Thursday morning (4 November) saw something that has never happened before: some 20 countries agreed at Cop26 in Glasgow to end oil and gas finance outside their borders. This year has seen numerous countries agree to phase out coal investment at home and abroad – but it is the first time countries have agreed to end foreign backing for two fuels that are major contributors to climate change.
The agreement commits 20 countries – including the US, UK, Denmark, Costa Rica and Ethiopia – to stop investing in oil and gas projects abroad by the end of 2022. Diverting foreign investment from these countries to clean energy projects should directly shift around $8bn each year from fossil fuels to clean energy.
“The signatories of today’s statement are doing what’s most logical in a climate emergency: stop adding fuel to the fire and shift dirty finance to climate action,” said Laurie van der Burg, from the NGO Oil Change International. “Only this way can we avoid the worst climate crisis scenarios.”
However, campaigners were quick to add a note of caution. None of the countries that provided the most finance to foreign fossil fuel projects – Canada, Japan, Korea and China – are signed up to the deal yet. Moreover, international public finance for fossil fuels represents only a small fraction of overall state support for fossil fuels.
Between 2018 and 2020, some $188bn was invested by the G20 and multilateral investment banks in fossil fuels abroad. But the International Monetary Fund found that the world’s coal, oil and gas industries were overall subsidised by a massive $5.9tn in 2020 – equivalent to $11m a minute. These cover fossil fuel production – such as a coal mine or oil well – and consumption, helping provide a fixed fuel price at the petrol pump.
To limit global warming to 1.5°C above pre-industrial levels, 2021 needs to mark the end of all new investments in fossil fuels, says the International Energy Agency. And elsewhere at Cop26, there are urgent voices calling for a more comprehensive package to end support for fossil fuels.
Many island nations are at risk of being submerged with a global temperature rise any higher than 1.5°C; current climate pledges put the world on track for 2.7°C of warming by the end of the century, says the United Nations. A group of 40 such nations is represented in Glasgow by the Alliance of Small Island States (Aosis), which wants all fossil fuel subsidies to be abolished by 2023.
“Antigua and Barbuda is calling on major emitters, particularly the G20, to phase out all fossil fuel subsidies and accelerate actions towards transitioning to low-greenhouse gas emission, climate-resilient economies,” said Diann Black-Layne, the Antiguan ambassador for climate change and the lead negotiator for Aosis at Cop26.
“In 2018, fossil fuel subsidies amounted to three times the amount mobilised for renewable energy subsidies. What this illustrates is an unfair competitive advantage provided to the fossil fuel industry,” she said.
The sense of injustice many island states feel at Cop26 is palpable. At the opening of the world leaders summit on Monday, Mia Mottley, prime minister of Aosis member Barbados, lamented that world leaders could “no longer appreciate the cries of humanity”.
Central banks found $9tn to pump into the global economy during the Covid pandemic but have not been able to find enough money to help countries tackle climate change, she noted.