Deal to limit oil and gas funding abroad hinges on US

By Sara Schonhardt | 06/17/2024 06:25 AM EDT

The United States and other wealthy nations are weighing a proposal that would restrict support for overseas fossil fuel projects.

President Joe Biden speaks to the media last year on the South Lawn of the White House.

President Joe Biden speaks to the media last year on the South Lawn of the White House. Alex Brandon/AP Photo/File

The fate of an international plan to end a major funding source for fossil fuel projects could be decided this week by U.S. officials.

Some of the world’s richest countries will meet behind closed doors starting Monday to discuss a European Union-led proposal to end loans and guarantees from their export credit agencies to oil and gas projects.

It’s part of an evolving arrangement under the Paris-headquartered Organisation for Economic Co-operation and Development — a group of 38 countries that collaborate on issues of trade and finance — and follows a 2021 deal to end such investments in coal.


If the countries under the arrangement reach a new agreement, it could help squelch the flow of billions of dollars into polluting energies.

If they don’t, the proposal could get punted to the next round of talks in November, when former President Donald Trump, the presumptive Republican nominee for president, could be re-elected — which would threaten any agreement to restrict fossil fuel investments.

“All eyes are on the U.S.,” said Kate DeAngelis, deputy director of international finance at the climate advocacy group Friends of the Earth. “Without the U.S coming to the table, we’re not going to see Japan and Korea get in line. And so I think if nothing happens, then that’s telling in and of itself that it’s a failure of U.S. leadership.”

The White House did not respond to a request for comment.

The Treasury Department, which represents the United States in these OECD meetings, provided a statement but did not make clear its stance on the oil and gas proposal.

“The United States is committed to its international climate pledges, including ending new direct support for the international unabated fossil fuel energy sector,” Megan Apper, a senior spokesperson for Treasury, wrote in an email to E&E News. “We are continuing to work across the U.S. government on the details of our position for the upcoming meetings.”

This week’s Paris meeting will center on a so-called “gentleman’s agreement” among 10 OECD member countries and the EU that puts limits on export credit agencies’ financing terms and conditions to ensure an even playing field among them.

Those countries are Australia, Canada, Japan, Korea, New Zealand, Norway, Switzerland, Turkey, the U.K. and the United States.

In 2021, they agreed to end the use of government-supported export credits for coal-fired power plants that don’t capture and store their emissions. It’s an attempt to align the export guidance with the more ambitious goal of the Paris climate agreement, which seeks to limit global temperature rise to 1.5 degrees Celsius since pre-industrial times.

Now they’re trying to agree on whether to expand that prohibition to include oil and natural gas.

The EU proposal, discussed in March at the last OECD meeting, would extend the ban to cover the full fossil fuel supply chain except in limited circumstances that are consistent with the 1.5 degree target.

While the Biden administration hasn’t revealed its position on the latest proposal, it previously has made other commitments to end public funding for fossil fuel projects internationally.

In a 2021 executive order, Biden instructed federal agencies, including the U.S. Export-Import Bank to end overseas financing of all fossil fuels. The U.S. joined dozens of other countries later that year at climate talks in Glasgow, Scotland, in agreeing to stop funding international fossil fuel projects before 2023.

But the Export-Import Bank, or Ex-Im, has come under fire from climate activists and some officials for continuing to invest in projects that run counter to the president’s pledges. Those include approval for a $500 million loan guarantee for an oil and gas development in Bahrain and an Indonesian oil refinery that received a $100 million loan.

The Paris meeting comes amid growing attention to Ex-Im’s funding decisions. The bank currently is weighing support for a controversial gas project in Mozambique and another in Papua New Guinea. A group of protesters disrupted the bank’s annual meetings in early June — taking to the stage during chair Reta Jo Lewis’s speech to call on Ex-Im to stop investing in fossil fuels.

A spokesperson for the White House National Security Council said earlier this year before approval of the Bahrain project that Ex-Im’s decision to approve the loan to Indonesia did not reflect administration policy.

Meanwhile, activists say the clock is ticking.

“Every dollar that we put of public finance into fossil fuels is putting money into the problem, as opposed to putting the trillions needed into the solutions,” said Nina Pušić, an export finance climate strategist at Oil Change International. “As long as export credit agencies keep putting money into the problem and not the solution, they’re just making the crisis, which is already very bad, worse.”