Stay informed with free updates
Simply sign up for the myFT Climate Change Digest – delivered straight to your inbox.
The world's richest countries are at loggerheads over ending state support for oil and gas development, with the United States and the European Union disagreeing over the extent of the ban, according to people familiar with the talks.
OECD countries held a second round of closed talks in Paris to discuss proposals from the European Union and the United Kingdom to cut most export credit agency loans and guarantees for oil, gas and coal mining projects, which are the world's largest source of public financing. sector. This will be followed by an agreement in 2021 to stop providing such subsidies for coal-fired power.
A person familiar with the talks said the United States was still evaluating the EU's proposals, and discussions were scheduled to continue into June and November. The US Treasury Department declined to comment.
The United States, Canada, France, Germany and the United Kingdom were among the countries that agreed during the UN COP26 climate summit in Glasgow in 2021 to align their public financial institutions with the Paris Agreement goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels. .
But this could impact the role of Exim, the US credit export agency, which will need to secure new funding from the US Congress in 2026, opening it up to political scrutiny by Republican lawmakers who are resisting cutting funding for oil and gas. Progressive lawmakers criticize bank's climate record.
Exim recently offered $500 million in financing for an oil and gas project in Bahrain, although six Democratic lawmakers urged it not to move forward with the deal because it would undermine international progress on climate.
Exim's corporate charter contains a clause prohibiting it from “discriminating” against any particular sector or industry. Senior Exim officials say this provision can only be changed through congressional action.
“The United States is slowing down at a time when it needs to step up its efforts to demonstrate its climate leadership, ahead of elections later this year,” said Nina Bosic, export finance climate strategist at US environmental campaign group Oil Change International.
The campaign group said that export credit agencies in G20 countries provided support for fossil fuel projects seven times greater than support for renewable energy sources between 2019 and 2021. It found that fossil fuel projects received $33.5 billion annually on average compared to $4.7 billion for clean energy development.
Under the EU proposal, export credit agencies can only back fossil fuel projects if each OECD member state decides that the projects are consistent with the need to keep temperature rises to 1.5 degrees Celsius above pre-industrial levels.
The International Energy Agency said there is no scope for new oil and gas exploration projects if the goals of the Paris climate agreement are met.
The EU is also proposing a new transparency requirement, where countries would publish details of financing fossil fuel projects.
Recommended
“A total ban would be cleaner and send a stronger signal, but the question is whether you can get the same political outcome but with a more politically acceptable approach,” said Claire Healey, senior fellow for international climate policy and diplomacy at E3G.
Changes to the OECD's voluntary arrangement on export credits will require the consensus of a group of 38 member states that includes the US, EU, UK and Canada, but also major fossil fuel financiers who have not agreed to align public finances with the Paris Agreement. Such as Japan and South Korea. Even within the European Union, implementation of policies to end subsidies has been patchy.
“We are at a moment where differences in attitudes to export credits within the G7 are creating an unlevel playing field,” a European diplomat familiar with the OECD negotiations told the Financial Times. “We have to be realistic. We're not going to be able to follow a unique approach with one tipping point.”
Climate capital
Where climate change meets business, markets and politics. Explore FT's coverage here.
Interested in learning about FT's commitments to environmental sustainability? Learn more about our science-based goals here
