(Environmental Defence, Ottawa, 15 April 2023) In a letter to Prime Minister Trudeau, a broad range of Canadian organizations note that it has been over a decade since Canada first committed to ending inefficient fossil fuel subsidies. Instead of fulfilling this promise, the Government of Canada has continued to provide billions of dollars to oil and gas companies year after year. Now, the federal government has a critical opportunity to correct its track record and become a global leader in its efforts to eliminate fossil fuel subsidies. Noting the much-anticipated Assessment Framework for Fossil Fuel Subsidies has the potential to set an example for the rest of the world – if the framework delivers the highest possible ambition. Conversely, a weak framework could damage Canada’s credibility in international fora and set a dangerous precedent for other countries. Canada should use the World Trade Organization Agreement on Subsidies and Countervailing Measures Article 1.1 definition of subsidies to ensure all relevant measures are captured in the review. The definition of subsidy used must ensure that all tax and non-tax measures that benefit fossil fuel producers are captured in the review. Canada spent $18B on financial supports for the fossil fuel industry last year.
Oil & Gas
Ahead of OECD negotiations, report shows OECD export finance props up fossil fuels, blocking energy transition
(Price of Oil, Hiroshima, 20 May 2023) G7 Leaders in Hiroshima concluded that there is “an important role” for “increased deliveries of LNG” and that “publicly supported gas investments can be appropriate”, jeopardizing the 1.5ºC warming limit and directly contradicting last year’s G7 commitment to end international public finance for fossil fuels by the end of 2022. The G7 endorsement of increased gas finance comes despite strong opposition. Leading up to the Summit, activists organized over 50 actions in 22 countries to urge Japan and fellow G7 countries to end their support for fossil fuels and to stop driving the expansion of gas and other fossil-based technologies such as ammonia co-firing in coal-fired power plants. In their Leaders’ Communique, the G7 claim that “they are steadfast in their commitment to … keeping a limit of 1.5ºC global temperature rise within reach”. A true commitment to 1.5°C, however, requires the G7 to explicitly exclude continued investments in new upstream gas projects and Liquefied Natural Gas (LNG) infrastructure. Today’s G7 endorsement of increased gas investments came after a push from Japan and Germany, with Japan using its G7 Presidency to also promote other fossil fuel-based technologies such as hydrogen, ammonia and CCS. The G7 play a central role in enabling the global buildout of LNG infrastructure.
OECD ECAs urged to scale up climate ambitions
(Global Trade Review, London, 24 May 2023) The export credit agencies (ECAs) of OECD countries should take more ambitious action to protect the climate after pouring 77% of their spending into fossil fuel projects between 2018 and 2020, a campaign group has argued. OECD members pumped an annual average of US$41bn into fossil fuel exports during the three-year period, totalling almost five times the amount of financing provided for clean energy, according to NGO Oil Change International. The report uses energy finance data for OECD members with ECAs which held assets above US$1bn between 2018 and 2020. “This directly contradicts internationally agreed climate goals, including the Paris Agreement objective to align financial flows with the low-carbon energy transition,” says the organisation, which campaigns for an end to public financing for polluting energy sources. ECAs have come under increased scrutiny for their role in fossil fuel finance in recent months, and campaign groups called for strict curbs on such financing as part of the modernisation of the OECD framework on export credits, announced earlier this year. OECD Arrangement participants are meeting in Paris this week to begin drafting the text of the updated framework. It will likely result in an expansion of the types of projects classed as climate-friendly to include clean hydrogen and ammonia, low emissions manufacturing, zero and low emissions transport, and clean energy minerals and ores. The OECD Arrangement’s announcement of the modernisation package did not include any measures on limiting oil and gas support.
