Today (04 November) at COP26, more than 20 countries and institutions, including the United States, Canada, Mali and Costa Rica, launched a joint statement committing to end direct international public finance for unabated coal, oil and gas by the end of 2022 and prioritise clean energy finance.
After a wave of commitments to end international coal finance this year, this is the first international political commitment that also addresses public finance for oil and gas.
If implemented effectively, this initiative could directly shift more than $15 billion a year of preferential, government-backed support out of fossil fuels and into clean energy — and much more if initial signatories are successful in convincing their peers to join.
Shifting public finance for energy out of all fossil fuels and into clean energy is an urgent task. The International Energy Agency (IEA) says that to limit global warming to 1.5°C, 2021 needs to mark the end of new investments in not just coal, but also new oil and gas supply.
Yet new research by Oil Change International and Friends of the Earth US shows that between 2018 and 2020, G20 countries’ international public finance institutions and Multilateral Development Banks (MDBs) still backed at least $188 billion in fossil fuels abroad.
This was 2.5 times more than G20 and MDB support for renewable energy, which averaged $26 billion per year.
Public finance for clean energy has stagnated since 2014, despite the need for it to grow exponentially to ensure universal access to clean energy and to stay below the 1.5°C limit.
The IEA finds that annual public and private investments into clean energy should reach nearly $4 trillion by 2030.
The joint statement unites some of the largest historic providers of public finance for fossil fuels — Canada, the United States, the UK and the European Investment Bank (EIB). However, other large financiers have yet to join them.
Laggards include Japan ($10.9 bn/yr), Korea ($10.6 bn/yr) and China ($7.6 bn/yr), which are the largest providers of international public fossil fuel finance in the G20 and together account for 46% of G20 and MDB finance for fossil fuels.
Italy ($2.8 bn/yr) and Spain ($1.9 bn/yr), some of the biggest EU fossil fuel financiers, are also missing.
But campaigners hope that the joint statement can help raise pressure on these countries that are lagging behind, similar to the momentum in place on ending coal finance.
On the same morning of the statement launch, activists took to the streets of Glasgow in inflatable Pikachus to urge Japan to stop funding fossil fuels.
The EIB has signed the statement and the civil society coalition, Big Shift Global, is urging the other MDBs also to get on board, including the World Bank Group, the African Development Bank, the European Bank for Reconstruction and Development, the Asian Development Bank and the Asian Infrastructure Investment Bank.
Collectively the MDBs still provided at least $6.3 billion each year to fossil fuel projects between 2018 and 2020.
Earlier this week the MDBs provided an update on their joint Paris alignment efforts in which they confirmed their framework will have no exclusions for oil and gas projects.
The combination of big polluters and low-income countries signing the statement is positive, and challenges the assumption that developing country signatories want or need investments in fossil fuels to achieve their development objectives.
Alongside fulfilling their stated goal of prioritising support ‘fully towards the clean energy transition’, campaigners remind signatories that the ability of this initiative to support a just and 1.5°C-aligned global energy transition will also hinge on avoiding loopholes allowing for a dash for gas, acting on debt relief, increasing grant-based climate finance and securing a growing number of signatories to the statement.