countries,” she said, citing estimates that Seoul had invested $5.7 billion in 22 foreign coal projects from 2013-19.

A 2019 report by the European Commission showed that South Korea’s greenhouse gas emissions were 13.9 tonnes per capita in 2015, the latest year for which data is available, more than double the world average of 6.7.

South Korea’s existing climate plan submitted as part of the Paris Agreement aims to cut emissions by 37% below projected rates of growth with no climate policies.

“Korea … is increasing the production of renewable energy in order to reduce greenhouse gas emissions from fossil fuel,” the plan says. The South Korean Environment Ministry did not immediately reply to a request for comment on Thursday’s study.

Sejong Youn, director at South Korea-based climate policy group Solutions for Our Climate (SFOC), said “2029 is an ambitious goal (for exiting coal) but I think it’s necessary to meet the Paris Agreement goals”.

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He told CHN it was unclear if Seoul would scale up the ambition of its climate targets this year, the five-year milestone of the 2015 Paris Agreement when countries are meant to upgrade or reaffirm their plans.

Worldwide, coal accounts for almost 40% of electricity generation and more than 40% of energy-related carbon dioxide emissions, the International Energy Agency says.

Some nations are setting dates for phasing out coal.

The Powering Past Coal Alliance, for instance, says it counts 33 governments among its members including G7 members Germany, France, Britain, Italy and Canada as well as other nations ranging from Ethiopia to the Marshall Islands.

The post South Korea urged to exit coal by 2029 to stick to Paris climate agreement appeared first on Climate Home News.

That was UK Prime Minister Boris Johnson’s message to African heads of state gathered in London this week to talk investments.

As the UK prepares to pull out of the EU, it has turned some of its attention to the African continent, where it intends to compete for business.

Johnson promised the UK would end all direct support for coal mining and coal-fired power plants overseas. Instead, he pledged to help African countries “extract and use oil and gas in the cleanest, greenest way possible” while “turbocharging our support for solar, wind and hydro”.

In the last few years, the UK had largely stopped financing coal mines and coal-fired power plants abroad but continues to spend billions in supporting oil and gas projects. About £2bn worth of oil and gas deals in Africa were announced shortly after the summit.

Environmentalists blasted hypocrisy, warning the announcement was “a drop in the ocean” compared with ongoing support for foreign oil and gas projects.

Carbon sinks

In other UK news, a fifth of the country’s agricultural land needs to be released for climate mitigation if it is to achieve carbon neutrality by 2050, government advisers have said.

That means planting trees, restoring peatlands and soils and growing bioenergy crops with carbon capture and storage. Consumption of carbon-intensive food such as beef, lamb and diary also needs to be reduced by a fifth and so does food waste.

The report comes as the UK’s first climate citizen assembly is due to meet this weekend to thrash out solutions to achieve the net zero emissions goal by 2050.

Ireland and France have also used citizens assembly to inspire climate policies and Spain could soon follow suit.

‘Prophets of doom’

Climate change was the hot topic in Davos. Greta Thunberg reminded the world’s rich and powerful of the science, warning the 1.5C goal risked slipping out of reach as the world rapidly consumes its remaining carbon budget to limit warming below the Paris deal temperature target.

“We don’t need to lower emissions, our emissions have to stop,” she said.

Donald Trump lamented missing Thunberg’s speech. There was no eye roll this time but the US president hit back at climate activists, denouncing them as “prophets of doom” as he boasted about the economy. Expect more of this in the run-up to November’s presidential election.

Gullies

In Nigeria, where climate change is causing more intense downpours, land is opening up under people’s feet, swallowing homes, farms, businesses and roads.

The erosion crisis is exacerbated by more frequent landslides and has been estimated to cost up to $100 million every year. Up to 90% of agricultural yield have been lost as a result in some areas.

Linus Unah reports from Nigeria.

Icy ruling  

Norwegian plans to drill for more oil and gas in the Arctic do not violate people’s rights for a healthy environment.

The ruling by the Oslo Court of Appeals endorsed a previous court decision vindicating the government’s handing out of oil exploration licences in the Arctic. However, the court acknowledged that emissions from burning Norwegian fossil fuels abroad should be included in assessing environmental damage.

Greenpeace, which brought the lawsuit, said it would take the case to the Supreme Court.