CSOs condemn G7 leaders for dangerous backsliding on gas, breaching commitments to end fossil fuel finance
(Oil Change International, Washington, 20 May 2923) G7 Leaders in Hiroshima concluded that there is “an important role” for “increased deliveries of LNG” and that “publicly supported gas investments can be appropriate” [i.e. by ECAs], jeopardizing the 1.5ºC warming limit and directly contradicting last year’s G7 commitment to end international public finance for fossil fuels by the end of 2022. The G7 endorsement of increased gas finance comes despite strong opposition. Leading up to the Summit, activists organized over 50 actions in 22 countries to urge Japan and fellow G7 countries to end their support for fossil fuels and to stop driving the expansion of gas and other fossil-based technologies, A majority of international public finance for fossil fuels is provided by OECD governed Export Credit Agencies – more than even Multilateral Development Banks – with 71% of export financing for energy going to oil and gas. OECD ECAs invested in 56% of new hazardous liquified gas (LNG) export terminal capacity built in the last decade (providing at least $81 billion total), helping drive the global fossil gas boom. Overall, about 42% of all fossil fuel finance [comes] from ECAs under the OECD supported midstream infrastructure activities, such as pipelines, LNG ports, and shipping. At COP26, the 2021 global climate conference in Glasgow, 34 countries and 5 institutions pledged to end direct international public finance for unabated fossil fuels by the end of 2022 and prioritize their public finance fully for the clean energy transition. A regularly updated OIC briefing tracks implementation efforts and assesses whether countries are on track to keep their stop funding fossils promise.
SINOSURE pulls out of Nigerian AKK pipeline funding
(Guardian.NG, Abuja, 19 April 2023) Financiers of the Abuja-Kaduna-Kano pipeline have pulled out of the project, citing an alleged 570% inflated contract sum, far above global threshold. Infrastructure and Commercial Bank of China (ICBC), Infrastructure Bank of China and China Export Credit Agency (SINOSURE) – were to provide 85% or $2.38 billion of the funding requirement. Their Nigerian counterparts, Oilserve and Oando, are to shoulder the balance 15% or $420 million. With this development, the project has been stalled, as there is no funding to cover cost of the second and third legs from Abuja to Kaduna and Kaduna to Kano. It was learnt that the Nigerian National Petroleum Corporation Limited (NNPCL), through the Nigeria Gas Transport Processing Company (NGTPC), had attempted to bridge the funding gap, but lacked the needed liquidity. Globally, the cost of high-pressure transmission gas pipelines is built at $800,000 per kilometre. In Nigeria, the Final Investment Decision (FID) for EPC was scheduled at $4,560,260 million, which is a 570% inflation above global standards.These examples clearly show that Nigeria has the highest cost of contract in the world. These companies cannot afford to go into cahoots with Nigerians because they would be easily caught when they submit their financial reports to their countries of origin.”
FOE investigates EXIM fossil fuel influence peddling in Alaska carbon bomb
(Friends of the Earth, Washington, 13 April 2023) Friends of the Earth has filed an open records request of the Alaska Gasline Development Corporation (AGDC), the state entity developing the Alaska LNG Project–a proposed $38.7 billion LNG project with a potential carbon footprint of 2.7 billion metric tons of CO2, ten times the climate pollution of the recently approved Willow Project. The Alaska LNG Project is already angling for significant federal subsidies. A provision snuck into the Infrastructure Investment and Jobs Act (IIJA) makes the project potentially eligible for a $25.6 billion loan guarantee. The project was also “provided official correspondence” that it will receive a Letter of Interest from the U.S. Export-Import Bank (EXIM), the export credit agency of the US. Thanks to its new Make More in America Initiative, passed in 2022 and widely seen as benefiting LNG developers, EXIM can now finance domestic projects like Alaska LNG as well as international ones. “Hopefully the Biden Administration isn’t about to greenlight another carbon bomb,” said Lukas Ross, Program Manager at Friends of the Earth. “A story about two former fossil fuel executives shaping climate policy seems like something out of the Trump Administration.”
