EU(Parliament Politic Magazine) – According to sources familiar with the matter, the UK and EU are set to urge the wealthiest nations worldwide to discontinue subsidies for foreign oil and gas ventures, as well as coal mining, during a private OECD meeting scheduled for next month in Paris.
This proposal to halt the major international source of public funding for fossil fuels is expected to trigger intense negotiations at the OECD’s headquarters in Paris.
This initiative aligns with the commitment of some OECD member countries to bring their public finance institutions in line with the goals of the Paris Agreement, aimed at constraining global warming to well below 2 degrees Celsius, ideally reaching 1.5 degrees Celsius above preindustrial levels.
International Pressure to Curb Fossil Fuel Funding by Export Credit Agencies
Nevertheless, the move to end subsidies for overseas projects will highlight the persistence of domestic subsidies for the oil and gas sectors, even as the prospects of a global agreement to cease fossil fuel production without emissions capture at the upcoming UN COP28 climate summit appear increasingly uncertain.”
Nina Pušić, an export finance climate strategist at the U.S. environmental advocacy organization Oil Change International, stressed that discontinuing the provision of loans and guarantees by export credit agencies for fossil fuel projects is a crucial initial step to ensure we remain on track with our global climate objectives.
Between 2018 and 2020, OECD countries’ export credit agencies collectively directed an estimated $41 billion annually to support coal, oil, and gas ventures, a figure nearly five times greater than their support for clean energy, according to OCI. The primary beneficiaries of this support, aside from Mozambique, were found in developed nations such as Canada, the UAE, and Russia.
Support Grows for the UK’s Proposal to the OECD on Ending Fossil Fuel Subsidies
The commitment by wealthy nations in 2021 to cease subsidizing coal-fired electricity generation overseas illustrates the significant influence such OECD decisions can have on promoting the transition to cleaner energy sources, Pušić emphasized.”
The initiative to redefine the stance of the international organization’s member countries concerning fossil fuels also extends from the commitment made by some member states, which include the UK, Canada, France, Italy, and the US, at the UN COP26 summit in Glasgow two years ago.
Their pledge, announced at Glasgow, aimed to cease new public backing for global fossil fuel endeavors by the close of 2022, with exceptions granted for projects involving emissions capture and those deemed ‘consistent’ with the Paris Agreement.
Governments at the Glasgow summit also vowed to exert pressure on entities such as the OECD and multilateral development banks to adapt their governance frameworks to align with the goals of the Paris Agreement.
EU’s Push to End Oil, Gas, and Coal Support Gains Momentum for COP28 Summit
The proposed alterations to the OECD’s export credits framework would be voluntary and necessitate the consensus of a group of member states, which includes major financiers of fossil fuels that did not endorse the Glasgow commitment, such as Japan and South Korea.”
This approach would also exert pressure on signatory nations to curtail the financial support provided by their export credit agencies for fossil fuel projects in foreign territories.
For instance, directors at the US export credit agency Exim voted in May to allocate nearly $100 million to facilitate the expansion of an Indonesian oil refinery, as well as upgrades in fuel efficiency and safety. In July, they further approved credit support for commodity trader Trafigura’s acquisition of US liquefied natural gas for export to Europe.
Exim contended that these decisions would promote the creation of over 12,000 jobs in the United States by boosting the sales of the country’s oil and gas. However, the agency did not respond to a request for comment.
Louise Burrows, responsible for climate and energy diplomacy within the Beyond Oil and Gas Alliance, a coalition of governments including France and Denmark, stated that the discussions within the OECD would serve as a valuable catalyst for initiating conversations with those lagging behind in climate action.”
Sources familiar with UK Export Finance, Britain’s credit agency, have indicated that Canada has committed to supporting the UK’s forthcoming proposal to the OECD in advance of the upcoming meeting next month. Canada’s finance department expressed its anticipation of collaborating with like-minded partners at the OECD and other international forums to foster the global clean economy.