Wed, Jul 17 2024 17 July, 2024

Norway, Australia join CETP to end public fossil fuel finance

Australia and Norway announced at the COP28 summit earlier this month that they were joining the Clean Energy Transition Partnership (CETP), but concerns over signatories’ missing targets remain.

The entrance to the venue of COP28 in Dubai, in December 2023 (Photo credit: Sophie Davies/Gas Outlook)

Prominent oil and gas producing countries including Australia and Norway have joined an agreement to end public financing of international fossil fuels investments, with the step seen as a major boost to the deal which could shift $19 billion per year in funding towards clean energy.

The CETP also known as the Glasgow Statement, is an international effort aimed at ending public financing of fossil fuels which was launched by the UK at COP26 in 2021. It has so far been joined by over 40 signatories including the UK, the U.S., Germany, France and Italy as well as organisations such as the European Investment Bank (EIB).

Specifically, signatories agreed at COP28 to “end new direct public support for the international unabated fossil fuel energy sector within one year of signing this statement, except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement.”

The CETP includes any government or majority government-owned financial institutions that provide finance for energy projects abroad, so beyond Export Finance Australia, this covers public superannuation funds like AustralianSuper, Claire O’Manique, a public finance analyst at Oil Change International explained to Gas Outlook.

It also covers signatories’ “approach on the boards of multilateral development banks” and to “multilateral negotiations in international bodies, in particular in the OECD.”

“This is notable given Australia has historically played an influential blocking role in these fora,” she said.

Public finance covers an estimated 10-25% of fossil fuel financing, and plays a key role in fossil fuel expansion, being involved in some 82% of new LNG export terminal capacity built in the last decade accounting for at least $78 billion funding, she said.

“It flows especially to large fossil fuel infrastructure projects that are hard to finance privately and that enable the rest of the industry to grow.”

“Currently, international public finance remains skewed towards support for fossil fuel projects, providing almost twice as much than for critically-needed renewable energy solutions,” she added.

According to an Oil Change International report, if signatories’ development finance institutions, export credit agencies, and government departments fully redirect their international fossil fuel funding, this could result in $19.4  billion a year being redirected towards clean energy.

“Of the 16 high-income signatories, eight have delivered policies that are aligned or nearly align with the Glasgow pledge, which are already shifting an estimated $5.7 billion out of fossils each year,” O’Manique said.

“Aside from those that have met their commitment, a further six signatories have new policies that restrict fossil fuel support but do have loopholes, which must be addressed.”

Eksfin, the Norwegian export credit agency, provided an estimated $1 billion financing alone to fossil fuels from July 2021 to June 2023, according to Oil Change International.

“As one of the world’s largest carbon emissions exporters, Norway should play a pivotal role in the shift from fossil fuels to renewable energy. Hopefully, this is the first of many climate commitments from Norway aimed at speeding up the green transition,” Dina Rui, public finance programme lead, at the Nordic Center for Sustainable Finance said.

U.S. among laggards

However, despite the pledges, several countries have not kept their promise to end international public financing of fossil fuels, including the U.S., Italy and Germany.

The U.S. has yet to publish its policy to respond to the CETP and the US Export-Import Bank continues to finance fossil fuels “undermining President Biden’s multiple pledges to end this finance,” O’Manique said.

Meanwhile, Italy and Germany’s policies contain major loopholes that will allow a significant amount of fossil finance to continue.

“While the pledge is similar to other commitments made at COP28” and “there are no penalties on signatories who violate it, civil society continues to hold them accountable to their commitments,” she added.

Governments that continue to fund fossil fuels also face legal implications.

According to a legal opinion commissioned by Oil Change International, States must meet the goals and obligations of Climate Agreements, particularly those relating to finance.

“Thus, the continued financing of fossil fuel-related projects or activities must be legally assessed in a specific context characterised by the climate emergency, and the decreasing carbon budget,” she said.

The commitment to end public finance to fossil fuels also appears at odds with domestic policies among signatories supporting new oil and gas exploration, such as the UK’s recent announcement that it will hold annual licensing rounds to boost its North Sea oil and gas production.

Norway’s Prime Minister, Jonas Gahr Støre was reported as saying that issuing new oil and gas licences is not in contrast with the country’s climate commitments.