New Report: International Public Finance for Fossil Fuels Dropped in 2021, but a Rebound Is Likely Unless Key Governments Deliver on Pledges

A report released today by Oil Change International and Friends of the Earth U.S. reveals that between 2019 and 2021 the G20 countries and multilateral development banks (MDBs) provided at least USD 55 billion per year in international public finance for fossil fuels. This is a 35% drop compared to previous years (2016-2018), but still, almost twice the support provided for clean energy, which averaged only $29 billion per year.

However, report authors warned that international public finance flows are often volatile and that to be aligned with climate goals, public support for fossil fuels needs to end entirely. To continue this trend of decreasing fossil support, key G20 governments will need to meet a joint pledge made by 39 countries and institutions at last year's global climate conference to end direct international public finance support for fossil fuels by the end of 2022 and instead fully prioritize public finance for clean energy.

Today's report highlights that G20 countries Canada, United States, Germany, and Italy continue to be large fossil financiers, while lagging behind on publishing their policies to deliver on this Glasgow Statement. However, a growing number of their peers have reaffirmed clean energy is the path to affordable energy, not fossil gas. With one week left until the global climate conference in Egypt and two months left until the end of 2022, policies released by UK, EIB, Denmark, France, Finland, and Sweden completely ban support for gas extraction, processing, and key infrastructure like LNG and pipelines. They place varying restrictions on support for gas power.

The report also finds that if all G20 countries and MDBs fully shift their international fossil support to clean energy it would nearly triple their current annual average for clean energy to $85 billion. To reach this total, other large G20 providers of public finance, including Japan, South Korea, and China, will need to join their peers as Glasgow Statement signatories and meet the new commitment.

Other key findings include:

• Japan, Canada, Korea, and China again provided the most direct public finance for fossil fuels between 2019 and 2021, with an annual average of $10.6 billion; $8.5 billion; $7.3 billion, and $6.7 billion respectively. These countries have remained in the top position for the entire 2013-2021 dataset.
• 53% of international public finance for fossil fuels flowed to gas projects. This $30 billion a year is larger than what any other energy type received from 2019 to 2021, and greater than all renewable energy finance combined.
• Most G20 and MDB international fossil fuel finance flowed to relatively wealthy countries. Mozambique was the only low-income country in the top 15 recipients, and 12 were high or upper-middle income countries.
• An estimated $8.2 billion or 27% of the 2021 drop in fossil fuel finance is due to new policies. The decrease in fossil support for 2019 to 2021 was driven by a dramatic drop in 2021. However, early 2022 data for Canada and a decrease in data availability for South Korea suggest that 53% of the decrease will be temporary unless new fossil fuel restriction policies are adopted. The bright spot is that 27% of the drop is traceable to new fossil-restricting policies from the UK, European Investment Bank, China, OECD, and others coming fully or partially into effect.
• Clean energy finance to African countries has been decreasing, from an annual average of $3.2 billion between 2016 to 2018, down to $2.8 billion annually between 2019-2021. This falls well short of what is needed to meet both energy access and climate imperatives across the continent.

The evidence to end public finance for fossil fuels and rapidly increase international support for clean energy has never been clearer: in the IEA's 1.5degC scenario there are no investments in new fossil fuel production beyond 2021 and there is a rapid phase-out of fossil fuels across the rest of the supply chain. Despite calls for new gas investments to reduce reliance on fossil fuels, the head of the IEA has said that the solution to the energy security and price crisis is a faster transition from fossil fuels to clean energy requiring public finance to shift out of dirty, unreliable and unaffordable oil and gas and into reliable, affordable and clean energy and energy efficiency.

Public finance for fossil fuels undermines the effectiveness of climate finance, which is still not delivered at either the scale promised by rich countries ($100 billion a year in additional finance from 2020) or needed. It also adds to the growing costs of loss and damage finance and sovereign debt cancellation the UN Secretary General and UNCTAD among others are urgently calling high-income countries to pay their fair share for.

Using data from Oil Change International's Public Finance for Energy Database (energyfinance.org), a database covering over 15,000 public finance for energy transactions, totalling over $2 trillion, the report analyzes finance provided by the G20 export credit agencies (ECAs), G20 development finance institutions (DFIs), as well as the major multilateral development banks (MDBs). It does not cover direct domestic subsidies for the industry through tax and fiscal subsidies or public finance from domestically focused institutions.

