A report published by campaign groups Oil Change International and Friends of the Earth shows that ECAs within the G20 nations provided a staggering $96 billion towards fossil fuel projects between 2020 and 2022. This amount, averaging $32 billion per year, marks a 20% decrease from the previous period but still maintains a significant disparity compared to the funding allocated to clean energy projects.
Despite efforts to reduce fossil fuel exposures, the report highlights that the volume of financing directed towards fossil fuels remains six times larger than that allocated to clean energy, which averaged $5 billion annually during the same period.
The report points fingers at a “handful of countries” within the G20, accusing them of obstructing energy transition efforts by prioritizing fossil fuel financing over renewable energy projects. Such deals often occur in developing countries like Mozambique, Papua New Guinea, and Uzbekistan.
The report's scope encompasses the activities of ECAs, development finance institutions (DFIs), and multilateral lenders like the World Bank and the European Bank for Reconstruction and Development.
Among the top financiers of fossil fuels from 2020 to 2022 were Canada, Japan, and Korea, collectively supplying nearly $28 billion to heavy-emitting industries, primarily through their state ECAs. Canada, for instance, approved $10.9 billion in fossil fuel financing, mainly driven by the broad mandate of its ECA, Export Development Canada (EDC), which permits domestic funding of oil and gas projects.
Additional research highlighting the investment trends of ECAs can be found in the World Energy Investment 2023 analysis by the International Energy Agency (IEA). It provides a comprehensive overview of global energy investments, comparing clean energy and fossil fuel funding from 2015 to 2023.
While ECAs bear the brunt of criticism, the report also highlights the significant contributions of DFIs and multilateral development banks (MDBs) to fossil fuel development during the same period.
The report underscores the substantial influence of public finance in shaping energy projects, given its provision of preferential market rates for loans, grants, equity purchases, and guarantees to borrowers. Without affordable financing packages, backers of large-scale energy projects may opt against their development.
Efforts to curb fossil fuel financing have been ongoing, with the European Union and several G20 governments advocating restrictions on public finance institutions, including ECAs. The EU recently proposed a motion at a meeting of the OECD Arrangement to ban support for oil and gas value chains, aiming to extend a previous ban on coal-fired power projects agreed upon in 2021.
However, experts anticipate opposition from countries like the US, Japan, and Korea to outright prohibiting ECA oil and gas financing. Despite pledges and agreements, countries like the US continue to approve fossil fuel financing, raising concerns about the effectiveness of existing policies and commitments.
The high volumes of ECA financing for fossil fuels are unlikely to change at the OECD Arrangement and national levels without policy reforms. They call for more decisive action to shift financing away from fossil fuels towards sustainable, clean energy alternatives, highlighting the urgent need for global cooperation to address the climate crisis.
