Study finds leading economies have funded projects related to fossil fuel, worsening global heating
Palma, Mozambique. The US Export-Import Bank is a major funder of a huge gas project in the country. Photograph: John Wessels/AFP/Getty Images
Wealthy nations are breaking their climate commitments by funding a new dash for gas in the global south, according to a study.
A week before the G7 summit begins in Cornwall, the report reveals low and middle-income nations received nearly $16bn a year between 2017 and 2019 to fund projects related to gas, a fossil fuel that worsens global heating.
This was nearly four times more than international public finance for wind or solar projects, raising concerns that poorer nations are being locked into the old fossil fuel economy even though cleaner and increasingly cheap alternatives are available.
Many of these gas projects are likely to become stranded assets before the end of their 30-year terms because the International Energy Agency said last month that no new oil, gas or coal fields should be tapped if the world is to stay within 1.5C of warming above pre-industrial levels.
Leading economies and international financial institutions have promised to help others make the transition away from fossil fuels, but the report from the International Institute for Sustainable Development (IISD) shows many of their funding decisions remain stuck in the past.
Three governments – the US, Japan and China – provided 48% of the public funding for gas in the global south. The World Bank accounted for a further 12%. The authors of the study said this funding was being used to expand markets in Asia and Africa, which would benefit petroleum industries in wealthy nations.
“As countries like Australia and the United States massively expand their liquefied natural gas exports, the public money supporting new gas infrastructure looks more geared to serving powerful interests than helping southern countries meet their needs,” the lead author, Greg Muttitt, said.
The report notes that new gas projects are inconsistent with the Paris climate agreement. According to 1.5C scenarios published by the Intergovernmental Panel on Climate Change, global gas consumption must decline by 55% between 2020 and 2050. The just-published Net-Zero by 2050 report from the International Energy Agency notes there is no need for investment in new fossil fuel supply. More questionable still are new gas power plants, which – often built with a 30-year lifespan – would take the world past 2050 targets for achieving net zero.
The petrochemical industry has long claimed gas is a “bridge fuel” that is less damaging to the climate than oil or coal. But IISD experts say these arguments have been undermined by growing evidence of the damage caused by methane leaks, the urgency of curbing emissions and the falling price of renewables.
Some nations, such as the UK, and international financial institutions, including the European Investment Bank, have already decided to exclude overseas funding support for new gas and oil in line with the Paris agreement goals.
Ahead of the G7 “rich nation” summit in Cornwall next weekend, campaigners are calling for other major funders to follow suit, though gas has remained a priority during the pandemic. Last year, development banks, including the World Bank, sank 75% of their fossil fuel support into gas projects.
Public money makes up a small fraction of funding for energy projects, which comes mostly from private banks and finance houses. But its influence is disproportionate in reducing risk and sending signals about future policy.
Attention is likely to focus on the US under Joe Biden, which is reviewing whether to end new oil and gas finance. The US Export-Import Bank is a major funder of a huge gas project in Mozambique that is blamed for deepening domestic public debt, increasing militarisation, and worsening corruption and militia violence.
Last week, G7 environment ministers announced an end to public financing for coal projects, but many scientists and civil society activists say this needs to be extended to all fossil fuels.
“At this stage, we should no longer be putting public money into the problem, only into the solution,” said Muttitt. “Governments have to stop pushing the market in the wrong direction.”
Many relatively progressive nations are sending contradictory signals. The UK, which is hosting the next major United Nations climate conference – Cop26 in Glasgow – continues to issue new domestic licences for oil and gas drilling in the North Sea, even after halting funding support overseas.