The UK government has announced that it will end direct support for fossil fuel projects overseas ‘with very limited exceptions’. The announcement came at the virtual Climate Ambition Summit, on 12 December, which the UK co-hosted with the UN and France.
More than £20bn of oil and gas exports has been funnelled into overseas energy projects through trade promotion and export finance in the last four years. However, the government has faced much criticism over the allocation of financing, which has favoured fossil fuel projects. The government is set to introduce the financing ban once a consultation has been concluded, but has promised to implement the decision before COP26 next November.
Prime minister Boris Johnson commented: “Our actions as leaders must be driven not by timidity or caution, but by ambition on a truly grand scale. By taking ambitious and decisive action today, we will create the jobs of the future, drive the recovery from coronavirus and protect our … planet for generations to come.”
The decision builds on the recent enhanced Nationally Determined Contribution from the UK, which will see the UK aim to reduce emissions by 68% by 2030.
While the UK is pushing for more ambitious commitments, green groups have been calling for the government to get its financing decisions in alignment with the net-zero target for 2050.
For example the government's direct lending facility, UK Export Finance, could support 42 000 jobs in the renewables sector each year by 2035, up from 2000 today. The UK had announced in March that UKEF would receive an additional £2bn to finance clean energy projects overseas. Nonetheless the government has suffered strong criticism over UKEF’s allocations.
Criticism arose when the Environmental Audit Committee (EAC) published the results of its enquiry into the organisation’s global environmental impact. The findings showed that 96% of the £2.6bn spent by the body to support energy exports abroad between 2013 and 2018 was funnelled into fossil fuel projects, mostly in developing nations.
Since the EAC published these findings, several think tanks and journalists have undertaken investigations to uncover further information. Global Witness this year published a report stating that UKEF’s recent financial packages include a £734m support fund for the Duqm oil refinery project in Oman, financing worth £248m for oil exploration in Brazil, £171m for an oil refinery in Kuwait, and several hundred million for power projects in Iraq. Similarly, The Guardian documented leaked UKEF plans to invest up to £1bn in major fracking projects in Argentina. Carbon Tracker has also summarised the ways in which UKEF’s activities are “incompatible” with the Paris Agreement’s 1.5C trajectory.
Regarding this latest decision, Dr Doug Parr, policy director at Greenpeace UK commented: “The UK government could never seriously claim the mantle of climate leadership whilst financing climate wrecking projects across the world. So calling time on financing overseas fossil fuel projects really is a welcome move and an important show of times changing. With an end to financing oil and gas projects overseas we must now see efforts moved rapidly towards supporting nations make the switch to renewable energy.
And in ending support to fossil fuel extraction abroad, the government must now build on its commitments to take further global leadership by beginning a managed transition away from oil and gas production in the UK and North Sea, whilst supporting workers affected to make the switch to good green jobs.”