A pledge made at the UN climate conference Cop 26 to end international public financing for unabated fossil fuel projects by the end of this year risks being watered down by exemptions for gas on the back of energy security concerns, while lacking concrete strategies to boost support for clean energy, a report released by civil society organisations (CSOs) Oil Change International (OCI), International Institute for Sustainable Development (IISD) and Tearfund shows.
A total of 39 countries — including G7 nations the UK, US, Canada, Germany, Italy and France — pledged in November last year to end new direct international public financing for unabated fossil fuels by the end of 2022. Although it came with caveats — investments in fossil fuels could still be made in limited and clearly defined circumstances consistent with a 1.5°C warming limit and the goals of the Paris Agreement — the commitment was the first directly aimed at phasing out public finance for oil and gas.
The CSOs found that most of the signatories have yet to publish updated, or new, fossil fuel exclusion policies, and warned that loopholes allowing the financing of gas projects must be avoided. "While most governments and institutions have ruled out financing for coal projects, stringent gas finance restrictions are generally absent from pre-existing policies," the CSOs said.
The risk of signatories continuing to support large-scale gas projects abroad has increased following Russia's invasion of Ukraine and because of energy supply concerns, the CSOs said. Germany has already indicated it would pursue gas projects in Senegal.
A similar public financing commitment made by the G7's climate and environment ministers in May, which includes Japan, was weakened earlier this week. The leaders of the group added the caveat that gas investments can receive public support to reduce dependency on Russian gas.
Countries party to the Cop 26 pledge could want to add similar exemptions to their policies, although the UK, which launched the initiative in Glasgow, wants to ensure participants stick with the original commitment, OCI global public finance co-manager Laurie van der Burg said.
"Rather than a reason to backslide on previous commitments, the current energy security and price crises, and the war in Ukraine should provide an additional incentive for signatories to reduce their dependence on coal, oil and gas," the CSOs said.
Only a handful of Development Finance Institutions (DFIs) and governments — including France's Agence Francaise de Development, Sweden's Swedfund, the Netherlands' FMO, the European Investment Bank, Denmark and the UK — have adopted policies compatible with the pledge so far. These enforce a nearly complete or full ban on new support for fossil fuel projects, including for gas-fired power plants. Export Credit Agencies (ECAs), apart for Denmark and the UK, have yet to publish updated policies compatible with the pledge, with some still allowing full or partial support for gas exploration.
The report suggests countries and institutions must come up with strict definitions of "limited and clearly defined exceptions" and "unabated" to avoid loopholes and "fossil fuel lock-in", including for gas. The most common and substantial gaps identified by the CSOs in the institution's pre-existing policies relate to exemptions and gas-exclusion policies. The report also recommends they publish updated policies by the next UN climate conference Cop 27.
They found that if DFIs, ECAs and governments party to the pledge redirected their $28bn a year in public finance for oil and gas, they would more than double their clean energy financing, from $18bn/yr currently. But most high-income signatories lack publicly available, concrete targets and strategies to scale up clean energy, the report said, and more needs to be done to support "a just energy transition" and collaborations with low and middle-income countries.
