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2021 Must Mark the End of International Support to Coal, Oil, and Gas

Urgent action is needed to ensure 2021 marks the end of international public finance to fossil fuels. This would free up significant support for clean energy and a just and equitable transition worldwide.

Energy scenarios, including from the International Energy Agency, stress that drastic emission cuts are needed now to limit global warming to 1.5°C. To respect this temperature limit, governments and companies must stop investing in new coal mines and oil and gas fields from 2021 onwards and simultaneously wind down existing fossil fuel production. Instead, governments are propping up fossil fuels with huge amounts of public money. G20 members still provide at least three times as much public finance for fossil fuels (USD 77 billion) as for clean energy (USD 28 billion) every year.

But momentum is growing to end overseas finance to not only coal but also oil and gas. In March 2021, the United Kingdom was the first major economy to adopt a comprehensive approach by announcing an immediate end to trade and development support for coal, oil, and gas. Several development banks, like the European Investment Bank, the Dutch development bank FMO, and the French Development Agency, have also adopted robust restrictions to their oil and gas financing. These governments and institutions are leading the way in aligning finance with the Paris Agreement. They have created examples that should be followed by others.

Any new support to oil and gas risks locking in outdated energy infrastructure in places that need investments in clean energy the most. In fact, many fossil fuel infrastructure assets may soon become stranded, and heavily centralized power generation, notably from gas, is not needed to deliver on energy access and development objectives in the Global South. At the same time, clean alternatives such as wind and solar are becoming increasingly cost competitive and respond effectively to clean cooking and electricity needs in the Global South.

The window of opportunity to make a 1.5°C future possible is rapidly closing. Delayed action will only bring more violent and devastating impacts to the climate crisis. Ahead of the United Nations Framework Convention on Climate Change’s 26th Conference of the Parties (COP 26) in Glasgow, governments and public finance institutions—national and regional development banks as well as export credit agencies—have a clear task to promote a climate-safe, equitable transition toward clean energy. We call them on to:

• Immediately rule out any new international public finance to coal, oil, and gas projects across the entire value chain (extraction, transport, distribution, and power generation), including through export credit agencies.
• Avoid loopholes that allow indirect public finance for fossil fuels to continue through associated infrastructure, technical assistance, or financial intermediaries.
• Ramp up bilateral and multilateral climate finance to deploy renewable energy at scale, grant universal and affordable access to energy, and enable an equitable and just transition for affected communities and workers in the Global South.
• Prioritize support to low-income countries that face the largest energy access and transition challenges, including by acting on debt relief and increasing grant-based finance.
• Ensure a whole-of-government approach to ending public finance for fossil fuels as part of efforts to align public finance with the Paris goals and improve transparency and reporting standards.

Progressive governments and public finance institutions should launch a joint statement with the objective of leveraging these principles by COP 261 and ensure that others follow suit. As the COP 26 host, we call on the United Kingdom to show leadership to deliver on this agenda and keep the promise to internationalize its first-mover commitment on shifting overseas finance from fossil fuels to clean energy.