Quick hits

• Erosion crisis swallows homes and livelihoods in Nigeria
• UK to stop funding coal abroad but will help Africa with oil, gas
• Thunberg says only ‘eight years left’ to avert 1.5°C warming
• Trump criticises ‘prophets of doom’ in Davos and touts fossil fuels
• UK must cut land use emissions by two thirds to meet 2050 goal, advisers warn
• Oslo court backs Arctic oil exploration in defeat for environmentalists

And in climate conversations

• 2020 may be ‘last opportunity’ to limit warming to 1.5°C

The post ‘Trundling over to Africa’ – Climate Weekly appeared first on Climate Home News.

Johnson made the remarks at the opening of the UK-Africa investment summit in London – a one-day event which signalled the UK’s intent to compete for African business with China, Russia, Germany and France – all of which have strengthened their investment strategy on the continent.

16 African leaders attended the summit planned a day before political and business leaders meet in Davos, Switzerland. Egypt’s president Abdel Fattah el-Sisi, Kenya’s Uhuru Kenyatta, Nigeria’s Muhammadu Buhari and Paul Kagame of Rwanda all came to London.

The summit was also an opportunity to push climate action as one of the UK’s key diplomatic priorities, ahead of hosting this year’s UN climate talks – known as Cop26 – in Glasgow in November.

Johnson acknowledged that most African countries were on the frontline of climate impacts and biodiversity loss.

He committed to end “new direct official development assistance” to thermal coal mining and coal power plants overseas, including aid money and loan guarantees and support from the UK’s export credit agency.

“There is no point in the UK reducing the amount of coal we burn if we then trundle over to Africa and line our pockets by encouraging African states to use more of it,” he said.

2020 may be ‘last opportunity’ to limit warming to 1.5°C

Instead, Johnson said the UK would help support Africa’s transition to “lower and zero carbon alternatives”.

“First by helping you to extract and use oil and gas in the cleanest, greenest way possible – and we are world leaders in that and have much to share – but also by turbocharging our support for solar, wind and hydro and all the other carbon free sources of energy that surround us,” he told African heads of state and business leaders.

In practice, very little of the UK’s development money has been used to support coal projects overseas in recent years.

Responding to a UK parliamentary inquiry last year, Claire O’Neill, the UK’s former clean growth minister and now Cop26 president, said the UK government’s export finance agency had “not funded any new coal-fired power-plants overseas since 2002”.

A spokeswoman for the Department of International Development (Dfid) said the department had not supported coal-fired power plants abroad since 2012. Support would, however, be made available for decommissioning projects, she added.

Labour MP Matthew Pennycook said this made it “difficult to see this as anything other than tokenistic”.

“The more pertinent issue is the UK’s ongoing support for overseas oil and gas projects. Act on that, Prime Minister,” he tweeted.

“This is greenwash and hypocrisy of the highest order,” Molly Scott Cato, Green MEP for the South West of England, told CHN. “This is a reminder of what has effectively been UK policy for nearly 20 years; hardly an announcement.”

Erosion crisis swallows homes and livelihoods in Nigeria

It is unclear what proportion of the UK’s current development and export credit budget will be affected by the announcement.

Sarah Wykes, lead analyst on climate change and energy at the Catholic Agency for Overseas Development (Cafod), told CHN that between 2010 and 2017, Cafod identified £84million the UK government had spent on coal equipment – “a tiny proportion” of all spending, she said.

“It’s good that the government has now closed that loophole. It’s a step forward but a drop in the ocean” compared with oil and gas support, she added. “But if the government is serious about ending energy poverty in Africa, it needs to invest in decentralised renewable energy,” she said.

However, the UK government has continued to pour significant amounts of public funds to support oil and gas projects abroad.

During the 2018-2019 financial year alone, the UK’s export finance (UKEF) agency provided more than £2billion ($2.6bn) in support and loans guarantees to oil and gas projects overseas, according to an analysis by DeSmog UK.

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A recent report by Cafod also found that between 2010 and 2017, 60% of the UK’s support for energy in developing countries was fossil fuel energy. During that time, 97% of the UK export finance’s support for energy projects – or £3.6bn ($4.7) – went to fossil fuel developments.

Andrew Norton, director of the International Institute for Environment and Development (IIED), described the announcement as “a first step in the right direction”.

“But it needs to go further,” he added, calling on the UK to “stop subsidising all fossil fuel exploration and production”.

Adam McGibbon, a senior climate campaigner at Global Witness, told CHN, the announcement would make “very little difference to the UK’s lack of climate ambition”.

“It leaves untouched the billions in oil and gas support that the UK will continue to spend worldwide,” he said.

The post UK to stop funding coal abroad but will help Africa with oil, gas appeared first on Climate Home News.