Biden considers OECD proposal to end export credit agencies’ support for oil, gas

The European Union, United Kingdom, and Canada have proposed to end support for fossil fuels through export credit agencies, and they hope to finalise an agreement at an OECD summit this week. But the position of the U.S. could be pivotal, and with former President Trump set to retake control of the White House in just two months’ time, campaigners are calling on the Biden administration to take action before it’s too late.

An agreement at the OECD would all but close off an important but often overlooked source of financing for the continued expansion of oil and gas production, but ahead of this week’s meeting, the U.S. still had not staked out a position. 

The Biden administration has already taken some important steps in this direction. In his first days in office, President Biden issued an executive order that directed multiple government agencies to form a climate finance plan that would push global financial flows towards climate solutions and away from fossil fuels. He added more teeth to that move in mid-2021 when the U.S. Treasury Department issued guidance for multilateral development banks, which slapped new restrictions on overseas financing for oil and coal projects. The U.S. has also signed onto G7 communiques that support such action.

Nevertheless, that hasn’t cut off U.S. government support for fossil fuel projects around the globe and the Biden administration hasn’t formulated a clear policy on export credit agencies. In particular, the U.S. Export-Import (Ex-Im) Bank, which provides financing for projects abroad that result in increases of U.S. exports, has continued to support oil and gas.

For example, in May 2023, Ex-Im approved $100 million in financing for upgrades at an oil refinery in Indonesia. A few months later, the bank signed off on $90 million in financing for commodity trader Trafigura to buy gas cargoes from Freeport LNG in Texas in order to sell them to Europe. And in March 2024, Ex-Im Bank approved a $500 million loan for Bahrain for development of a gas field.

Ex-Im is also considering applications for many more oil and gas projects, including an LNG export terminal in Mozambique that has set off a violent insurgency, a massive LNG export project in Papua New Guinea, and a gas-fired power plant in Guyana. Since 2023, the agency has approved $2.2 billion in financing for oil, gas, and coal projects, but another $10 billion in financing is under consideration.

The U.S. is not the only country using its export credit agency (ECA) to promote new fossil fuel projects. Taken together, the ECAs of OECD countries provided an average of USD$41 billion to fossil fuel projects between 2018 and 2020, according to Oil Change International.

But that could change if the OECD, made up of 38 countries, approves a proposal put forward by the EU, the UK and Canada, which would rule out financing from export-credit agencies for fossil fuels. The OECD is meeting for several days from November 18-21.

If such a measure is agreed to, it could result in significant reductions for fossil fuel projects around the world, potentially tens of billions of dollars annually, Kate DeAngelis, international finance deputy director at Friends of the Earth, told Gas Outlook.

“Export credit agencies provide a lot of that early financing that’s pivotal for so many projects. And so, if you start to see cracks in that, then it’s definitely going to have ripple effects across the oil and gas industry globally,” she said.

Donald Trump will soon take control of the U.S. government, but if the Biden administration finalises an agreement at the OECD, there is a chance that it could remain in place even after Trump takes office. That is because the ECA restrictions are just one part of a much broader set of agreements that are under consideration at the OECD.

“To pull out of that one piece, without pulling out of the whole thing, would be quite difficult,” DeAngelis said.

She said a similar situation occurred during Trump’s first term, when the OECD had agreed to rule out overseas financing for coal projects. Trump ended up not changing the U.S. position despite his support for the coal industry. Global support for coal from ECAs dropped precipitously.

The Biden administration has very little time left to insulate U.S. policy from the whims of the incoming Trump administration, but Biden also has little left to lose. “Why not force Trump’s hand and have an agreement that will have global implications?” DeAngelis said.

“It would send a pretty massive signal if the world’s richest countries were saying that they’re going to phase out support for the oil and gas industry from their export credit agencies.”

A set of starkly different scenes are unfolding at the same time. The COP29 negotiations in Azerbaijan are ongoing, and while the final outcome remains uncertain, progress and momentum has languished.

Meanwhile, back in the U.S., President Trump has signalled his desired direction on energy and climate policy with a series of selections for personnel to head up agencies with an overt intention to undermine those very agencies. He picked Lee Zeldin to lead the Environmental Protection Agency, who is expected to spearhead an aggressive campaign of environmental deregulation. Trump chose North Dakota Governor Doug Burgum, who said he wants to bring back “energy dominance,” a mantra of Trump’s first term.

And Trump named an oil and gas executive as his new Secretary of Energy. Chris Wright, CEO of Colorado-based Liberty Energy, a provider of fracking services for oil and gas producers, is a full-throated supporter of the industry.

In a 2023 post on LinkedIn, he said: “There is no climate crisis, and we’re not in the midst of an energy transition either.” He is expected to immediately lift the pause on new LNG permits, and redirect the agency’s activities to favour oil and gas, to the detriment of renewable energy.

It is against this backdrop that campaigners want the Biden administration to demonstrate some urgency. There is a chance to push the ball forward at the OECD.

“The Biden Administration has a final opportunity to honor its commitment to end the use of taxpayer dollars for overseas fossil fuel projects and solidify its climate legacy before Donald Trump assumes office,” Nina Pušić, senior export finance climate strategist at Oil Change International, told Gas Outlook. “The world is watching President Biden in his final weeks in office, hopeful that he will seize this moment to deliver meaningful progress for the United States and the global community.”