(Global Trade Review, 26 February 2025) Experts call on the EU to establish a dedicated unit to better coordinate export credit agencies and development finance institutions, boosting the Global Gateway Initiative’s €300bn global infrastructure ambitions. A report highlights the need for a unified strategy to compete with China’s Belt and Road Initiative and support European businesses in global markets. Advocates believe that such a unit could bolster the EU’s global competitiveness and facilitate sustainable development projects.
European Union (EU)
US Sanctions on Gazprombank (Russian ECA?) Imperil Uzbek Copper Mine Expansion
(The Diplomat, Arlington, 5 December) The U.S. Treasury Department’s decision to slap sanctions on Gazprombank poses a potential major headache for Uzbekistan’s burgeoning mining industry, which until now has relied on the Russian lender to finance a $4.8 billion mine expansion set to nearly double the country’s copper production. The U.S. designation of Gazprombank could also result in a major financial hit for European mining and engineering firms, banks, and state-backed export credit agencies active in Uzbekistan, which have thus far continued to transact with entities financed by Gazprombank. Gazprombank has established partnerships with major world financial institutions and leading national import-export agencies. Access to international capital markets helps Gazprombank’s customers attract considerable amounts of funding on convenient terms. UKEF has guaranteed a €12.6m loan to Uzbekistan’s Almalyk Mining and Metallurgical Complex to refinance its purchase of fully automated machinery from the Scottish multinational Weir.
COP29 outcomes: balancing progress and challenges on the road to climate action
(UN Environment Program, Baku, 4 December 2024) COP29 held in Baku, Azerbaijan, offered an important opportunity for governments and other global stakeholders to put in place the mechanisms, tools and signals required for countries to continue implementing their contributions to the Paris Agreement as urgently needed. The main areas of negotiation were on:
- the design & key elements of future climate financial architecture & the next collective quantified goal (NCQG) on climate finance;
- the rulebook for future international, compliance carbon markets; and
- countries’ collective signaling on mitigation ambition, as follow up to the various energy transition objectives captured in last year’s COP28 ’UAE Consensus’.
As widely reported elsewhere, while opportunities were missed to create the required clarity and determination on finance and ambition, there was some good news, even a breakthrough, on the establishment of government-backed, international carbon markets of the future. This summary highlights the recent, impressive achievements of the UNEP FI-convened net-zero groups, progress on financing climate adaptation, and the implications for financial institutions of some of the summit’s outcomes.
South Korea and Turkey block landmark OECD deal to end fossil fuel subsidies
(Oil Change Int’l, Washington, 20 December 2024) OECD members have failed to pass a landmark deal to end over $40 billion in public subsidies to fossil fuels. Despite last-ditch attempts by senior government and international figures to sway South Korea and Turkey – the only countries blocking the deal – negotiators could not agree on a proposal to restrict export finance to fossil fuels. They will instead focus on a range of measures to improve transparency in export financing. Last year the UK, Canada and EU tabled a proposal at the OECD to end export finance for all fossil fuels, building on a 2021 OECD agreement that ended export finance support for coal plants. In a surprise move, the US recently switched its position at COP29 and came out in support of the proposal, leaving just a handful of countries blocking it.
The International Institute for Sustainable Development (IISD) on December 9th noted: “We have seen the potential of multilateral leadership in export finance before. In 2021, the OECD ended coal-fired power export credit financing, a key milestone in the phase-out of international public finance for coal. Now OECD countries have [had!] the opportunity to replicate this success for oil and gas. This could [have] freed up much-needed public finance to accelerate the uptake of clean energy. Rich countries still provide export credit finance of USD 41 billion per year to oil and gas, following their earlier agreement to end export credit support for coal.
President Joe Biden was poised to back restrictions on international funding for oil and gas projects in a move that could free up billions of dollars for clean energy and crystallize his climate legacy.
Landmark Minerals Security Partnership Finance Network Established for Critical Minerals Projects
(JD Supra, Sausalito, 5 November 2024) The Minerals Security Partnership Finance Network (MSPFN), a joint financing body, was announced by the United States, the European Commission, the United Kingdom, Canada, Japan, Australia, and nine other nations on 23 September 2024 at the United Nations General Assembly in New York. The new financing initiative aims to enhance collaboration amongst export credit agency and development finance institutions to support financing for critical mineral projects. The MSPFN is a US-led financing initiative that stems from the Minerals Security Partnership (MSP); a framework established in 2022 by 14 governments and the European Commission to advance, diversify, secure, and sustain supply chains for CMs. The MSPFN was created to strengthen cooperation and promote information exchange and co-financing among participating institutions.
