Contact:
- Nina Pusic, nina[at]priceofoil.org
Over 175 organizations launch proposal for the OECD to end export finance support for oil and gas
Summary:
- 175+ organizations call on the OECD to end oil and gas finance. As a first step towards this objective, an OECD member must table a proposal to prohibit oil and gas support at next week’s OECD meeting
- Governed by the OECD, Export Credit Agencies (ECAs) provide more public finance for fossil fuel projects (USD 34 billion a year) than any other type of public finance institution (including the Multilateral Development Banks)
One week before international negotiators meet at the Organisation for Economic Co-operation and Development (OECD) in Paris to discuss aligning export finance with international climate goals, more than 175 civil society organizations (CSOs) from over 45 countries have released a Joint Position calling on world leaders to end OECD export finance for oil and gas, and explaining how it can be done. They urge OECD members who consider themselves climate leaders to table a proposal for doing so.
The position is also supported by the Co-presidents of the Club of Rome, Sandrine Dixson-Declève and Mamphela Ramphele. Dixson-Declève says: “Continued government support for long term fossil energy development is as reprehensible as short-term fossil energy company windfall profits on the back of energy poverty. In both cases it is the world’s vulnerable communities that will continue to suffer the most.”
Climate science is crystal clear that to meet a 1.5°C warming limit by the end of the century, no new oil and gas fields can be exploited, and that 40% of already developed fields may need to be shut down early. Yet, G20 ECAs provide seven times more support for fossil fuels than clean energy. From 2019-2021,G20 ECAs supported at least $34 billion per year worth of transactions for fossil fuels, over 90% of which were for oil and gas, while providing only $4.7 billion for clean energy.
Export Credit Agencies (ECAs) play a catalytic role in shaping our global energy systems. ECAs help domestic companies limit the risk of selling goods and services in overseas markets, by providing loans, loan guarantees and insurance. This finance is government-backed, and often concessional, helping prop up fossil fuel projects and infrastructure which would otherwise be too risky for the private sector to finance alone.
Next week from March 6th – 9th, OECD negotiators have a crucial opportunity to take ambitious climate action in line with the science. The Civil Society Joint Position advocates that OECD negotiating countries do this by prohibiting all export support for new oil and gas infrastructure and associated infrastructure. In doing so, OECD members have an opportunity to build on recent progress made on coal-fired power restrictions at the OECD. In 2015, countries agreed to restrict ECA support for unabated coal-fired power and in 2022 they agreed to prohibit it. This catalyzed a $2.7 USD billion drop in G20 public finance support for coal projects from 2019 to 2022, highlighting the real-world impact that OECD Arrangement can have on shifting energy finance away from fossil fuels.
Over 50% of the 38 OECD members and 5 out of 10 of the OECD negotiating countries have already committed to ending international finance for fossil fuels by the end of 2022, including for their ECAs, through signing onto the COP 26 Statement on International Public Support for the Clean Energy Transition. This pledge explicitly includes, “driving multilateral negotiations in international bodies, in particular in the OECD, to review, update and strengthen their governance frameworks to align with the Paris Agreement goals”. To kick-off negotiations on an oil and gas prohibition, a progressive OECD member must table a proposal for doing so. OECD members who consider themselves climate leaders have an opportunity to do so at the meeting next week.
The Joint Position on OECD oil and gas restrictions comes at a time when civil society is also calling for other OECD workstreams, such as the guidelines for multinational enterprises, to take climate concerns seriously. Civil society organizations say that the science is clear that there is no time to lose if we are to keep 1.5°C and a livable future within reach.
Sandrine Dixson-Dècleve, Co-president of The Club of Rome, said: “It is time for OECD countries to unite around the phase out of fossil fuel extraction, use and subsidies and honor previous pledges made by some of its members including through the G7. The compound environmental and economic effects of climate change and the conflict in Ukraine has shown us that we must wean ourselves off fossil energy now and transition to clean and affordable energy for all by the end of this decade. This is our best plan to build resilience against future shocks and stresses from climate and conflict. OECD leaders must end fossil energy extraction and infrastructure investments at home as well as abroad and establish the necessary partnerships and financial transfers to enhance an equitable clean energy revolution globally.
Let’s be clear, continued government support for long term fossil energy development is as reprehensible as short-term fossil energy company windfall profits on the back of energy poverty. In both cases it is the world’s vulnerable communities that will continue to suffer the most.”
Mamphela Ramphele, co-president of The Club of Rome, said: “It is vital that humanity retreats from its fossil fuel addiction that is overheating our planet. It is also critical to reduce our current rate of energy consumption. Scientific evidence suggests that we could achieve decent living standards for every one of Earth’s 8 billion citizens with just 40% of our current energy use. This is what The Club of Rome is championing: Global Equity for a Healthy Planet.”
