By Wallace Mawire
Countries could shift almost USD 28 billion/year from fossil fuels to jump-start the energy transition if they follow through on their pledges.
The COP 26 Statement on International Public Support for the Clean Energy Transition,the Glasgow Statement requires signatories to end new direct overseas support for fossil fuels by the end of 2022 and fully prioritize their international public finance for a clean and just energy transition. But halfway through the year, only a handful of signatories have published new or updated policies that turn these pledges into action, new research shows.
In addition, G7 leaders weakened a near-identical commitment adopted at the G7 ministerial in May, creating uncertainty for the Glasgow Statement initiative. A new report from the International Institute for Sustainable Development (IISD), Oil Change International (OCI), and Tearfund warns of two major threats to implementing the Glasgow Statement on time.
Some signatories have signalled their intention to allow continued large-scale overseas support to gas, despite their pledge. This risk has increased since the war in Ukraine as countries look to replace the Russian fossil fuel supply. Yet, this support is incompatible with the agreed 1.5°C global warming limit, and research shows that clean alternatives are better suited to serve energy security and clean development pathways.
All international public finance institutions have yet to scale up substantially their clean energy support and target strategic subsectors, such as energy access, to catalyze a globally just energy transition and support energy security in a time of crisis.
Successful implementation could mean a transformative boost for the energy transition. If signatories’ development finance institutions, export credit agencies, and government departments fully redirect their USD 28 billion a year in overseas public finance for oil and gas, they would more than double their international clean energy finance, from USD 18 billion a year to USD 46 billion, the report finds.
By delivering on their commitments, the signatory countries also have an opportunity to encourage the G7 to follow through and avoid new gas investments.
With the G7 on board, the potential impact would be even greater: a total of USD 39 billion in public finance could shift from fossil fuels to clean energy.
Laurie van der Burg, Global Public Finance Co-Manager at OCI, said: “Shifting public finance out of fossil fuels and into clean energy is critical for energy security, climate, and development, and the Glasgow Statement has the potential to be truly transformative. This week’s G7 leaders’ statement that weakened a near-identical pledge cannot be allowed to derail signatories’ efforts to shift public finance out of fossil fuels and into clean energy. It is critical that governments stop Russian fossil fuel imports, but investing in new gas infrastructure is not a viable strategy—these projects take years to build and will not support energy security needs. Renewable energy and efficiency can be deployed faster, better serve development and energy access needs, and do not come with the stranded assets and financial stability risks of fossil gas. In today’s turbulent context, countries must stand firm in their commitment, stop dirty finance, shift it to clean, and pay their fair share of climate finance.”
Paul Cook, Head of Advocacy at Tearfund, said: “For people in poverty around the world, how this USD 28 billion in energy finance is spent could mean the difference between life and death. Either the money goes to dirty fossil fuels and contributes to more drought and flooding, or it ushers in a clean energy transition and a safer, brighter future. Communities on the frontline of the climate crisis can’t afford any more delays.”
The tools to implement the Glasgow commitments are already available, the report highlights. The best-in-class policies adopted by Denmark, the United Kingdom, Swedfund (Sweden), the Agence Française de Développement (France), and Financierings-Maatschappij voor Ontwikkelingslanden (the Netherlands) can serve as examples for other signatories as they undertake efforts to align their fossil fuel exclusion policies with the promises made in Glasgow.”
Lucile Dufour, Senior Policy Advisor at IISD, said: “Today’s energy security and price crises only intensify the need for more secure and sustainable energy systems built on renewables and energy efficiency. Acting on the Glasgow Statement would kick that transition into high gear. COP 27 will be an accountability test for signatories: they should come prepared with new international public finance plans in line with the 1.5°C warming limit.”