Export Finance Australia (EFA) can no longer justify fossil fuel funding
(Lowy Institute, Sydney, 6 April 2023) Since 2009 EFA has helped to underwrite global heating by providing roughly AU$1.69 billion to fossil fuel firms, while offering a relatively paltry AU$20 million for renewable energy projects. Last year, many of Australia’s key allies signed the so-called Glasgow Statement, which commits signatories to ending public support for international fossil fuel projects. The reasoning was clear: continuing to use taxpayer dollars to underwrite new oil, gas and coal projects, such as coal-fired power plants, is inconsistent with the 1.5°C warming limit and goals of the Paris Agreement. Our ECA research suggests this pattern of lending is likely a result of interrelated pressures from large, politically influential exporting firms that argue EFA’s support is critical for the Australian economy, and national security concerns about the future of Australia’s energy security. However, these arguments no longer stack up. First, fossil fuel firms that benefit from billions in EFA support are among Australia’s largest and most profitable corporations; second, ending public financial support for the export of coal and gas will not prevent the sector from maintaining energy security necessary to power the country’s economy and third, and related, if Australia is to be a renewable energy superpower as the PM has declared, Canberra can ill afford to delay supporting renewables industries.
OECD countries reach historic agreement to modernize export credit support
(Trade Finance Global, London, 7 April 2023) A modernisation package agreed in principle by participants will specifically allow countries to offer greater support for green projects while also expanding the use of export credits in the context of an evolving world economy and an increasingly competitive landscape. Within the package of reforms, the Participants agreed to expand the scope of green or climate-friendly projects eligible for longer repayment terms, as permitted under the Climate Change Sector Understanding (CCSU). “The modernisation package agreed by Participants to the Arrangement on Officially Supported Export Credits is a great milestone to help increase the impact of trade and finance flows on securing our climate objectives,” OECD Secretary-General Mathias Cormann said. “It will allow the scaling up and a better targeting of public and private finance to support climate-friendly investments and help us meet our global net zero emissions objective.” This reform is expected to come into effect later this year, once Participants complete their formal internal decision-making processes and agree to the new Arrangement text. [As noted in the next What’s New article, OECD ECAs have a long way to go to brag about reducing the current $1 to $7 ratio of renewable to fossil fuel project support!]
ECAs of a wide range of OECD countries still finance oil and gas
(Energy Monitor, London, 17 April 2023) All 38 members of the OECD have pledged to reach net zero, with the US and EU in the middle of hugely significant domestic decarbonisation programmes. Yet export finance remains misaligned with the requirements of net zero, directing seven times more support to fossil fuels ($33.5bn per year) than renewables (just $4.7bn per year) on average from 2019 to 2021, according to the OCI. Between 2019 and 2021, OECD ECAs were the world’s largest public international financiers of energy projects. Although China is not subject to the OECD Arrangement guidelines, “a general trend has seen Chinese international public finance eventually follow the OECD guidelines, which also help shape G7 and G20 commitments”, says Nina Pušić, from the NGO Oil Change International (OCI). China’s international coal financing ban, for example, came into effect the same year that the OECD ECAs introduced a similar ban. OECD ECAs (most notably Japan, South Korea and Canada) were the world’s largest public international financiers of oil and gas between 2019 and 2021. Canada has since implemented a pledge made at COP26 to end export finance for oil and gas, but others, including Japan, the US and South Korea, have yet to either make such a pledge or fully follow on through on it. There is a campaign under way from 175 civil society groups from more than 45 countries – including the OCI, the Club of Rome and Friends of the Earth – for the OECD to phase out international public financing of fossil fuels.
Italy Vows to Support Fossil Fuel Projects At Least Until 2028 Despite COP26 Pledge to Cut Investments
(Earth Org, Hong Kong, 28 March 2023) ) The new policy will allow Italy’s export credit agency SACE to support various fossil fuel projects, including exploration, production, storage, and distribution. Climate experts have strongly criticised the move, saying it would breach international commitments and slow down the country’s green transition. The new rules, presented by Premier Giorgia Meloni last week, will allow Italy’s state-owned export credit agency SACE to finance gas exploration and production projects until January 2026. Existing exemptions, which include projects deemed “strategic” for the nation’s energy and economic security, could postpone the date even further. Support for oil transport, storage, and refining projects will be allowed until 2024, and oil distribution until 2028. A deadline for gas transport and storage has yet to be defined.
