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U.S. Treasury Secretary Janet Yellen attends an inclusive Eurogroup Ministers meeting in the Europa building on July 12, 2021 in Brussels, Belgium. (Photo: Thierry Monasse/Getty Images)

'Deeply Concerning': Biden Treasury Guidance Fails to End US Support for Fossil Fuels Abroad

"The United States can't be a credible climate leader at COP 26 while using public money on fossil fuels—climate leaders don't support new gas projects."

Jessica Corbett

Climate campaigners on Monday expressed disappointment with a new U.S. Department of the Treasury guidance on fossil fuels that President Joe Biden called for in a January executive order.

Biden's Executive Order on Tackling the Climate Crisis at Home and Abroad (E.O. 14008) directed Treasury Secretary Janet Yellen to "develop a strategy for how the voice and vote of the United States can be used in international financial institutions, including the World Bank Group and the International Monetary Fund, to promote financing programs, economic stimulus packages, and debt relief initiatives that are aligned with and support the goals of the Paris agreement."

Yellen said in a statement Monday that with the department's new guidance (pdf) for multilateral development banks (MDBs), "the United States takes bold, proactive steps to address the climate crisis by working with our international partners to establish a clear path to end… support for fossil fuels except in exceptional circumstances while helping developing countries build a strong and sustainable future."

Progressive U.S. advocacy groups were far more critical, pointing to scientists' warnings about the necessity of keeping fossil fuels in the ground to meet the 2015 Paris climate agreement's temperature goals and prevent climate catastrophe.

"While the guidance introduces novel, broad-based restrictions on U.S. support for fossil fuel projects at the MDBs, it pays a lot of lip service, but has little teeth," said Luisa Galvao, international policy campaigner at Friends of the Earth (FOE) U.S., in a statement.

An analysis (pdf) authored by Galvao points out that the guidance "allows for continued U.S. support for midstream (e.g. transportation) and downstream (e.g. power plants) gas investments" in certain countries and "could also conceivably allow for continued U.S. support for gas exports, which is mostly in the form of" liquefied natural gas (LNG).

An official FAQ for the guidance "refers to the possibility of gas serving as a transition fuel away from coal in market access countries, despite the science," Galvao highlights, acknowledging how gas impacts the planet.

Bronwen Tucker, research analyst at Oil Change International, said in a statement Monday that "the Biden administration had a clear opportunity to take a stand against financing for fossil fuels at MDBs, but it is in danger of badly missing the mark."

"Any credible analysis of the clean alternatives, development impacts, and Paris agreement alignment the guidance says it will test for would find that new gas projects should not be financed," Tucker continued. "The U.S. has a large sway at the MDBs, and so it's critical that President Biden and Secretary Yellen add clear and strict details to their proposed gas finance conditions immediately."

"Otherwise, up to 40% of the total fossil fuel finance from the MDBs where the U.S. is a member could continue," she added. "That's $1.6 billion per year for gas pipelines, power plants, and LNG terminals that the climate and frontline communities can't afford."

"The Treasury guidance leaves loopholes for continued fossil fuel financing that are so big, you can drive an LNG ship through them."
—Luisa Galvao, FOE U.S.

The FOE analysis also notes that the guidance "will allow U.S. support for some carbon capture utilization and storage," and it "calls for MDBs to accelerate coal decommissioning around the world, but fails to lay out clear principles to avoid new risks and harms that could arise from this process."

"While the guidance calls on the U.S. to oppose policy-based operations when policy reforms are targeted towards or are likely to expand fossil fuels," the FOE document says, "it does not provide details on how this screening will be done."

"Another significant loophole, the guidance stipulates that the U.S. will determine its voting position on financial intermediary (FI) investments based on how likely FIs are to use MDB finance towards fossil fuels," Galvao continues. "However, the lack of disclosure of FI subprojects and investments at MDBs remains a key issue."

FOE further notes that "missing from this guidance is how the U.S. will use its 'voice and vote' in the International Monetary Fund (IMF) to ensure its activities are aligned with the Paris agreement, as Treasury was instructed to do" in Biden's January order.

As Galvao put it in her Monday statement: "The Treasury guidance leaves loopholes for continued fossil fuel financing that are so big, you can drive an LNG ship through them."

"Continued support for fossil fuel expansion in developing countries," she warned, "will subject the world's most vulnerable communities to displacement, illness, and livelihood loss, and developing economies to the risks and injustice of a delayed transition to clean energy."

Oil Change International senior campaigner Collin Rees said that "President Biden and Secretary Yellen's refusal to oppose public finance for all fossil fuels is deeply concerning."

"Even one penny of public money going to deadly fossil gas projects is unacceptable in the midst of our climate emergency," he declared, "and the new U.S. guidance is less ambitious than similar United Kingdom and European Investment Bank policies."

Noting that "this guidance could saddle the lowest-income countries with out-of-date energy and lead to frontline communities continuing to face deadly impacts from gas projects," Rees argued that "instead of doubling down on gas, Biden and Yellen should focus on ensuring adequate U.S. and MDB support to pursue a just transition to renewable energy in these countries."

Monday's announcement, which comes as the Biden administration faces pressure from civil society groups and U.S. lawmakers to enact bold climate finance policies, "is proof that the era of public finance for fossil fuels is coming to a close, but gas continues to be a deadly sticking point," Rees said.

Looking ahead to a United Nations summit for Paris agreement parties set to kick off in Scotland on October 31, he added that "the United States can't be a credible climate leader at COP 26 while using public money on fossil fuels—climate leaders don't support new gas projects."

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