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20 nations join COP deal to end foreign fossil fuel funding

© Supplied by BloombergCOP26 fossil fuel
Power generation in Germany. Ammonia could help decarbonise thermal power generation.

The UK has corralled about 20 nations including the US, Canada and Italy at the COP26 climate summit to pledge to stop funding foreign fossil fuel projects, though the impact of the deal is undermined by the absence of key countries.

Italy, which is co-hosting the talks, told the UK late Wednesday that it wouldn’t sign the pledge, according to two people familiar with the matter, but changed its stance at the last minute. China and Japan hadn’t been expected to sign.

Germany remained in the balance late Wednesday but wasn’t listed on a map of signers displayed at the UK announcement of the pledge at the summit in Glasgow Thursday morning.  A German spokesperson declined to comment.

The pact isn’t binding and would still allow limited support for foreign fossil fuel ventures. It excludes some of the biggest funders of such projects and allows for exemptions. But it does mark a further tightening of the flow of money from public development banks to oil, gas and coal.

The countries and four financial institutions signing the statement also include Denmark – which announced a similar plan on its own on Wednesday. The European Investment Bank is also on board. U.S. and Canadian representatives hailed the pact Thursday.

The agreement applies to new, direct public support for unabated fossil fuel energy projects – and sets a target date of the end of 2022. It has exceptions in “limited and clearly defined circumstances.”

The UK also announced a separate pledge by dozens of institutions and countries to phase out coal power, including 18 nations, such as Vietnam, Poland and Chile, making such a commitment for the first time.

Under the pact, nations aim to stop the use of coal-fired power generation in the 2030s and 2040s, and agreed to end investments in the sector both domestically and overseas. Still, the plan appears to fall short of the UK hosts’ initial COP ambition to “consign coal to history.”

“This is a significant move towards the end of the fossil fuel era,” said Juan Pablo Osornio, head of Greenpeace International’s COP26 delegation, especially given the US’s backing. But the effectiveness of the deal hinges on whether major funders including Australia and South Korea sign up, he said, adding that countries should also make binding commitments to stop fossil fuel projects at home.

Both the Group of Seven and G-20 have already agreed to stop financing overseas coal projects. The UK, US and the European Union have announced restrictions on foreign fossil fuel finance.

But the new initiative on overseas fossil fuel finance would force some to go further: the US for example, would have to block funding from regional development banks such as the US Export-Import Bank and US International Development Finance Corp., one of the people said.

International public finance now is lopsided in favor of fossil projects. In 2020, G-20 nations alone contributed nearly $600 billion to oil, gas and coal projects, according to BloombergNEF estimates. Activists hope to use the joint statement to help pressure financiers and countries that didn’t sign the pledge and are still devoting tens of billions to foreign fossil projects annually.

The COP unit didn’t respond to a request for comment on the plan to end funding of foreign fossil fuel projects.

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