Seven European countries have formally committed to ending export finance agency support for fossil fuel projects, as efforts to curb public financing for high-emissions energy sources accelerate.
Denmark, France, Germany, the Netherlands, Spain, Sweden and the UK announced a new alliance, the Export Finance for Future (E3F) coalition, following a virtual meeting today [April 14] hosted by the Directorate General of the Treasury, a unit of France’s finance ministry.
“Today, for the first time, several countries publicly committed to massively increase support for sustainable projects and to assess how to best phase out export finance support to oil and gas industries,” said French finance minister Bruno Le Maire, speaking at the meeting. “The moment is decisive.”
The seven countries, which Le Maire said account for some 40% of export finance in the OECD, committed to ending “official trade and export finance directed to unabated coal power”, thermal coal mines and coal supply chain infrastructure.
For other fossil fuels however, they promised instead to “review our official trade and export finance support… and assess how to best phase out support to these sectors, taking into account their respective characteristics”.
The pact’s members have not committed to a single timeline for winding down fossil fuel support, with Le Maire saying it will be up to each government.
The coalition also includes a commitment to “start a climate-orientated review” of export finance activities and “work on improving transparency on climate-related information”.
“We are totally determined to stop all export guarantees financing fossil fuels while taking into account each country’s industrial specifics and the impact on jobs,” Le Maire said on April 13 in remarks foreshadowing the announcement, according to Reuters.
It is “hypocritical” for European countries to adopt tough domestic emissions rules but back emissions-intensive projects overseas, Le Maire added.
Some countries party to the new coalition have already announced their own moves to end financing for fossil fuel projects. The UK government revealed late last year that it would halt “export finance, aid funding and trade promotion for new crude oil, natural gas or thermal coal projects, with very limited exceptions” from March 31, 2021.
France has also ended export finance for new coal exploration and power plants and will phase out support for oil and gas exploration in a timeline stretching to 2035. Sweden’s export credit agency EKN has said it will stop financing fossil fuel exploration and extraction projects by 2022.
EKN stopped providing new guarantees for exports relating to the extraction and transportation of coal at the end of last year, Karin Wessman, the agency’s sustainability manager, tells GTR.
“EKN is currently exploring additional incentives for green projects and transactions and has recently issued the first guarantee to a new solar project in Angola which is the biggest of its kind in Sub-Saharan Africa,” she adds.
Le Maire invited “all countries sharing our convictions to join this alliance” and reportedly said on April 13 that he is keen for the new US administration of President Joe Biden to sign up to the coalition. Biden climate envoy John Kerry has already said the US will cease support for overseas fossil fuel projects and the US Export-Import bank recently committed to putting “no less” than 5% of its lending authority towards renewable energy.
Export credit agencies (ECAs), like private trade finance providers, have come under pressure from environmental campaigners to choke off emissions-intensive industries from financing.
ECAs in China, Japan, South Korea and Canada were named as the biggest export finance backers for oil, gas and coal projects globally in a 2020 report by Oil Change International, a US-based campaign group.
The organisation says the formation of the Export Finance for Future group “will build momentum to provide political guidance in future multilateral negotiations”. But it has criticised lengthy phase-out periods, such as that adopted by France for gas financing.
“Self-proclaimed export finance leaders will fail to lead unless they put a halt to new export support for oil and gas now, not in five or 10 years from now,” says Laurie van der Burg, Oil Change International’s senior campaigner.
“Even if coal use were phased out overnight, the emissions from oil and gas in existing fields alone would push average global temperature rise beyond 1.5°C. The UK ended export finance for virtually all fossil fuel projects overseas as of last month. That is now the bar for leadership. The science tells us that anything less is insufficient.”
In addition to the US, Le Maire said he hopes other European countries will join the initiative.
European Commission sources told GTR in February that it will likely launch a feasibility study into the creation of a new bloc-wide ECA, which would likely only take on big projects in concert with national agencies.