Canada-led proposal to end international fossil fuel financing dies with incoming Trump administration
A recent deal aimed at ending public financing for foreign fossil fuel projects, co-led by Canada on the world stage, has unfortunately fallen through due to the resistance of key holdout countries and the impending administration of U.S. president-elect Donald Trump. The proposed deal, put forth in 2023 by Canada, the U.K, and the European Union, sought to cease financing through export credit agencies for oil and gas projects abroad, redirecting the funds towards clean energy initiatives instead.
The support of the U.S. under President Joe Biden was only secured after the presidential election in November of last year, sparking a rush to solidify an agreement before Trump’s inauguration. Regrettably, time ran out, and the Organisation for Economic Co-operation and Development (OECD) confirmed that despite extensive negotiations, a unanimous agreement could not be reached. Alongside the delayed U.S. backing, Turkey and South Korea also withheld their support over concerns related to energy security and economic implications.
With Trump’s stated intentions to expand oil drilling and his inclination towards appointing oil industry-friendly individuals to his cabinet, it is unlikely that he would have endorsed any proposal limiting fossil fuel finance. Nina Pušić, a senior export finance climate strategist at Oil Change International, lamented the missed opportunity for climate action, emphasizing the necessity of directing public finance towards a clean energy transition to align with the goals of the Paris Agreement.
The proposal brought forth by the OECD stemmed from a commitment made at the 2021 UN climate conference in Glasgow to phase out fossil fuel subsidies and allocate the resources to clean energy. Export credit agencies play a crucial role in providing public financing to support projects that may be deemed risky and struggle to secure initial private investments. By de-risking investments, these agencies facilitate further private sector funding, thereby bolstering the fossil fuel industry.
Countries like South Korea, a major fossil financier, raised objections to the deal due to concerns regarding their domestic LNG industry. Despite their hesitations, the global energy transition is already underway, and companies fixated on fossil projects may find themselves lagging behind. As countries navigate these challenges, it is imperative to stay committed to negotiating solutions that prioritize sustainable energy alternatives.
Moving forward, it is essential for countries like Canada to uphold their promises to phase out inefficient fossil fuel subsidies and align their financial commitments with clean energy objectives. While the OECD deal may have faltered, there is an opportunity to reinforce existing pledges by eliminating loopholes and enforcing strict regulations on all forms of fossil subsidies. By holding governments accountable to their environmental commitments, progress towards a greener future can be accelerated and sustained.
