Seven European countries have pledged to promote reforms and encourage green incentives in the export credit sector, but dashed campaigners’ hopes that they would axe public finance for fossil fuels more quickly than the end of 2022 deadline set at the Cop26 conference.

The Export Finance for Future (E3F) coalition, initially comprising Denmark, France, Germany, the Netherlands, Spain, Sweden and the UK, held its second virtual meeting today, hosted by the Dutch government.

Belgium, Finland and Italy also joined the alliance today, Dutch state secretary for finance Hans Vijlbrief told the summit following the nations’ closed-door talks.

A statement expected after the meeting had not been published as of press time, but a draft seen by GTR said the E3F countries would collaborate on strategies to meeting a pledge signed by each at the Cop26 climate change summit to end public finance support for fossil fuels by the end of 2022.

“E3F was based on the idea that you are phasing out fossil fuels, but now this is getting a new impetus through Glasgow. So this was sort of the mood here, [that] we now have to work really quickly to get things done,” Vijlbrief said when describing the meeting between the 10 member states.

Vijlbrief said the coalition discussed how to best incentivise green investments, a point further emphasised by other officials at the meeting.

The draft statement also said the alliance would promote incentives at the “level of the OECD” and encouraged non-E3F governments to adopt export finance strategies aligned with the 2015 Paris climate agreement, which aims to keep global warming to under 1.5 degrees compared to pre-industrial times.

The E3F members also agreed to report their transactions relevant to the Cop26 target within six months, Vijlbrief said.

The E3F members provided €20bn in export finance for fossil fuel projects overseas between 2018 and 2020, according to data cited by Oil Change International, a campaign group, and ODI, a think-tank. This compares to €17bn for clean energy projects over the same period.

At the end of 2020, the UK announced it was ending all public finance for fossil fuels, with some limited exceptions.

More action needed, but gas kept close

Export credit agencies (ECAs) and public finance institutions will need to dramatically increase support for sustainable finance in order to maintain pace relative to other climate finance sources, according to a research paper presented at the conference.

Researchers at Offenburg University, led by export finance and sustainability export professor Andreas Klasen, found that the 20 export-import banks and ECAs which responded to a questionnaire would need to boost climate financing 6.8 times current levels to between €45.3bn and €57.4bn by 2030 “in order to reach required climate finance volumes by the end of the decade”.

The report also found that the 20 public finance institutions provided lending and insurance amounting to between €6.7bn and €8.4bn last year, significantly higher than a previous estimate by the Climate Policy Initiative.

The researchers suggested that ECAs and public export finance bodies should include innovation mandates to encourage green innovation, and that the OECD Arrangement on export credits should be rejigged to include incentives such as lower minimum pricing.

Those recommendations echoed the comments of some public finance representatives at the E3F summit. “I think we need to work to reconsider our mandates,” said Christof Wegner from Germany’s federal economic affairs and energy ministry. “It’s also important to think about how to change the international framework of rules we are operating under.”

“Fossil fuels get the attention they deserve, whereas incentives are a bit underrated,” he said, adding that incentives can help channel private finance into efforts to support climate goals.

Astrid Bronswijk, head of export finance and investment guarantees at the Dutch ministry of finance, said that limits on support for green transactions had been reached and argued for these to be adjusted to boost capacity.

A briefing by Oil Change International and ODI, released prior to the summit, called on E3F coalition members to move more quickly than the end of 2022 deadline in the Cop26 pledge and “agree to put an immediate halt to new fossil fuel finance”.

The groups called for change at the OECD framework level, suggesting new restrictions on oil and gas export finance.

They also opposed support for liquefied natural gas as a transition fuel in place of coal and oil.

But in contrast, Vijlbrief indicated that attendees at the closed-door meeting endorsed support for natural gas beyond the end of 2022 deadline. “We all know gas will play a role for a couple of years in our energy supply, that’s no secret,” he said.

Peder Lundquist, chief executive of EKF, Denmark’s ECA, told the summit that “logically you need some kind of transition”, pointing to natural gas as a “stable” energy source for power grids in less-developed countries that would struggle to handle a rapid shift to renewables.

Deputy assistant for export finance at France’s Treasury directorate, Paul Teboul, said his government does not plan to end support for upstream gas projects until 2035.

Oil Change International and ODI also called on E3F to lead discussions on defining some of the terms in the Cop26 public finance statement, such as what constitutes “unabated” fossil fuels and exceptions to ending fossil fuel finance in “limited and clearly defined circumstances”.

“Thanks to significant public pressure, all Export Finance for Future countries eventually committed to stop financing the past in Glasgow,” says Laurie van der Burg, Oil Change International’s global public finance campaigner.

“We now need to see that these countries make true their commitment to stop export finance for fossil fuel projects and shift this money to clean energy projects. We also want to see a concrete E3F plan for cementing the commitments made in Glasgow in existing multilateral policy processes, such as at the OECD, so that laggard countries, including Korea, Japan, China and Australia, are compelled to follow suit.”

Vijlbrief said the group is targeting the US, Canada and some Asian countries as new members.