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Public finance institutions pledge to end fossil fuel support by end of 2022

A group of governments and public finance institutions across the world, including in the US, European Union, Canada and UK, have pledged to end direct support for the unabated fossil fuel energy sector by the end of next year. 

A joint announcement made this morning at the COP26 summit in Glasgow promises an end to direct support for international fossil fuel projects “except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement”. 

Other signatories include the European Investment Bank, Agence Française de Développement and the East African Development Bank. Greg Hands, the UK’s minister of state for business, energy and clean growth, revealed at the statement’s launch that Italy has also since joined as a signatory. 

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“The accelerated alignment of international public and private sector financial flows is critical to driving energy transitions, energy access and supporting the development of both emerging and existing clean technologies,” the joint statement says. 

It also recognises “the progress, driven in part by enabling public finance investments, in reducing the costs of clean energy alternatives such as solar and wind power to become cheaper than unabated fossil fuels in almost every region of the world”. 

The statement also contains a vow to encourage other governments, export credit agencies (ECAs) and public finance institutions to implement similar commitments. 

A joint response by a group of civil society organisations, including Climate Action Network International and Oil Change International, praises the announcement as “the first international political commitment that also addresses public finance for oil and gas”. 

“Shifting public finance for energy out of all fossil fuels and into clean energy is an urgent task,” it says. “The International Energy Agency (IEA) says that to limit global warming to 1.5°C, 2021 needs to mark the end of new investments in not just coal, but also new oil and gas supply.” 

A report published by the IEA in May issued a stark warning over earlier climate pledges by governments. Even if fully realised, it says those commitments “would fall well short of what is required to bring global energy-related carbon dioxide emissions to net zero by 2050 and give the world an even chance of limiting the global temperature rise to 1.5°C”. 

However, it accuses governments and public institutions in other countries – including Japan, Korea and China – of being “laggards”. Those three nations account for nearly half of all G20 and multilateral development bank finance for fossil fuels, it says. 

“Campaigners hope that the joint statement can help raise pressure on these countries that are lagging behind, similar to the momentum in place on ending coal finance,” the response says. 

Research by Oil Change International and Friends of the Earth US has found that between 2018 and 2020, international public finance institutions and development banks in G20 nations provided at least US$188bn in support towards fossil fuels abroad. 

That figure is nearly triple the amount given in support for renewable energy, which the two groups warn “has stagnated since 2014”. 

It calls on the World Bank Group, the African Development Bank, the European Bank for Reconstruction and Development, the Asian Development Bank and the Asian Infrastructure Investment Bank to make similar pledges. 

Tasneem Essop, executive director at Climate Action Network International, says today’s commitment is “a step in the right direction but must be scaled up with more governments and public finance institutions, including the multilateral development banks, committing to end finance for fossil fuels”.  

“This public money needs to be urgently redirected into a just energy transition that ensures clean universal energy access for communities in the global south and support for communities and coal, oil and gas workers without saddling countries with any further debt,” she says. 

Lisa Fischer, programme leader for climate neutral energy systems at E3G, adds that the statement is “a powerful signal to policy makers and investors alike that high climate and investment risks are an inherent part of oil and gas finance, and that no investment in new oil and gas supply is needed”. 

Daniel Willis, climate campaigner at Global Justice Now, adds: “When it comes to the climate crisis, every investment in fossil fuel infrastructure is like pouring petrol on a house fire.  

“Hopefully we will now see the UK government get its own house in order by ending trade and development finance for gas power and rescinding licenses for North Sea oil exploration.”  

The other signatories to today’s pledge are the governments of Albania, Costa Rica, Denmark, Ethiopia, the Gambia, Fiji, Finland, Mali, the Marshall Islands, New Zealand, Moldova, Portugal, Slovenia, South Sudan, Switzerland and Zambia. 

Other public finance institutions that have joined are Brazil’s Banco de Desenvolvimento de Minas Gerais and Dutch development bank FMO. 

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