SINGAPORE – More than twice as much money went to bankroll oil, gas and coal projects than for renewable energy between 2018 and 2020, according to an analysis of public finance released on Thursday by two environmental groups.
Most of that money also went to projects in wealthier countries rather than to develop the energy needs of poorer nations, it found.
The Group of 20 (G-20) countries financed at least US$63 billion (S$85 billion) per year for oil, gas, and coal projects through their development finance institutions, export credit agencies and the multilateral development banks (MDBs) compared with about US$26 billion per year for renewables, the report by non-governmental organisations Friends of the Earth US and Oil Change International said.
The report was published just ahead of this weekend’s G-20 leaders’ summit in Rome and the start of the COP26 United Nations climate talks in Glasgow on Sunday (Oct 31).
The G-20, which includes the United States, Russia, China, India and Indonesia, is responsible for about 80 per cent of humanity’s annual carbon dioxide (CO2) emissions that are heating up the planet. Burning fossil fuels is by far the single largest source of CO2 and pressure is growing on the G-20 to halt the expansion of fossil fuel use to try to limit the impact of global warming.
In a strong warning earlier this year, the International Energy Agency said development of new oil and gas fields must stop this year and no new coal-fired power stations built if the world is to stay within a relatively safe 1.5 deg C of warming since pre-industrial times and meet the goal of net zero emissions by 2050.
Yet continued direct government support undermines global climate efforts, the United Nations and environmental groups say and calls have been growing for the big MDBs, such as the Asian Development Bank and World Bank, to end all support for fossil fuel projects.
Public finance is important because it helps reduce the financial risks for specific projects. But ultimately it undermines efforts to ramp up investment in cleaner energy because governments typically also subsidise fossil fuels through myriad other means such as tax breaks.
“Public finance has an outsized impact because it ‘de-risks’ projects for other investors,” said Ms Bronwen Tucker, public finance campaign manager at Oil Change International. The US$188 billion of total funding from 2018 to 2020 made a much larger amount of private investment in new oil, gas, and coal possible, she said.
“As the fossil fuel industry faces unprecedented global headwinds these preferential loans, grants, and guarantees mean that projects that otherwise would not see the light of day are getting to the finish line,” she added.
The report, “Past Last Call: G20 public finance institutions are still bankrolling fossil fuels”, found that the majority of the finance is going to governments and corporations for electricity production, refining and transportation, with 51 per cent going towards gas projects.
National export credit agencies, which help companies get contracts for energy-related projects abroad, provided 11 times as much support for fossil fuels than clean energy with US$40 billion per year for fossil fuels versus US$3.5 billion for clean energy.
About 70 per cent of the finance was in the form of loans and much of that flowed to wealthier countries, the authors found, rather than to develop the energy needs of poorer nations.
Canada, Japan, South Korea, and China provided the most public finance for fossil fuels, together accounting for nearly half of money from G-20 governments and development banks.
Public finance, though, dwarfs the total value of subsidies for fossil fuels.
More on this topic
A report by BloombergNEF and Bloomberg Philanthropies earlier this year found that G-20 countries have provided more than US$3.3 trillion in subsidies for fossil fuels between 2015 and 2019, or just over US$600 billion a year. This is despite the landmark Paris climate agreement being sealed in 2015 in which nations pledged to limit global warming — and ultimately fossil fuel use.
Government supports fossil fuels in many ways. In addition to tax breaks, there are production subsidies in national budgets and subsidies to lower electricity costs for consumers.
The Bloomberg report showed that while G-20 governments say they recognise the urgency of the climate crisis, continued large-scale support for fossil fuel companies, their projects and products suggests a very different picture.
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