Nina Pusic, Export Finance Climate Strategist at Oil Change International, said: “Export credit agencies’ continued support for oil and gas projects completely undermines global climate goals under the Paris Agreements, putting a 1.5 C global warming trajectory beyond reach for us all. Powerful OECD negotiators, like the U.S. and EU Commission, must live up to longstanding climate commitments at the OECD level and table a proposal for oil and gas export finance restrictions, to ensure ECAs do not continue to obstruct our pathways to an equitable and just energy transition.”
Brighton Aryampa, Youth for Green Communities, Uganda, said: “Governments all over the world should and must stop funding fossil fuels at home and abroad. They have power to stop banks that are financing these dirty projects, such as the dangerous EACOP project in Uganda and Tanzania. The banks together with oil companies should look at supporting Uganda, Tanzania and Africa at large to be leaders of the 21st century transition to clean renewable energy while promoting green economic activities if they want to invest in Africa.”
Kate DeAngelis, Friends of the Earth United States, said: “The world is waiting for the U.S. to fulfill its pledges as a leader on climate, particularly through the U.S. Export-Import Bank. Biden cannot promote a renewable energy transition at home while bankrolling fossil fuels abroad. It’s time to take our global responsibility seriously and fund an equitable, renewable energy future.”
Ariel Slipak, Fundación Ambiente y Recursos Naturales (FARN), Argentina, said: “Countries from the global north with a green discourse channel the financing of the worst extractive projects in the global south through their export credit agencies. Nowadays ECAs are a mechanism that deepens the global south dependency and the ecological inequalities.
It is no coincidence that each of the successive governments of Argentina always looks to the ECAs as possible financiers of the infrastructure associated with Vaca Muerta fracking project.
Beyond the search for an end to the financing of fossil fuels, we must also be alert about their discourse towards renewable energies. With green rhetoric, ECAs begin to display interests in the so-called “critical minerals for the energy transition” with documented human rights violations, such as the case of lithium.”
Shawn Katz, Above Ground, Canada, said: “Canada has committed to phasing out its public finance for fossil fuels, yet year after year it continues to be one of the G20’s largest providers of fossil finance. In signing and implementing the Glasgow Statement, Canada finally took a step from laggard to leader. The OECD negotiations provide a crucial test of this commitment, as well as an opportunity for Canada to continue its move towards climate leadership on the world stage.”
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Notes:
- The OECD Arrangement on Officially Supported Export Credits (the Arrangement) provides a soft law framework for ECAs of OECD countries, and is the only multilateral body that specifically regulates ECA standards.
- Next week’s OECD negotiations also come almost 1 year after Russia’s invasion of Ukraine. European ECAs such as Italy’s SACE and Germany’s Euler Hermes, guaranteed almost $13 billion euros in oil and gas expansion for Russian companies in the seven years since Russia annexed Crimea.
- The CSO Joint Position notes that not only does any new support for oil and gas obstruct international climate goals, it also highlights that fossil fuels are no longer the cheapest nor most accessible way to provide energy access.
- This Position advocates for the implementation of an already existing international commitment that was signed on to by 52% of OECD negotiations countries, which promised to end international public finance for fossil fuels by the end of 2022.
- Several major OECD countries including the United States, Canada, Germany, and the United Kingdom promised to end new direct public support for the international unabated fossil fuel energy sector within one year of signing the COP 26 Statement on International Public Support for the Clean Energy Transition. This pledge explicitly includes, “driving multilateral negotiations in international bodies, in particular in the OECD, to review, update and strengthen their governance frameworks to align with the Paris Agreement goals”.
- To date, these signatories of the statement have failed to do so at the OECD level, while some signatories, such as the United States, Germany, and Italy, have failed to implement the commitment domestically by the agreed deadline. Countries that have implemented their commitment with integrity domestically, such as the United Kingdom, Denmark, and New Zealand, must ensure that the latter part of their commitment to take this ambition to the OECD-level is not forgotten.
- In 2015, the OECD Arrangement adopted the Coal Fired-Power Sector Understanding (CFSU), which prevented OECD-member export credit agencies (ECAs) from supporting coal-fired power plants that were less efficient unless they were in developing countries. Although far from 1.5°C-aligned, the CFSU highlighted the potential of the OECD to respond to the growing threat of climate catastrophe. Six years later, in January 2022, the CFSU was replaced with a new prohibitive clause on export credits for new unabated coal-fired electricity generation plants. While the prohibition clause still leaves loopholes for the financing of associated coal infrastructure, it highlights the fact that the OECD Arrangement has the power to enact policies that further align ECAs with financing a liveable and more equitable future.