12 june 2020

UK considers ending financial support for fossil fuels overseas

Britain has spent £3.5bn of public funds on polluting projects since signing Paris accord

Jillian Ambrose, The Guafdian
Published on Fri 12 Jun 2020

The UK government is considering steps to end its ongoing financial support for fossil fuels overseas after using £3.5bn of public funds to support polluting projects since signing the Paris climate agreement.

Senior civil servants are understood to be planning a new climate strategy that would phase out financial support for oil and gas infrastructure in developing countries ahead of the UN’s Cop26 international climate talks next year.

The talks come amid growing outcry from MPs and campaign groups over the government’s continuing financial support for fossil fuel projects in Africa and south-ease Asia through its foreign finance institutions.

Separate investigations by campaigners, to be published this week, reveal that the government has offered billions of pounds-worth of overseas fossil fuel financing since the Paris climate accord was agreed in 2016, and forged close links with the fossil fuel industry through a series of hospitality events and gifts.

UK Export Finance (UKEF), a government credit agency, has offered loans, guarantees and insurance worth at least £3bn to UK companies involved in foreign fossil fuel projects since the Paris climate agreement, according to figures unearthed by Global Justice Now.

The campaign group found that the government’s development bank, CDC Group, has directly invested at least £300m in high-emissions projects in Africa and south Asia, including fossil fuel power plants and cement-making.

CDC’s indirect investments include £34.5m for the African Infrastructure Investment Fund III, which has invested some of this money in four different fossil fuel projects, according to Global Justice.

Daniel Willis, a climate campaigner with Global Justice, said the financial support offered by the financial institutions and other aid since the Paris agreement in 2016 has totalled £3.5bn.

“For the government to show real climate leadership ahead of Cop26 and support a global green recovery from Covid-19, it needs to end these highly damaging investments,” he said.

A separate investigation by Global Witness has found that 96% of the gifts and hospitality accepted by UKEF in the past 20 years related to the energy sector were paid for by major fossil fuel companies, including Saudi Arabia’s state-owned oil business Saudi Aramco and Gazprom, which is owned by the Russian government.

The gifts include Nokia mobile phones from Sabic, a petrochemical company owned by Saudi Aramco, and trips worth several thousand pounds to visit a gas project in Russia that was paid for by Gazprom.

A modest 4% of UKEF’s energy industry hospitality events were linked to renewable energy companies, according to the report.

Adam McGibbon, a senior campaigner at Global Witness, said UKEF’s hospitality records “underline just how in bed they are with some of the world’s biggest polluters”.

“Hospitality gifts are more than just pleasantries; they are a tried and tested technique for big business to maintain influence over policy. When the UK-hosted Cop26 finally happens in 2021, ending the hypocrisy of exporting pollution abroad will be a key test of just how serious this government is about fighting climate change,” he said.

A UKEF spokesperson said the agency supported UK exports “in all sectors”, and was “proactively developing the breadth of our support for renewable sectors”. UKEF has allocated £2bn to its direct lending facility for clean growth and renewable energy projects, the agency added.

Both UKEF and CDC have increased the proportion of renewable energy within their financial support for energy projects. A CDC spokesman said the development bank will reveal its new climate strategy later this year, which will prioritise investment in renewable energy over fossil fuels.

Government officials are understood to be wary of calling for fossil fuel financing to be ruled out entirely at the expense of helping developing countries achieve other development goals, including access to reliable electricity for almost 1 billion people for the first time.

This stance would likely draw criticism from environmentalists and MPs who believe renewable energy could help power developing economies.

The Labour party leader, Keir Starmer, before his election as leader of the opposition, said earlier this year that “rather than funding fossil fuel projects abroad, we should use our development budget and technical expertise to help other countries skip our bad habits and grow their own low-carbon economies on renewables instead”.

A spokesperson for the Department of International Development said the UK government had agreed that “all future aid spend will be aligned with the Paris agreement” and last year doubled its investment to help developing countries tackle climate change.

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