The News
Ten of the richest countries in the Organisation for Economic Co-operation and Development began meeting in Paris on Monday to decide the future of publicly financed oil and gas projects, with the US’ vote this week set to determine the fate of such investments.
If passed, the “gentleman’s agreement” would compel 10 members of the 38-country group — Australia, Canada, Japan, Korea, New Zealand, Norway, Switzerland, Turkey, the UK and the US — to stop pouring billions of taxpayer dollars into new fossil fuel investments, similar to a 2021 OECD memorandum on coal projects.
US President Joe Biden has previously signaled his support for such initiatives, but the country has continued to finance projects including an oil refinery in Indonesia and a loan guarantee for a drilling project in Bahrain.
SIGNALS
US continues to fund oil and gas projects overseas, despite climate pledge
The US has continued to fund international fossil fuel projects, despite a 2021 pledge to phase out such funding and align its public finance institutions with the Paris Agreement’s climate goals. But funding for the US Export-Import Bank (Ex-Im), the US export credit agency which finances many such projects, is the responsibility of Congress, and Republicans are hesitant to cut off finance for oil and gas, the Financial Times reported. Ex-Im’s charter also prohibits “discrimination” against any particular sector, and changing this clause requires Congressional action — currently unlikely because of the Republicans’ majority in the House of Representatives.
US financing of fossil fuels leads private investors to follow suit
The US government’s financing of fossil fuel projects abroad has a major impact on the global energy industry, because it signals to private investors that it is safe to do the same, Nina Pušić of advocacy group Oil Change International said in an interview with Living On Earth, an independent media program. “As soon as a project gets funding from the U.S. government, it makes it a lot less likely to fail,” Pušić said, leading private banks and financiers to follow suit. This has the effect of making fossil fuel projects more viable than renewable energy investments around the world.
Big banks still pouring trillions into oil and gas
Big banks such as JPMorgan Chase and Bank of America have poured $6.9 trillion into fossil fuel projects since the 2015 Paris Agreement, according to the May Banking on Climate Chaos report by the Rainforest Action Network, an environmental group. Some, including Bank of America, have rolled back previous exclusions, funding projects in sectors such as Arctic drilling and coal-fired power plants. One researcher noted that while banks including JPMorgan Chase have strengthened their climate commitments since 2015, “the practices and policies that they’re implementing do not move fast enough to recognize the urgency of this moment.”