U.S. Agrees to End Fossil Fuel Financing Abroad

November 04, 2021

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by Sara Schonhardt (E&E News) The United States committed today with other countries to stop financing fossil fuel projects abroad by the end of next year, in a seismic shift that could stem the construction of natural gas and oil facilities in lower-income nations.

The pledge, announced at the global climate summit in Glasgow, Scotland, could take billions of dollars away from future fossil fuel production and redistribute it to low-carbon energy projects such as wind and solar. The agreement covers "unabated" projects, which generally refers to fossil fuel facilities that don’t capture carbon dioxide emissions.

“The signing of this statement represents a step forward very much in the right direction,” said Jonathan Wilkinson, Canada’s minister of natural resources.

The announcement goes beyond a separate agreement by the world’s largest economies last weekend to end public financing for international coal power development.

But the organizers of today’s commitment failed to attract every nation in the Group of 20, meaning some of the biggest financiers of fossil fuels, including Japan, South Korea and China, could continue building oil and gas infrastructure abroad.

And it only covers new investments, so projects already in the pipeline would continue to be built. The pledge does not include liquefied natural gas — which countries produce domestically and export to be burned outside of their borders. U.S. exports of LNG have surged in recent years.

In addition to the U.S. and U.K., signatories include Costa Rica, Denmark, Canada, Italy and Mali. Several development banks also signed the agreement, including the East African Development Bank and the European Investment Bank.

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Justin Guay, director for global climate strategy at the Sunrise Project, said it’s one of the more meaningful announcements he has seen amid a flurry of pledges and agreements rolled out at the annual climate conference, known as COP 26.

“Given how important public finance is for de-risking and crowding in private capital for fossil fuel projects, especially in emerging markets, it’s quite a big deal,” he said.

Between 2018 and 2020, G-20 countries and the multilateral development banks they support provided $63 billion a year on average in public finance for international fossil fuel projects, according to a recent report by two environmental groups, Friends of the Earth and Oil Change International. About half of that went to gas projects.

The top four financiers — Canada, Japan, Korea and China — provided nearly half of that amount. The United States was fifth.

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Despite pledges to move toward net zero by midcentury, G-20 countries have continued to subsidize fossil fuel production and consumption.

A report by BloombergNEF found that G-20 nations provided nearly $600 billion in fossil fuel subsidies and other financial support in 2020. The countries also allocated more than $100 billion in stimulus funding to oil, gas and coal projects.

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In addition to phasing out support for fossil fuels, countries will also need to put a price on carbon emissions and disclose their climate risks, the report said. READ MORE

Denmark, Costa Rica seek alliance to speed up the end of oil and gas (Reuters)

A New Hope? Launch of the Beyond Oil and Gas Alliance (350.org)

Climate Policy Factbook: 3 priority areas for climate action COP26 EDITION (Bloomberg NEF)

Green finance promises but no enforcement -- BANKING ON FAITH: (Politico's Morning Energy)

Farewell to financing oil and gas overseas (maybe) (Politico's Morning Energy)

Canada announces commitment to end new direct public support for the international unabated fossil fuel sector by the end of 2022 (Natural Resources Canada)

TURNING OFF THE TAP FOR OVERSEAS FOSSIL FUELS: (Politico's Morning Energy)

Biden to end fossil fuel financing abroad (E&E News)

Biden orders end to federal support of overseas coal plants: report (The Hill; includes VIDEO)

The U.S. has officially stopped financing new coal plants abroad -- But it might keep propping them up at home. (Grist)

Biden to end fossil fuel financing abroad (E&E News)

Private Equity Firms Continue Funding Dirty Energy (World War Zero)

U.S. retreats from pledge to end gas investments: The energy crisis resulting from Russia's war is testing Western leaders' promises to phase out natural gas investments abroad. (Politico Pro)

Excerpt from Politico's Morning Energy: The financial sector was in the limelight at the U.N. climate summit in Glasgow, Scotland, on Wednesday when banks and other financial institutions took the main stage and committed to working toward net-zero emissions by 2050. The Glasgow Financial Alliance for Net Zero, a collective led by U.N. special envoy Mark Carney, the former head of the central banks of Canada and the U.K., is leading the initiative. As part of the commitments, the institutions vow to shift trillions of dollars away from fossil fuels, leading to a parade of praise from world leaders.

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But how to actually measure compliance remains up in the air, with undefined parameters and no unified enforcement mechanism, Pro’s Zack Colman and Lorraine Woellert report. Banks largely have their own voluntary standards, and environmentalists fear they could engage in greenwashing without actually doing much to curb emissions. And over complicating things could lead banks to divest from fossil fuels all together, leading fossil fuel companies to turn to less scrupulous funding sources, Zack and Lorraine report.

