1 year ago
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In Paris this week, the Organisation for Economic Co-operation and Development (OECD) countries will negotiate terms and conditions for climate-friendly export financing. According to new analysis by Oil Change International, OECD countries supported fossil fuel exports by an average of $41 billion from 2018 to 2020, almost five times more than clean energy exports ($8.5 billion). This directly contradicts internationally agreed climate goals, including the Paris Agreement objective to align financial flows with the low-carbon energy transition.
A majority of international public finance for fossil fuels is provided by OECD governed Export Credit Agencies (ECAs) – more than even Multilateral Development Banks – with 71 percent of export financing for energy going to oil and gas.
OECD ECAs play a particularly influential role in getting large fossil infrastructure projects built. They invested in 56 percent of new hazardous liquified gas (LNG) export terminal capacity built in the last decade (providing at least $81 billion total), helping drive the global fossil gas boom by getting these large keystone projects built. Overall, about 42 percent of all fossil fuel finance from ECAs under the OECD supported midstream infrastructure activities, such as pipelines, LNG ports, and shipping.
According to IEA and IPCC scenarios, maintaining a 50% chance to limit global warming to 1.5°C requires an immediate end to investments in new coal, oil, and gas production and LNG infrastructure. Even in IEA scenarios that are not 1.5°C aligned, coal, oil, and gas demand, including demand for LNG, is forecasted to drop. To avoid breaching climate goals and stranded assets, countries must cease new expansion.
With 52 percent of OECD countries signed onto the COP26 Clean Energy Transition Partnership commitment (CETP) to end international public finance for fossil fuels by the end of 2022 and prioritize public finance for clean energy, OECD members have the opportunity and responsibility to align export finance with climate goals at the OECD. Under the CETP commitment, countries explicitly committed to promote this agenda at multilateral forums, including at the OECD. The OECD has in recent years assisted in building momentum on shifting finance out of fossil fuels through restrictions on coal export financing – showing that the OECD Arrangement has the power to enact policies that further align ECAs with financing the clean energy transition through placing restrictions on export finance for oil and gas.
This new report recommends that OECD countries present an ambitious proposal to prohibit financing all oil and fossil gas projects in order to align with a 1.5°C warming limit.
Authors of the new report recommend that:
- Australia, Norway, Turkey, Korea, and Japan, urgently sign onto the Clean Energy Transition Partnership (CETP).
- OECD members that have already signed onto the CETP, including the UK and Canada, fulfill their commitment to “driv[e] multilateral negotiations in international bodies, in particular in the OECD” to align with the Paris agreement goals and present a proposal for an OECD oil and gas export finance prohibition;
- OECD members close the existing coal loopholes, to extend the coal-fired power prohibition to cover coal mining, transport, and associated infrastructure;
- OECD members ensure that under the Climate Change Sector Understanding (CCSU) no favorable investment conditions are offered to any project or technology derived from fossil gas, including but not limited to blue, gray, and black hydrogen and ammonia, or projects that extend the lifetime of fossil fuel assets.
Experts at Oil Change International and partner organizations issued the following statements:
“Now is the time OECD countries must step up to the plate and make international climate goals a reality, by ending export finance for oil and fossil gas. The science is crystal clear that any new oil and gas projects are not compatible with a safe climate future, and that more oil and gas expansion will not solve concerns over energy security. ECA-supported oil and gas projects, such as recent LNG export projects in Mozambique, have played a role in displacing whole communities, fueling human rights violations, polluting the environment, and compounding the region’s climate vulnerabilities while providing little to no socioeconomic or energy benefits. OECD countries have an obligation to stop using public money against the public interest”. Nina Pušic, ECA Climate Strategist, Oil Change International
”At COP26, governments have shown that leadership on ending public finance for fossils is possible. Climate science dictates it is time to take the next step: creating a level playing field at the OECD by ending oil and gas export finance.” Niels Hazekamp, Both ENDS, The Netherlands
“It is high time for the United States to be a leader at the OECD to push for an end to export credit support for fossil fuels, alongside other wealthy historical emitters. Unfortunately, instead of leading and taking responsibility, the US is moving in the opposite direction – most recently approving almost $100 million for an oil refinery in Indonesia: a clear violation of the Glasgow commitment.” Kate DeAngelis, Friends of the Earth, United States
“Vaca Muerta, a shale mega project in Argentina promoted and financed by ECAs, turned 10 years old. Since the beginning of exploitation, it not only causes severe socio-environmental problems but also ties us to the past, delaying the just energy transition needed in the Global South. OECD ECAs have an opportunity to stop involvement in controversial projects, and redirect finance toward clean energy that can shape low carbon emission energy systems based on environmental, democratic, decentralized, popular and fair bases in the Global South.” Julia Gerlo, Fundación Ambiente y Recursos Naturales (FARN), Argentina
“The global south, burdened by the impacts of climate change, can no longer shoulder the heavy costs of adaptation while OECD countries persist in providing export support for fossil fuels. It is time for OECD countries to honor their commitments and cease such support. Embrace the urgent call to action on climate change and lead by example, inspiring others to join the cause. Together, let us forge a path towards sustainability. By taking decisive action, we can create a future that is fair, resilient, and inspiring for all.” Samuel Okulony, Environment Governance Institute, Uganda
