Rich nations under fire for funding gas as 'bridge fuel' overseas

by Megan Rowling | @meganrowling | Thomson Reuters Foundation
Thursday, 22 April 2021 20:30 GMT

FILE PHOTO: A girl walks on a gas pipeline running through Okrika community near Nigeria's oil hub city of Port Harcourt December 4, 2012. REUTERS/Akintunde Akinleye/File Photo

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Donor governments are pulling out of financing new coal plants, but campaigners say they want pledges to cover all fossil fuels, with gas still touted by some as a way to transition to renewable energy

* More governments plan to end international coal financing

* Climate campaigners concerned about continued backing for gas

* Clean energy investment rising but far smaller than fossil fuels 

(Updates with announcements at Biden's Leaders Summit on Climate and approval for UK legal case)

By Megan Rowling

BARCELONA, April 22 (Thomson Reuters Foundation) - Pressure on wealthy governments to stop financing polluting coal projects in developing nations is getting results, with more countries announcing they will no longer make such investments.

But the battle is far from won - and is now shifting to include oil and gas finance, climate change campaigners say.

Britain has led the way among major donors, saying it would provide no new government financing for fossil fuel projects overseas from this month, with "very limited" exceptions.

During the Leaders Summit on Climate organised by U.S. President Joe Biden on Thursday, the United States said its departments and agencies will seek to end international backing for carbon-intensive fossil fuel-based energy projects.

They will work with other countries to promote the flow of capital toward "climate-aligned" investments and away from high-carbon investments, the White House said in a new international climate finance plan.

Under the plan, the U.S. International Development Finance Corporation (DFC) pledged to reach net-zero emissions in its investments by 2040 and to increase "climate-focused investment" to 33% of its new allocations starting in fiscal year 2023.

South Korea's President Moon Jae-in, meanwhile, announced at the summit that his country would end all new financing for overseas coal projects in places like Indonesia and Vietnam.

Japan and Canada could also soon join a handful of European nations in pledging to phase out overseas aid for coal, climate finance experts said.

Green groups welcomed the announcements at the summit but pointed to potential loopholes in the U.S. plan that could enable continued funding for gas projects.

Last week, 57 U.S. green groups wrote to U.S. climate envoy John Kerry urging him to "unequivocally declare that gas is not part of the solution" and to immediately end all fossil fuel support internationally as well as U.S. exports of fossil fuels "as science and justice require".

The move came after Kerry told a discussion with the head of the International Monetary Fund this month that "gas, to some degree, will be a bridge fuel", meaning it could smooth the transition from the dirtiest energy sources - coal and oil - to renewables.

Kate DeAngelis, international finance programme manager for Friends of the Earth, said the DFC's new net-zero target could allow it to continue providing support to gas projects, while reaching its emissions goal by using carbon offsets.

She also noted the new plan to phase out fossil fuel finance did not cover the U.S. Export-Import Bank, the largest source of U.S. government financing for fossil fuel projects abroad.

MOZAMBICAN GAS

This month, Denmark, France, Germany, the Netherlands, Spain, Sweden and Britain agreed to harness public export finance as "a key driver in the fight against climate change".

Governments in the new Export Finance for Future (E3F) coalition endorsed principles including ending trade and export support for coal power that does not have technology to lower its emissions, reviewing finance for fossil fuels more broadly and assessing how to best phase that finance out.

But, in a statement, about 20 environmental organisations said the coalition had made no new commitments.

"To make a real difference, (E3F) needs to take decisive action to end all export finance for fossil fuels, following at least the level of ambition shown by the UK," they said.

They also noted the Netherlands, France and Britain continued to provide support for gas extraction in violence-hit northern Mozambique, saying the investments had forced communities from their homes after losing their fishing areas and farmland.

An aerial view of the Afungi Liquified Natural Gas Camp in Afungi, Mozambique, is seen in this undated handout picture. WFP/Handout via REUTERS

On Wednesday, Mozambique President Filipe Nyusi told an energy conference the government foresees "direct benefits" of more than $100 billion from the gas projects, which are expected to generate 70,000 formal jobs over 20 years from 2022.

Clean energy advocates disagree, saying such projects could result in "stranded" assets and job losses as the world moves away from fossil fuels to curb climate change.

Britain's High Court on Thursday agreed to a request by Friends of the Earth for a judicial review of the UK's decision to provide about $1 billion of taxpayer money to support development of the Temane LNG plant in Mozambique.

That decision was made on "the incorrect basis" that the project was consistent with commitments by Britain and Mozambique under the 2015 Paris Agreement to curb global warming, the green group said in a statement.

It added that construction of the project would increase the African nation's greenhouse gas emissions by up to 10% by 2022, while annual emissions from using and burning the gas produced would equal the total from the EU aviation sector.

"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," said Will Rundle, head of legal at Friends of the Earth.

While London's new policy would prevent it from funding such projects on climate grounds in future, the British government confirmed to the Thomson Reuters Foundation that the policy would not apply retrospectively to the Mozambique financing.

According to a government source, Mozambique considers gas from the project an important part of its transition to cleaner energy in line with its national climate action plan and its Paris Agreement commitments.

BOOST FOR RENEWABLES

Export finance and development agencies on both sides of the Atlantic, meanwhile, are keen to stress their backing to expand renewable energy in poor countries.

UK Export Finance, the government's export credit agency, said this week it doubled its support in 2020 to more than 2.4 billion pounds ($3.3 billion) for "sustainable projects", including hospitals and clean energy, in developing nations.

And the U.S. DFC recently invited private companies to apply for public financing to help them expand their businesses in small-scale renewables, such as solar micro-grids, with plans to invest $100 million in such firms in a year.

But campaigners say the amount of government money available for the fossil fuel industry still dwarfs that for clean energy.

According to Oil Change International and Friends of the Earth, which track such funding, G20 countries from 2016 to 2018 provided an average of $77 billion per year in public finance for fossil fuels through export credit agencies and development banks, compared with $24 billion a year for clean energy.

Laurie van der Burg, an Oil Change International campaigner, urged the G7 club of the richest nations to set an example and clearly state at their June summit they will no longer finance coal and will develop plans to shift away from oil and gas.

"I do think that 2021 has the potential to become the year in which, for the first time, we see the balance of public finance tip from fossil fuels to clean energy, because right now it's still mostly fossil fuels," she told the Thomson Reuters Foundation.

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U.N. chief urges wealthy nations to phase out coal use by 2030

(Reporting by Megan Rowling @meganrowling; editing by Laurie Goering. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org/climate)

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