Quotes:

Claire O'Manique, a lead author and Public Finance Analyst at Oil Change International, said: "International public finance is urgently needed to build a globally just energy transition. But it cannot play this critical role if G20 countries and MDBs continue to funnel $55 billion annually into climate-wrecking fossil fuel projects. The climate movement will continue to hold wealthy countries accountable for their role in funding the climate crisis, and demand they move first and fastest to phase out their fossil fuel production, stop funding fossils, and pay their fair share of a globally just energy transition. It is well past time that public finance dollars are spent to remedy fossil fuel colonialism by funding real solutions."

Kate DeAngelis, a lead author and International Finance Program Manager at Friends of the Earth United States, said: "Last year many of the world's largest public financiers of overseas fossil fuel projects, including the United States, committed to end all public finance for international fossil fuel projects and shift this money to clean energy. Since then, we have seen some leaders hold firm to those commitments while the United States and others have failed to release their policies on implementing these promises. These institutions for decades have financed fossil fuel projects all over the world that have harmed communities, killed workers and community members, and caused environmental destruction. It is time for this deleterious financing to end."

Anabela Lemos of Justica Ambiental/Friends of the Earth Mozambique said: "This report highlights the immense amount of funding that the world's wealthiest countries continue to pour into fossil fuel projects in Africa to the detriment of Africa's citizens. The current rush for Africa's fossil fuel resources amounts to a perpetuation of extractive modes of colonial exploitation, devastating the continent's agricultural and forest resources and depriving local communities of their livelihoods and sometimes even their lives."

Lidy Nacpil of Asian Peoples' Movement on Debt and Development said: "Public finance continues to support coal and other fossil fuels in Asia despite the current climate emergency. The devastating impacts of the climate crisis is most dramatically and tragically demonstrated by the recent catastrophic flooding that saw a third of Pakistan under water. If governments and multilateral institutions do not end their support for the fossil fuel industry, these tragic events will only become more common and more severe.

Tasneem Essop, Executive Director at CAN International said: "Hard earned taxpayers' money cannot be used by governments to prop up fossil fuel projects domestically or abroad. The G20 countries who together contribute more than 80% of global emissions cannot support this criminal waste of public resources that is driving the climate emergency, exacerbating conflicts, adding to the cost of living crisis and increasing poverty, sickness and climate disasters. Public finance - the people's money - must be used to help people transition to clean and sustainable energy systems and towards a climate safe future for all."

May Boeve, Executive Director at 350.org said: "It's time for governments to show what real climate leadership looks like and end international public finance for fossil fuels. If we want to keep global heating below 1.5 degrees, a managed decline of fossil fuel production is the only way, and the only language these profit-mongering fossil fuel companies understand is money. We need an efficient use of energy alongside a massive roll-out of renewables. It's time to turn off the money pipeline to dirty fossil fuels and invest in all of our futures."

Aki Kachi, Senior Climate Finance Policy Analyst at NewClimate Institute said: "Especially considering the current energy crisis in Germany, there is a clear need to support other countries to avoid German mistakes that have exacerbated its vulnerability. That means building energy security through renewables and not future fossil fuel dependency. It is imperative that Germany's implementation of the Glasgow Statement is ambitious instead of seeking to find loopholes."

Hadi Jatmiko, Head of WALHI's National Campaign Division, said: "International financing from wealthy G20 governments' public finance institutions for energy projects with fossil fuel sources in Indonesia, has contributed greatly to the sinking of coastal villages in Indonesia. Every year, 1 hectare of land is lost along the coastal area of Demak, Central Java Province due to rising sea levels, besides the financing of this climate-destroying project has also destroyed the economic life of fishermen and increased the number of fishermen who died at sea. In 2010 the number of fishermen who died was recorded as 87 people. But in 2020, the number has increased to 251 people. Due to unpredictable weather driven by climate change, fishermen in Indonesia can only go to sea for six months of the year. The rest of the year they have to change professions to become rough coolies or hawkers. On top of this, flash floods, landslides, and seroja storms are becoming more intense and more frequent throughout Indonesia. Stopping financing for climate-destroying projects and fake solutions to the climate crisis cannot be delayed, must be done now unconditionally, shifting financing to clean, equitable, sustainable and decentralized energy projects."