FOR IMMEDIATE RELEASE
- U.S Export-Import Bank approves almost USD 100 million for controversial Balikpapan oil refinery in Indonesia, breaking promise made at 2021 UN COP26 climate summit in Glasgow (and later reiterated at the G7), where Biden signed commitment to end public finance for international fossil fuel projects by the end of 2022
- Finance for oil refinery contradicts climate science and is financially risky
- Approval embarrassing for U.S. in the run-up to G7
- Policy undermines public finance shift to clean energy, prolonging fossil-fueled energy crisis and undermining energy security
WASHINGTON, DC — U.S. President Joe Biden has broken a major climate promise to end public finance for fossil fuels, with the United States Export Import Bank (US EXIM) voting this week to provide almost USD 100 million in export finance to expand the PT Kilang Pertamina Balikpapan Petroleum Refinery in Indonesia.
At the United Nations COP26 climate summit in November 2021, 39 countries and financial institutions, including the United States, signed the Glasgow Statement on International Public Support for the Clean Energy Transition, committing signatories to end direct international public financing for fossil fuels by the end of 2022, barring in exceptional circumstances aligned with 1.5ºC, and fully prioritize their public finance for the clean energy transition. If all signatories follow through on their pledges with integrity, this commitment will directly shift USD 28 billion per year from fossil fuels to clean energy and help shift even larger sums of public and private money away from investments in climate-harming fossil fuels.
While many nations including Canada, the United Kingdom, France, Denmark, Sweden, and Finland have published policies codifying their Glasgow Statement promises, the United States has refused to publish a policy and is now clearly breaking its pledge.
The refinery finance approval comes as Biden prepares to attend the G7 summit in Hiroshima, Japan, on May 19. Last year the G7 adopted a pledge near-identical to the Glasgow Statement, reiterating a collective commitment to end international public finance for fossil fuels by the end of 2022. Last month, the G7 Climate, Environment and Energy Ministers claimed they have fulfilled this commitment. The approval of U.S. financing for the Indonesian refinery, alongside recent approvals for public finance for fossil fuel projects by Japan and Italy, show that this is untrue.
The approval comes despite widespread opposition in the United States and Indonesia, with civil society outlining many problems with the project, including local fire risk, a concerning history of large oil spills, failure to engage with communities, inadequate environmental impact assessments, and climate risk. The project runs against established climate science, with the International Energy Agency’s Net Zero by 2050 scenario warning that for even a 50% chance of keeping global temperatures rise under 1.5ºC, oil demand must drop, inevitably leading to oil refinery closures. The IEA reports that the refining sector faces “major challenges”. This means that the Indonesia refinery expansion is not only incompatible with climate goals, but also financially risky, with high risk that the project will become a stranded asset.
This move will also damage U.S. energy security and prolong an energy crisis caused by fossil fuels. In October 2022, the International Energy Agency published its authoritative World Energy Outlook, showing oil, gas, and coal demand plateauing this decade, and confirms that no new oil and gas investment can be permitted if the world is to keep to the Paris Agreement’s 1.5ºC goal. The IEA states, “No one should imagine Russia’s invasion can justify a wave of new oil and gas infrastructure in a world that wants to reach net zero emissions by 2050.” This means any further public finance for fossil fuels will only exacerbate the energy crisis, not solve it. In response to the approval, Oil Change International experts released the following statements:
Adam McGibbon, Public Finance Strategist, said:
“Biden’s claims to be a climate leader are increasingly laughable after EXIM’s approval of this refinery. Biden has broken the most significant climate promise the United States made at the 2021 Glasgow climate conference.
“If he can’t be trusted to keep this relatively modest promise, how can anyone trust the United States to live up to its even grander climate promises?
“Other Glasgow Statement signatories and G7 members must not allow Biden to derail implementation. Shifting finance out of fossil fuels and into clean energy is key not just for meeting climate goals, but also to end the energy crisis.”
Collin Rees, United States Program Manager, said:
“Despite President Biden breaking many of his core climate promises, the Biden administration has pointed to its promise to end public finance for fossil fuels as a sign that it remains committed to global leadership on climate. This approval of nearly USD 100 million in public finance for a harmful oil refinery reveals those claims as nothing but empty promises.
“Lending his support to devastating fossil fuel development like the Willow oil project, Alaska LNG, Gulf Coast exports, and the Mountain Valley Pipeline is bad enough, but this approval shows the United States is committed to doing the fossil fuel industry’s bidding in all corners of the world. This dirty refinery would threaten the air, land, and water of communities in Indonesia, making a mockery of Biden’s purported commitment to environmental justice.”
- The Glasgow Statement was launched at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) in Glasgow. The 39 signatories aim to “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022” and instead “prioritise our support fully towards the clean energy transition”. It was signed by 34 governments and five public finance institutions.
- Recent research by Oil Change International shows that while many countries are living up to their Glasgow commitment, a small number of countries, including the United States, are lagging behind.
- The G7 adopted a near-identical commitment to end international public finance for fossil fuels by the end of 2022. Last month, G7 Ministers falsely claimed they now have fulfilled this commitment.
- The Intergovernmental Panel on Climate Change states that public finance plays a critical role in closing the mitigation finance gap, enabling emission reductions and a just transition. Public finance signals government priorities, can help reduce inequities in access to finance and reduces risks for private investors — leveraging large sums of private money.
- Oil Change International research shows that in 2018-2020 alone, G20 countries and the multilateral development banks (MDBs) they govern provided at least USD 63 billion per year in international public finance for oil, gas, and coal projects. This fossil fuel finance was 2.5 times more than their support for renewable energy, which averaged only USD 26 billion per year. This shows the urgent need to implement the Glasgow Statement — this would tip the public finance for energy balance from fossil fuels to clean.