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Export credit agency (ECA) financing for fossil fuels could be illegal under international law and governments are obligated to curtail it, according to a legal opinion commissioned by campaign group Oil Change International. 

Authored by barrister Kate Cook and Cambridge University law professor Jorge E Viñuales, the 99-page opinion, published today, says principles in areas of international climate change law, human rights law and some Organisation for Economic Cooperation and Development (OECD) instruments require governments to end export financing for fossil fuels. 

The opinion also argues that such export assistance is inconsistent with the 2015 Paris Agreement on keeping global warming below 1.5 degrees Celsius, a legally binding treaty made by 196 state parties. 

“Under the Paris Agreement, states have set specific goals and requirements which represent a strengthened response to the urgent threat of climate change,” the opinion says. 

“That response includes making finance flows consistent with a pathway towards low greenhouse gas emissions and climate resilient development, which entails addressing inconsistent flows, as well as promoting those which are consistent with the stated pathways.” 

“On the basis of the best available scientific evidence, and taking into account the current emission and production gaps and the associated risk of overshoot of the temperature goals, it appears that export credits which support fossil-fuel related projects/activities are not in principle consistent with the pathways set out in Article 2(1)(c), the temperature goals laid down in Article 2(1)(a) or the mitigation requirements under Article 4 of the Paris Agreement.” 

Oil Change International tracks and campaigns against export and other public financing for non-renewable energy sources such as coal, oil and gas. 

“This legal opinion puts states and their export credit agencies on notice,” says Laurie van der Burg, a senior campaigner with the group. “They need to stop financing fossil fuel projects or face potential litigation risks.  

“The opinion launched today puts serious legal muscle behind what was already a compelling moral and financial imperative: public money should not be used to prop up dirty projects and aggravate the dire climate crisis that is already affecting millions across the globe.”

The group says the prospect of legal action against governments or ECAs would depend on national laws in each country. 

Van der Burg tells GTR the opinion “suggests that it might be possible to, on the basis of international law obligations, challenge ECA finance for fossil fuels in general, instead of on a project-by-project basis”. The group will look into the possibility of such litigation, she says. 

Karen Hamilton, a program officer with the Canadian human rights group Above Ground, says in a statement on the opinion: “Civil society groups looking to safeguard the climate are increasingly turning to legal tools to protect our common future, and this opinion makes it clear that export finance for oil, gas and coal might become the next target of climate litigation.”

Cases against governments over slow action on curbing emissions or targeting individual projects have mushroomed in recent years, including a lengthy case in the Netherlands  which in December 2019 concluded when a court ordered the government to work towards a specific emissions reduction target. 

Marjan Minnesma, the head of the Dutch organisation Urgenda, which sued the government in that case, tells GTR: “As we see more and more courts willing to scrutinise the inadequate climate policies of countries, it may very well be a matter of time before countries will need to explain before the courts how the way they spend their money is in line with the Paris Agreement. At the moment this clearly does not seem to be the case.”

Campaigners are already using the courts to target ECA backing for projects that will generate heavy greenhouse gas emissions, including a petition filed in 2019 against South Korea’s ECA and its development bank over their backing of coal-fired power stations in Indonesia. 

Last month, the environmental campaign group Friends of the Earth won permission for a judicial review of UK Export Finance’s decision to provide some US$1bn of financing to a Mozambique liquefied natural gas project being developed by French energy giant Total. 

UKEF last year vowed not to provide any further financing for oil, gas or thermal coal projects from March 31, 2021. It was also one of seven European ECAs which in April announced an end to export financing for thermal coal and indicated they will eventually phase out financing for other emissions-intensive energy sources.  

Several other ECAs, such as those in Sweden, France and the Netherlands, have made similar or industry-specific pledges. 

Cook, a barrister at London’s Matrix Chambers, is representing Friends of the Earth in the UKEF case. She has also helped represent Australia in its International Court of Justice case against Japan over whaling in the South Pacific and Croatia in a genocide case against Serbia in the same court. 

The new opinion also states that governments’ international legal obligation to conduct due diligence is engaged when an ECA decides whether to finance exports or projects that could contribute to climate change. 

“Given the substantial contribution of ECAs to enable the emissions of greenhouse gases associated with existing and new fossil fuel-related projects/activities, in principle, states comply with their duty of due diligence only if they do their utmost to reduce their contribution to the problem, rather than extending it or increasing it,” the opinion says. 

Oil Change International has previously identified Japan, China, South Korea and Canada as the top providers of export financing to the fossil fuel sector, while the US, Indonesia and Russia have been the major recipients. 

The organisation, along with 11 other civil society groups, will send the legal opinion to ECAs in Australia, Canada, Denmark, France, Japan, the Netherlands, South Africa, Sweden and the US.