Blog News Events Publications Directory Community Industry Voices Media

Export credit coalition accused of ‘backsliding’ on fossil fuel support

A coalition of European governments has failed to agree on a common approach to ending export credit agency (ECA) support for fossil fuel projects by the end of the year.

The Export Finance for Future (E3F) coalition was launched in 2021 with the promise that the member countries would phase out or limit support for sectors such as oil, coal and gas in order to help curb global warming. The strategy was strengthened later that year when each of the 10 participating governments signed a pledge at the Cop26 summit to end public finance for fossil fuels by the end of 2022.

The alliance comprises Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Spain, Sweden and the UK.

AdvertisingEKA Turbo Charge Trading Systems in Weeks
AdvertisingFendahl CTRM Technology

In a statement released following a ministerial meeting of the E3F alliance in Berlin last week, the member states confirmed that the European energy crisis caused by Russia’s invasion of Ukraine “does not change their commitment to the implementation of the Cop26 statement”.

They also confirmed that by the end of the year each government will have fulfilled its obligation to end trade and export finance support for unabated coal power and the thermal coal supply chain.

But a stronger commitment by the coalition to specify which energy sources and parts of the supply chain for fossil-fuelled power would no longer qualify for support was abandoned in the face of objections from Italy, according to Reuters.

Sace, Italy’s ECA, has provided significant support to fossil fuel projects in recent years, according to E3F data.

An earlier draft of the final statement vowed to nix public trade and export finance for the “exploration, production, transportation, storage, refining, distribution of coal, crude oil, natural gas, and unabated power generation”, according to the news agency. A source with knowledge of the discussions confirmed the account to GTR.

The document released last week says instead that it will be up to each country to choose which fossil fuels they end support for. But it also committed the coalition to a “common standardised format” to monitor and report on each government’s export credit support for greenhouse gas-emitting energy.

The reported inclusion of natural gas in the draft statement is significant because many European states – and the European Commission – have taken a much softer approach to the fossil fuel, which some governments see as a transitional energy source and which has become a hot commodity as supplies from Russia dwindle ahead of the northern winter.

Oil Change International, a campaign group which has closely monitored the E3F, says the Berlin summit “was overshadowed by backsliding”.

“E3F was created to lead on an urgent task – aligning export finance with climate goals and fulfilling the 1.5°C warming target of the Paris Agreement,” the group’s export finance strategist Nina Pušić says. “To date, we continue to see a number of E3F members failing to lead. At best, they are dragging their feet, and at worst, breaking their commitments.”

Italy has funnelled most export credit support to fossil fuels of any coalition ECA, according to an E3F transparency report published in June. The country extended €8.37bn in medium and long-term export credit between 2015 and 2020, followed by Germany’s €6.45bn and Spain’s €4.6bn.

Some E3F countries have already axed such support or set imminent deadlines for doing so, including the UK, Sweden and France, although timelines and exceptions vary.

The transparency report shows Denmark was a clear leader in covering clean energy deals during the same period, providing support worth €9.4bn. Germany, the second-largest backer of renewable and electricity infrastructure, extended €4.3bn in support.

In last week’s communique, E3F members also repeated previous pledges to incentivise clean energy through public trade and export finance products and called for the participants in the OECD Arrangement – which sets widely-followed benchmarks on export credits – to end new support for fossil fuel power generation and to modernise the agreement “as soon as possible”.

EU finance ministers have pushed for similar reform of the OECD Arrangement, whose participants decided last year to end support for unabated thermal coal projects.

 

Netherlands unveils approach

Shortly after the E3F summit, the Netherlands published a policy on how it intends to meet its pledge to end export credit support for fossil fuels through its ECA, Atradius Dutch State Business (DSB).

Under the intended policy, “there won’t be any room for support for new projects aimed at the exploration and extraction, processing, storage, transshipment and transport of fossil fuels and electricity generation by means of fossil fuels” from January 1 next year, according to a finance ministry statement explaining the new measures.

There are some exceptions, including “under certain conditions for investments in existing fossil infrastructure, provided the economic life of the infrastructure is not extended”.

“Other examples of exceptions are fossil infrastructure support services, multi-purpose ports and electricity production in low-income countries with extreme energy poverty,” the ministry says.

The government will also allow Atradius DSB to consider applications received this year that aren’t aligned with the new policy until the end of next year, but applications that are not given approval by December 31, 2023 will be abandoned.

The Netherlands will consult with other signatories to the Cop26 pledge and the policy “can still be revised if policy developments in other countries give reason to do so”, a finance ministry spokesperson tells GTR. The policy was drafted following consultations with businesses and NGOs.

A group of Dutch and international campaigners say the decision to consider policies for fossil fuel projects into next year breaks The Hague’s promise at Cop26 of ending public finance support this year, and argue that the exemptions for energy security are “ill-defined”.

“Where other countries come up with ambitious policies, the Netherlands mainly shows ambition in terms of finding loopholes to continue with fossil support,” says Isabelle Geuskens, a senior policy advisor with environmental NGO Milieudefensie/Friends of the Earth Netherlands.

“This shows the Netherlands is not a climate leader, but an old-fashioned merchant who puts short-term corporate interests above a liveable planet and the lives of vulnerable people,” she adds.

The finance ministry spokesperson says in response: “The transition period of one year has been chosen in the context of due care. Many projects have a long lead time, whereby companies already invest resources in the phase before an order is awarded.”

The post Export credit coalition accused of ‘backsliding’ on fossil fuel support appeared first on Global Trade Review (GTR).

Go to the Source – Export credit coalition accused of ‘backsliding’ on fossil fuel support