U.S., Canada, 18 other countries vow to end funding fossil fuel projects abroad

An oil terminal. REUTERS

The United States, Canada and 18 other countries committed at the COP26 climate summit on Thursday to stop public financing for fossil fuel projects abroad by the end of next year, and steer their spending into clean energy instead.

Campaigners called the commitment a “historic” step in turning off the funding taps for fossil fuel projects. But it did not include major Asian countries responsible for the bulk of such financing abroad.

By covering all fossil fuels, including oil and gas, the deal goes further than a pledge made by G20 countries this year to halt overseas financing for just coal.

The 20 countries that signed the pledge include Denmark, Italy, Finland, Costa Rica, Ethiopia, Gambia, New Zealand and the Marshall Islands, plus five development institutions including the European Investment Bank and the East African Development Bank.

“We will end new direct public support for the international unabated fossil fuel energy sector by the end of 2022,” they said in a declaration.

That would cover coal, oil and gas projects that are “unabated” – meaning that they burn fossil fuels without using technology to capture the resulting CO2 emissions.

The deal allowed for exemptions in unspecified “limited” circumstances, which it said must be consistent with the Paris Agreement’s target to cap global warming at 1.5C.

Countries that signed the pledge together invested nearly $18 billion on average each year in international fossil fuel projects from 2016-2020, according to analysis by non-profit Oil Change International.”The world has no more space or time left to accommodate the expansion of fossil fuel energy,” said Lidy Nacpil of the non-profit Asian Peoples’ Movement for Debt and Development.

Britain ended direct government support for new fossil fuel projects overseas this year and Denmark said on Wednesday it would do the same, with exemptions for some gas projects that meet “strict conditions” until 2025. The European Investment Bank has also committed to end oil and gas project funding this year.

The International Energy Agency has said ending investments in oil, coal or gas supply projects is necessary for the world to reach net-zero global emissions by 2050 – which scientists say is crucial for keeping the average global temperature from rising more than 1.5 degrees Celsius beyond preindustrial levels. Beyond that threshold, global warming could unleash catastrophic and irreversible impacts.

Enormous investment in green technologies is needed for the task. Bernstein analysts estimate the required low-carbon investments at roughly $2-4 trillion per year until 2050.