Catching climate cheats is a major priority for COP negotiators, POLITICO’s Zia Weise reports, with deadlines, transparency and carbon markets remaining key areas of the Paris climate agreement left for deliberating. But getting all 197 signatories to agree on a unified timeline while establishing stricter reporting rules and carbon market provisions is proving a herculean task. READ MORE

Excerpt from Politico's Morning Energy: The U.S. joined several other major economies in swearing off public financing of most oil and gas projects overseas. But it comes with a lot of caveats.

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OIL AND GAS BEGONE: The U.S. signed onto a U.K.-led pact not to use public money to finance overseas oil and gas operations. But the Biden administration wasn’t exactly leaping at its first chance to sign on, and there are a lot of asterisks and room for exceptions.

The pact is only focused on “unabated” oil and gas operations, meaning those with carbon capture technology can still get public funds. And some of the biggest financiers of overseas fossil fuel projects opted against signing on. China, which funds tens of billions of dollars worth of oil and gas investments via its Belt and Road Initiative, sat this one out.

The Biden administration hasn’t settled the details on how its finance aid organizations would implement the pact and it said some exemptions will be necessary for national security reasons or in the case of a serious energy crisis. Those concerns led the U.S. to drag its feet to signing on, with U.S. climate envoy John Kerry saying he was unsure about the pact earlier this week.

Still, the agreement includes some of the world’s heaviest hitters, including Canada and the European Investment Bank, and would redirect $8 billion annually for clean energy spending through public and private finance.

"While this is welcome progress, countries, especially the U.S., must hold firm to these commitments, shutting off the spigot to fossil fuel companies like [Mexico's] Pemex and Exxon," said Kate DeAngelis, manager of Friends of the Earth's international finance program. Pro’s Zack Colman has the details from Glasgow.

And what about coal? The U.S. did not sign onto another U.K.-led pledge to consign “coal to history.” Without a strong, global commitment to phase out the dirtiest fossil fuel, IEA’s Fatih Birol told The Financial Times that “the chances to reach our 1.5C target is close to zero.” READ MORE

Excerpt from Politico's Morning Energy: TURNING OFF THE TAP FOR OVERSEAS FOSSIL FUELS: The U.S. will stop financing for most overseas fossil fuel projects, the Biden administration said in a cable to its diplomatic posts last week. The policy covers future fossil fuel projects and provides exemptions if agencies make a compelling enough case for carbon-intensive infrastructure projects that would otherwise not be built or would require more than $250,000 in federal financing, Pro’s Zack Colman reports after reviewing the diplomatic cable.

The administration wrote the policy "is to ensure that the vast majority of U.S. international energy engagements promote clean energy, advance innovative technologies, boost U.S. cleantech competitiveness, and support net-zero transitions, except in rare cases where there are compelling national security, geostrategic, or development/energy access benefits and no viable lower carbon alternatives accomplish the same goals."

The administration has been moving in that direction for some time now. Biden pledged to end most overseas oil and gas finance during the U.N. climate conference in Glasgow last month. Read more from Zack. READ MORE

Excerpt from E&E News: The Biden administration says it will immediately end federal funding for most international fossil fuel projects as it tries to exert global leadership on climate change.

Speeding the transition to a carbon-neutral future has been a hallmark of the administration’s foreign policy work, and the White House will increasingly promote clean energy and financing that supports emissions reduction goals in other nations, a spokesperson for the State Department said.

The policy was transmitted in a cable to U.S. embassies and agencies and first reported by Bloomberg.

The move would completely exclude coal projects but could also impact future natural gas terminals in Eastern Europe and the Caribbean that would have received U.S. liquefied natural gas shipments.

It also contains exemptions if the project is necessary to protect national security interests or advance development goals in places where no viable low-carbon alternative exists, the State Department spokesperson said.

While U.S. support for overseas coal has fallen in recent years, its funding of overseas oil and gas has been muscular. READ MORE

Excerpt from Politico Pro: Dozens of countries rallied around phasing out fossil fuel financing during global climate negotiations seven months ago. Yesterday, those efforts were weakened by the world’s most powerful economies.

The shift illustrates how the fear of losing access to energy imports — due to Russia’s war against Ukraine — is testing the commitment of countries that have been among the most vocal advocates of curbing climate change.

Leaders of the Group of Seven nations — the United States, United Kingdom, Canada, Germany, Italy, France and Japan — agreed to support public investments in the natural gas sector “as a temporary response" to the abrupt shortfall in global gas supplies created by the pariah status of Russian fossil fuels.

The move announced yesterday at the end of the G-7 summit in Germany threatens to undermine commitments announced by the United States and more than 30 other countries at the climate talks in Glasgow, Scotland, to stop spending public money on international fossil fuel projects by the end of this year (Climatewire, Nov. 4, 2021). READ MORE