When 450 global development banks with their hands on US$2 trillion in public funds meet in November to chart their contribution to the pandemic recovery, they must declare an end to international financing for fossil fuels, three leading finance and development advocates argue in a post this week for the Thomson Reuters Foundation.
The two countries that spearheaded the Powering Past Coal Alliance, Canada and the United Kingdom, figure prominently in the analysis—and not in the way they would presumably want to.
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“Overall, public finance institutions still present an obstacle to the energy transition,” write Sandrine Dixson-Dècleve, co-president of the Club of Rome, Chadian Indigenous leader Hindou Oumarou Ibrahim, and Green Member of the European Parliament Bas Eickhout. “The G20 governments provide over $77 billion in public finance for fossil fuel projects each year through institutions like public development banks. Despite the mounting urgency of the climate crisis, this number has remained virtually unchanged since the Paris Agreement was adopted and is three times the amount they provide for renewable energy.”
While “some argue that this government-backed fossil fuel finance is necessary to spur development and access to electricity,” the three authors state, “the data gives the lie to this argument. The largest recipients of support for fossil fuels are not the poorest countries, and where fossil fuel finance does flow to lower-income countries, it typically benefits multinational corporations and wealthy ‘donor’ countries over local populations, often while causing human and Indigenous peoples’ rights violations and displacements, while degrading health and the environment.”
The international response so far to the COVID-19 pandemic is cause for concern, they add. “Canada, the second-largest financier of fossil fuels in the G20 (per capita, it’s the highest), has given government-backed Export Development Canada a major role in the COVID-19 response, through two major financing programs that specifically prioritize the fossil fuel industry, without clarity on a financial ceiling for these programs,” they note. “And while the UK government is allegedly working on a policy to exclude oil and gas from export credit agency financing, the Prime Minister’s office last week agreed to put UKEF money into an LNG terminal in Mozambique, spearheaded by France’s Total. This clearly undermines the UK’s efforts to position itself as a climate leader in the lead-up to COP 26.”
Even if the world “did not face a climate crisis, throwing public money at fossil fuels would be a bad economic bet,” write Dixson-Dècleve, Ibrahim, and Eickhout. But “the way out of our current crisis is not through propping up the old economy,” and “public banks, controlling $2 trillion in public money and driving private investment, have a crucial role to play in leading this transformation.”
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