GLASGOW (SCOTLAND) Twenty countries announced at the United Nations Climate Conference on Thursday that they will no longer fund fossil fuel development overseas and will instead invest their money in clean energy.
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This move will limit the risk of new fossil fuel projects. This is a good thing as the atmosphere is rapidly running out of carbon dioxide. But while the news is undoubtedly good, details still need to be worked outand more countries and banks need to hop on board to give the world a fighting shot at preventing global warming above the 1.5-degree-Celsius (2.7-degree-Fahrenheit) target.
This group includes financial heavy-hitters such as the U.S., UK and Canada, as well as smaller players such as Mali and Costa Rica. Oil Change International's analysis shows that $15 billion could be transferred annually by the 20 countries and four other investment institutions that signed up to fund fossil fuels instead of clean energy projects.
One of the key factors to achieving the world's climate goals is slowing down the production of new fossil fuels. The International Energy Agency released a report earlier this year that stated that next year's new exploration must be stopped. According to the report, 20 countries said that they will fund projects. This is a significant climate win.
Signatories to today's statement are doing the most rational thing in a climate emergency: Stop adding fuel to the flame and shift dirty financing to climate action, Laurie van der Burg (global public finance campaigns manager at Oil Change International) stated in an emailed statement.
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This announcement is in addition to the other efforts to reduce fossil fuel extraction made at COP26, which included phasing out some coal-burning countries and addressing methane emissions from others.
E&E News was told by Justin Guay (Director for Global Climate Strategy at Sunrise Project) that public finance is crucial for crowding private capital and de-risking fossil fuel projects in emerging markets.
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As your local climate reporter, I must also follow up this positive news with some key caveats. First, the agreement does not pull funding from existing projects (climate joke, please). Oil Change International found that between 2018 and 2020, $188 billion was pumped by the G20 to support fossil fuel projects in other nations. This is a lot of recent extraction.
A lack of funding abroad does not necessarily mean that there is no financing at home. For example, Canada and the U.S. are both major oil and gas producers. The promise to stop financing fossil fuels overseas is not a way to say you won't loan your neighbor money to buy cigarettes.
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The biggest smokers are not the only ones who didn't sign up for the G20. According to Oil Change International, these include China, Korea and Japan, who are the largest fossil fuel backers in G20. They together account for more $29 billion annually in fossil fuel development overseas. This is a vital source of income for fossil fuel developers.
We still require more information about the pledge to stop funding. This includes how the 20 banks and countries define fossil fuel financing. A project that uses carbon capture, which is a very inefficient way to make dirty energy more climate-friendly, could be funded. This would mean that the agreement is without teeth.
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The world's investment and private banks must also sign up. The Bank of England's former head Mark Carney made the most impressive offer at the UN negotiations. He said that 450 investment firms with assets of $130 trillion were committed to aligning their investments with net zero. Although that is a lot of money it is also locked up in mortgages so the potential for climate-focused investments is much smaller than it appears. It seems perfect for greenwashing.
This is not the first time we've seen it, Rachel Rose Jackson (director of climate research at Corporate Accountability) stated in an email statement. The climate crisis was knowingly fuelled by financial enablers and corporations that made big promises and vowed huge sums. They fail to deliver and cause great harm. It is impossible to accept any climate crisis pledge made by the financiers. These actors must tell us how they will keep the temperature rise below 1.5 Celsius.
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The U.S., 19 other countries, and four development banks have made a new pledge to stop funding fossil fuel development. It seems like a good place for a start.