‘The finance Cop’ delivers a fragile climate pledge, but leaves questions unanswered
(Global Trade Review, London, 27 November 2024) The two-week-long UN Climate Change Conference (Cop29) ended last week with a contentious pledge by wealthy countries to increase climate finance. While the commitment was criticised by developing nations as insufficient, objections from some of the world’s richest nations meant there was nearly no agreement at all. The landmark pledge of Cop29, nicknamed “the finance Cop” due to its supposed focus on funding the green transition, was an increase of climate finance from the wealthiest countries to the poorest from US$100bn to US$300bn a year by 2035. While this is a clear upgrade – and higher than the originally proposed US$250bn – it is far less than the US$1.3tn that developing countries had sought. It is also unlikely to be enough to mitigate the effects of climate change, with NGO WaterAid’s lead policy analyst for water, sanitation and hygiene finance, Lesley Pories, calling it a “death sentence for the millions on the climate frontlines”. Though the official text of the resolution calls for financing from “all public and private sources” to reach US$1.3tn a year by 2035, it is unclear in practice how this will materialise.
ECAs prepare to lock horns over fossil fuel financing
(Global Trade Review, London, 14 October 2024) Ahead of crunch talks within the OECD Arrangement, climate groups are pressuring the US, Korea and Japan to agree to a comprehensive proposal that would halt billions of dollars in fossil fuel financing each year. In recent days, over 40 environmental and social activity groups have written to members of the OECD Arrangement on Officially Supported Export Credits, urging them to expand an existing ban on coal financing to also include oil and gas projects. Export credit agencies (ECAs) are among the world’s largest backers of fossil fuel transactions, often in developing regions such as Asia and Sub-Saharan Africa. Climate groups argue their support – in the form of guarantees, insurance and loans – can be vital in ensuring projects reach financial close. In the past year, the Export-Import Bank of the United States (US Exim) has seen two advisors on its climate board quit over a US$500mn loan guarantee backing oil and gas field expansion in Bahrain, while Japan’s agency has come under fire for financing a new gas field in Western Australia. Friends of the Earth, Oil Change International and BankTrack are among the signatories of the letter, which says it is “unthinkable that OECD agencies continue to pour billions into fossil fuel projects”.
Rich Nations Running Out of Time to Curb Oil and Gas Funding
(Bloomberg, 17 September 2024) A group of developed nations will make a new push to resolve differences amid fading prospects for a deal to restrict funding of foreign oil and gas projects by their export credit agencies. Restricting export credit agencies is seen as a potentially important tool in curbing the flow of financing to fossil fuels projects. Group of 20 nations offered more than $30 billion for such ventures in 2022, led by Canada and South Korea, according to data compiled by Oil Change International, a climate advocacy group.
Western nations join forces to break China’s grip on critical minerals
(Financial Times, New York, 23 September 2024) Coalition of 14 governments announces financing network for projects to provide raw materials required by tech industry. Western nations are directing their development finance and export credit agencies to work with private industry to support critical minerals projects, in a drive to break China’s chokehold over a sector that is essential for high-tech industries. The Minerals Security Partnership, a coalition of 14 nations and the European Commission, will unveil a new financing network at an event in New York on Monday as they try to ramp up international collaboration and pledge financial support for a huge nickel project in Tanzania, backed by mining company BHP.
Critical Minerals Security Partnership may not be enough for Australia
(Australian Strategic Policy Institute, Canberra, 25 September 2024) Fourteen countries this week took what they intended to be a big step in countering China’s dominance of critical minerals supply. But it’s unclear whether the initiative will restore competitiveness of Australian production and investment in the face of massive subsidies offered by China and, in response, the United States. The Minerals Security Partnership, a coalition of 14 countries, including the G7, Australia, India, South Korea, and European Union members, announced plans for a finance network to boost investment in critical metals. The initiative will tap into domestic export credit agencies and development finance institutions to attract private sector capital to produce, extract, process and recycle critical minerals, especially in riskier markets. The partnership seeks to lower investment risks and drive global supply chain resilience by providing guarantees and concessional financing. Australia’s economic prosperity and national security are intrinsically linked to the exploitation of its abundant resources, notably critical minerals. These minerals are the new oil. They’re the building blocks for everything from emerging technology to energy transition. Although Australia has vast reserves, its critical mineral mining and processing are still threatened by the intense subsidy war between the US and China.
