Contact:
Nina Pusic, Oil Change International, nina@priceofoil.org
Paris, France – The Organisation for Economic Co-operation and Development (OECD) recently agreed on terms and conditions for climate-friendly export financing as part of its revised Climate Change Sector Understanding (CCSU). While the agreement enables incentives for renewable energy projects like solar and wind, it also provides incentives for hydrogen and ammonia, including fossil gas derived hydrogen, and fossil fuel power plants with carbon capture and storage (CCS). The agreement does nothing to restrict oil and gas financing.
The OECD’s export credit agencies are the world’s largest international public financiers of fossil fuels. Recent analysis by Oil Change International shows that OECD countries supported fossil fuel exports by an average of $41 billion from 2018 to 2020, almost five times more than their clean energy support ($8.5 billion) over the same period. As such, OECD Export Credit Agencies (ECAs) play a critical role in propping up high-emitting projects, such as LNG infrastructure, which in turn shapes our future global energy system. For example, OECD ECAs have supported 56 percent of new hazardous liquified gas (LNG) export terminal capacity built in the last decade.
According to International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC) scenarios, maintaining a 50% chance to limit global warming to 1.5°C requires an immediate end to investments in new oil, gas, and coal production and LNG infrastructure. This underlines an urgent need for the OECD to, as called for by over 175+ CSOs, end export support for new fossil fuel projects.
It must now also strengthen its rules for climate-friendly incentives. Under the revised CCSU, the definition for “clean” hydrogen has a threshold of less than 3 kg CO2e per 1 kg of H2, which allows hydrogen projects derived from fossil gas. Enabling the fossil fuel industry to benefit from “climate-friendly” incentives undermines the efforts of OECD countries to use public money in pursuit of the public interest and help spearhead the energy transition. The science is clear that incentivizing technologies that are either fossil-based or serve to extend the lifetime of fossil fuel assets is a false solution to the climate crisis.
With 52 percent of OECD countries signed onto the COP26 Clean Energy Transition Partnership commitment (CETP) to end international public finance for fossil fuels by the end of 2022 and prioritize public finance for clean energy, OECD members have an opportunity and responsibility to align export finance with climate goals at the OECD. Under the CETP commitment, countries explicitly committed to promote this agenda at multilateral forums, including at the OECD. The OECD has in recent years assisted in building momentum on shifting finance out of fossil fuels through restrictions on coal export financing – showing that the OECD Arrangement has the power to enact policies that further align ECAs with financing the clean energy transition through placing restrictions on export finance for oil and gas. At the next OECD negotiation in November, leading countries have the opportunity to table an ambitious proposal to end export finance for all new fossil fuels.
Statements
Nina Pusic, Export Finance Climate Strategist, Oil Change International: “Allowing any fossil-based technology to receive financial incentives under the guise of ‘climate action’ is greenwashing, and a handout to the fossil fuel industry to continue its highly polluting and climate-wrecking practices using government money. OECD countries must now use their political capital to explicitly restrict export financing for all new coal, oil and gas projects and associated infrastructure, as well as for technologies that are fossil fuel-based or serve to extend the lifetime of fossil fuel assets. Anything less is insufficient to align export finance with 1.5°C.”
Kate DeAngelis, Senior International Finance Program Manager, Friends of the Earth United States: “The OECD is inappropriately encouraging export credit agency support for hydrogen. Incentivizing export credit agencies to fund hydrogen from fossil fuels is masquerading these projects as climate friendly.”
Notes:
- Joint Position: In February 2023, 175+ civil society organizations (CSOs) called on the OECD to end oil and gas export finance and align the Arrangement with 1.5°C.
- Report by Oil Change International and partners highlights that the majority of OECD export finance for energy goes to supporting mid-stream gas projects, such as LNG export terminals.
- The Hydrogen Science Coalition has proposed a definition of “clean” hydrogen as 1 kg CO2 emissions per 1 kg of H2 production.