Carve-outs have undermined a commitment to stop public international finance of fossil fuels by 2022, write Florence Schmit and Rhys Talbot
A pledge to end public international finance for fossil fuels made at 2021's Cop 26 climate summit in Glasgow is crumbling under energy security concerns. Key signatories are still investing in gas projects almost a year after the 2022 deadline, and caveats have allowed G7 countries to tick commitment off their action list.
A total of 39 countries and development banks, including the US, Canada, Germany, the UK, France and Italy, promised to end international public finance for unabated fossil fuels by the end of 2022. G7 countries in 2022 reiterated the pledge, committing Japan to stop funding fossil fuel projects abroad. This year, the G7 said members had "ended new direct public support" as planned. But some countries continue to support international fossil fuel projects.
Observers warned from the outset that loopholes could quickly weaken the Glasgow pledge, which focused on "unabated fossil fuels" and had exemptions for "limited and clearly defined circumstances consistent with a 1.5°C warming limit and the goals of the Paris agreement". The G7 added another layer this year, "recognising the importance of national security and geostrategic interests".
Disruption to Russian gas flows to Europe has fuelled longer-term supply insecurities, pushing some governments to support projects outside the continent. Germany, which was heavily reliant on Russian pipeline gas supply, has strayed from its promise. Under its new policy released in July, the country's export credit agency, Euler Hermes, can support new gas projects in "special individual cases", provided they "avert a serious impairment of security of supply". Germany will allow financing of projects already operational in developed countries to continue until the end of 2025, and until the end of 2029in developing countries.
German environmental association DUH says this is not compatible with the Paris goals. Berlin is missing its stated "goal of aligning foreign trade promotion with the 1.5°C limit", and is instead allowing further fossil use for decades, DUH federal managing director Sascha Mueller-Kraenner says. Euler Hermes was last year considering 10 international fossil fuel projects worth $1.1bn, including in Brazil and Iraq, advocacy group Oil Change International says.
When in Rome
Germany is not the only European country to have missed the mark. Italy, one of the largest financiers of fossil fuel projects in recent years, updated its policy in May to allow funding abroad as late as 2028, and a range of exceptions could allow its funding to continue even longer. Its credit export agency, Sace, can continue funding upstream gas projects until 2026, with no end date set for gas distribution and storage. Financing could continue for projects that are strategic for Italian energy security, involve conversions of existing fossil-fired plants or are in low and lower-middle income countries and intended for local consumption. Italian plans to become a Mediterranean energy hub will depend on increasing pipeline gas imports from north Africa and domestic LNG regasification capacity.
The US issued guidance in 2021 that left the door open to supporting overseas oil and gas projects, but only ones that would "significantly" support US security or energy development in vulnerable areas. Climate advocacy groups have since called on Washington to update it. The US provided $2.1bn/yr for international gas projects in 2017-21, while Germany and Italy spent around $1.7bn/yr and $1.5bn/yr, respectively, according to advocacy group Energy Finance.
Some have kept to the commitment, including the European Investment Bank, the UK, France, Finland, Sweden, Denmark and New Zealand. This has shifted an estimated $5.7bn/yr away from fossil fuels, but if all countries keep the pledge, it could yield a further $13bn/yr, Oil Change says.
