Our award-winning reporting has moved

Context provides news and analysis on three of the world’s most critical issues:

climate change, the impact of technology on society, and inclusive economies.

Legal opinion puts governments 'on notice' over export finance for fossil fuels

by Megan Rowling | @meganrowling | Thomson Reuters Foundation
Tuesday, 4 May 2021 12:10 GMT

FILE PHOTO: Two gas flaring furnaces and a woman walking on sand barriers are reflected in a pool of oil-smeared water at a flow station in Ughelli, Delta State, Nigeria September 17, 2020. REUTERS/Afolabi Sotunde/File Photo

Image Caption and Rights Information

As climate litigation increases around the world, legal experts say governments may breach international law if they carry on backing coal, oil and gas projects overseas

* Overseas support for dirty energy may breach international law

* G20 export credit agencies provide about $40 billion annually

* Green groups expect rise in litigation against such financing

By Megan Rowling

BARCELONA, May 4 (Thomson Reuters Foundation) - Governments could face litigation if they do not step up efforts to stop their export credit agencies financing fossil fuel infrastructure and activities overseas, legal experts and climate activists warned on Tuesday.

Advocacy group Oil Change International released a legal opinion saying the agencies - which provide loans, insurance and guarantees for businesses to invest abroad - should stop lending to oil, coal and gas projects around the world immediately.

"If they continue doing this, they are breaching international law," said Jorge E. Viñuales, a professor of law and environmental policy at the University of Cambridge who authored the opinion with Matrix Chambers barrister Kate Cook.

They concluded that in the context of accelerating climate change and shrinking space for countries to emit more greenhouse gases, there is an "in principle" requirement on states under international law to stop funding fossil fuel projects.

Governments should also reduce existing support for fossil fuel-related projects and activities within a clear time-frame, and avoid locking in polluting infrastructure that could use up a large part of the world's remaining carbon budget, they added.

A growing group of European nations and South Korea have pledged they will no longer use government money to fund coal mining and coal power plants in developing countries.

But climate campaigners also want donor governments to set deadlines to end similar backing for oil and gas.

The United States said last month its departments and agencies would seek to end international backing for carbon-intensive energy projects and promote the flow of capital toward "climate-aligned" investments.

The legal opinion issued on Tuesday examines how obligations under customary international law, international climate change law, international human rights law and guidelines by the Organisation for Economic Co-operation and Development (OECD) apply to export credit agencies.

Such agencies based in G20 countries provided about $40 billion annually for fossil fuel activities from 2016-2018, support that has not dropped since the adoption of the 2015 Paris Agreement, according to Oil Change International.

Viñuales said scientific evidence on the urgency of curbing global warming, as well as its surging impacts on people's lives, gave export credit agencies a legal responsibility to act.

"It's like walking around a park and seeing a drowning man - your obligations of care are different than if the man was not drowning," he told the Thomson Reuters Foundation by phone.

Alongside the release of the legal opinion, green groups sent letters to officials in Australia, Canada, Denmark, France, Japan, the Netherlands, South Africa, Sweden and the United States, urging them to immediately halt support for fossil fuel projects "consistent with international law obligations".


Climate experts have widely welcomed a decision by Britain to end overseas fossil-fuel financing starting from last month - but London is not applying the policy retroactively.

That led environmental group Friends of the Earth to seek a judicial review, recently given the green-light by Britain's High Court, of about $1 billion in UK public funding for a large natural gas project in violence-hit northern Mozambique.

Karen Hamilton, programme officer with the Canadian group Above Ground, said civil society organisations looking to safeguard the climate were increasingly turning to legal tools.

"This opinion makes it clear that export finance for oil, gas and coal might become the next target of climate litigation," she said in a statement.

Viñuales noted recent high-profile cases on climate change have been based on how lagging action by governments to reduce planet-warming emissions is affecting citizens' human rights.

Last week, Germany's top court ordered the government to update its climate law by the end of 2022 to outline how it will bring emissions down to almost zero by 2050, siding with a young woman who argued rising sea levels would engulf her family farm.

This and other lawsuits, often backed by green groups, have relied on legal norms that were already in place but whose application in a warming world was only now being made explicit, Viñuales said.

Governments "can no longer hide in the haze", he added.

Laurie van der Burg, senior campaigner with Oil Change International, said states and their export credit agencies had now been put "on notice".

"The opinion launched today puts serious legal muscle behind what was already a compelling moral and financial imperative: public money should not be used to prop up dirty projects and aggravate the dire climate crisis that is already affecting millions across the globe," she said in a statement.

Read more:

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

US to end overseas fossil-fuel funding as rich world urged to boost climate finance

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)

Our Standards: The Thomson Reuters Trust Principles.