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The US Export-Import Bank (US Exim) has become the latest export finance institution to be labelled as unaligned with the Paris Agreement on combatting climate change, despite overall emissions from the projects it backs falling in recent years.

US Exim is trailing many of its peers in other developed nations because of its large exposures to the fossil fuel and aviation sectors, has no target to reach net zero greenhouse gas emissions and is not transparent enough on how it is carrying out US government guidance on phasing out support for fossil fuels, according to a report by German think tank Perspectives Climate Group.

The organisation has previously rated the export credit agencies (ECAs) of Canada, Germany, Japan and the Netherlands as similarly unaligned, while UK Export Finance (UKEF) was judged as having made “some progress”.

Campaigners have in recent years homed in on the role of export finance institutions and multilateral development banks – many of which have traditionally played a key role financing and insuring large energy projects – although separate data released on Tuesday shows that the public finance made available to the fossil fuel sector by large economies continues to shrink.

The Paris climate accord, agreed to in 2015 by most of the world’s governments, aims to keep global temperature rises to 1.5 degrees Celsius above pre-industrial levels.

The US government is committed to a target of net-zero emissions by 2050 and is also a signatory to a pledge made at last year’s Cop26 climate summit to end direct financial support for unabated fossil fuel projects by the end of 2022.

However Perspectives Climate Group’s report, published on November 1, says that US Exim does not appear to have a clear strategy for meeting either commitment, despite internal guidance issued to US government agencies by the Biden administration last year.

The group also criticised US Exim’s failure to meet a “modest” target of having renewable energy constitute 5% of all new commitments in 2021 – renewables ultimately constituted 0.2% – and warned that the agency’s new domestic financing initiative could revive support for homegrown natural gas extraction.

“The Biden administration provided clear guidance on phasing out support for most fossil fuels, now Exim needs to implement [it],” says the report’s lead author Philipp Censkowsky. “In today’s world, not using state agencies like Exim as a driving force to support the climate transition would be a missed opportunity.” The NGO also urges US Exim to join the European-led Export Finance for Future coalition (E3F) of ECAs committed to ending backing for fossil fuels.

US Exim did not immediately respond to a request for comment sent early on Wednesday morning.

The institution’s reported emissions from projects it supports have been on a downward trajectory since 2013, according to the report. However, a board quorum lapse between 2015 and 2019, which stopped the agency from authorising large financial commitments, also prevented support for emissions-intensive projects.

US Exim’s own recently created advisory council on climate has also made recommendations on adopting a net-zero target and improving reporting and monitoring, as the agency emerges from what the report describes as “a period of silent climate denialism” under the Trump administration.

 

ECAs ‘worst’ on renewables

Since UKEF first committed to phasing out support for coal, oil and most gas projects in 2020, ECAs including those in Finland, France and Sweden, have also detailed how they expect to meet the same target. The E3F coalition, which includes most large European ECAs, is holding its annual meeting in Berlin on Friday.

While calls for stronger action by ECAs and other public finance institutions are ratcheting up ahead of the Cop27 summit, which begins in Egypt on November 6, data published on Tuesday by campaign groups Friends of the Earth US and Oil Change International show that public finance for fossil fuels from G20 countries fell in 2019-21 compared to the previous three-year period.

The average of US$55bn per year provided by ECAs and development finance institutions of the world’s 20-biggest economies, alongside multilateral development banks, represents a 35% drop compared to the US$86bn per year extended between 2016 and 2018, according to the figures.

Of G20 countries, those in Asia – Japan (US$10.6bn), South Korea (US$7.3bn) and China (US$6.7bn) – continue to be the biggest supporters of fossil fuel projects, reflecting the trio’s relative dependence on dirty sources of energy and lack of domestic supplies. Canada is the number two backer of fossil fuels, with US$8.5bn provided.

Last year climate campaigners leapt on a landmark report from the International Energy Agency (IEA) which found that for the globe to reach net zero emissions by 2050, investment into renewables needed to be vastly expanded, and there should be largely no new fossil fuel-powered energy developments.

In this year’s updated pathway to net zero by mid-century, published in late October, the IEA says that despite the energy crisis looking over Europe due to the war in Ukraine and a booming market for thermal coal, there is a “narrow but still achievable” pathway to net zero.

The new pathway calls for drastically higher government investment in renewable energy and clean energy technology supply chains.

But Friends of the Earth US and Oil Change International describe public financing for clean energy by major economies as “largely stagnant”, with support growing from US$27bn per year on average in 2016-18 to US$29bn in 2019-20.

“This means that initial decreases in trackable fossil fuel support have not yet led to a clear shift to clean energy support,” the groups say, noting that “ECAs were the worst public finance actors, providing seven times more support for fossil fuels than clean energy – at least US$34bn per year for fossil fuels and just US$4.7bn for clean energy”.

Of the 20 countries captured by the report, only Brazil and France provide significantly more public finance to green energy projects than to fossil fuels.

Clean energy finance to Africa, for example, actually fell to an average of US$2.8bn during the last three years, a drop of around US$400mn compared to the previous period.

“Last year many of the world’s largest public financiers of overseas fossil fuel projects, including the US, committed to end all public finance for international fossil fuel projects and shift this money to clean energy,” says Friends of the Earth’s Kate DeAngelis, a lead author of the report.

“Since then, we have seen some leaders hold firm to those commitments while the United States, Canada, Germany, and others have failed to release their policies on implementing these promises. These institutions for decades have financed fossil fuel projects all over the world that have harmed communities, killed workers and community members, and caused environmental destruction. It is time for this deleterious financing to end.”

Although regularly criticised for their role in fossil fuel energy financing, many major ECAs are also gearing up to play a bigger role in financing projects to mine and process key minerals used in the manufacturing of clean technology, such as batteries.