US, UK pledge to end overseas oil and gas funding, but with big reservations

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A senior Biden administration official told POLITICO that the measure included exemptions and that the Biden administration had not decided how it would ask its financial aid organizations like the US Export-Import Bank, the International Development Finance Corp. and Millennium Challenge Corp. to implement. this.

The degree of stringency of the oil and gas exclusions is potentially important to Ex-Im, which has approved $ 5 billion in fossil fuel funding over the past two years, environmental group Friends of the Earth said in a statement. communicated.

“While this is welcome progress, countries, especially the United States, must stick to these commitments firmly, turning off the taps to fossil fuel companies like [Mexico’s] Pemex and Exxon, ”said Kate DeAngelis, Director of the Friends of the Earth International Financial Program. She also called on “laggards like Japan and Korea” to join the new pledge.

Senior administration official Biden said each country will determine the exceptions to the oil and gas portion differently. This could create significant differences between countries in how they handle oil and gas investments, although the official added that the burden of proof for exemptions would be strict.

In a statement, a State Department spokesperson said the US government was working to “refine our implementation plan on the international energy commitment” and that “no one should doubt the direction in which we are moving towards a clean energy future ”.

“That said,” he added, “as reflected in today’s statement, the Biden administration recognizes that limited exemptions will be needed – for example, in cases where there are implications for national security or serious problems of access to energy. Such exemptions will be part of the responsible approach of the Administration to accelerate the energy transition. “

This implementation seemed to be at the heart of the US concerns about joining the agreement. British officials, who organized the push, were unsure whether the United States would sign the declaration even on Wednesday. Asked by POLITICO earlier this week about the pending announcement, Special Climate Envoy John Kerry said he was not sure.

The United States was not the only country that was still considering its position shortly before its announcement. Italy agreed to join the alliance so late that it was left out in official British government documents that were sent to the press.

Luca Bergamaschi, co-founder of Italian think tank Ecco, said that for Italy, one of Europe’s largest public financiers of oil and gas projects, especially in Africa, the decision represented a significant change. “This sends a strong signal of the need to shift Italian foreign policy and cooperation from fossil fuels, including gas, to clean energy,” he said.

The pledge also left out China, whose President Xi Jinping refused to participate in COP26 and used its “Belt and Road Initiative” to fund tens of billions of dollars in oil and gas investments outside of China. its borders.

Yet the pact, which also included Canada, Denmark and the European Investment Bank, would displace the flow of public money from signatories and redirect $ 8 billion a year to clean energy spending through finance. public and private.

“The United States and the other signatories are finally doing what makes sense in a climate emergency and recognizing the need to stop adding fuel to the fire. Shifting funding from dirty oil and gas to truly clean energy is the only way to avoid the worst impacts of the climate crisis, ”said Collin Rees, US program manager at Oil Change International, in a statement.

Administration official Biden said the deal was similar to directives the Treasury Department had issued to voting representatives of multilateral development banks, such as the World Bank. It has also created some exemptions for financing oil and gas infrastructure, such as in countries where there are no other viable alternatives.

At the same time, the Biden administration has yet to complete climate guidelines for external funding agencies like the Export-Import Bank, the official noted.

Ex-Im operates with some independence and does not yet have all of his vacancies filled. The Senate Banking Committee on Wednesday approved three candidates for the Ex-Im, including Judith Pryor, the choice of President Joe Biden for the post of vice-president of the Ex-Im. Environmental groups have opposed her, saying she too readily endorses financing fossil fuels.

Jake Schmidt, senior strategic director for international climate at the US-based Natural Resources Defense Council, said in a statement Wednesday’s announcement was a “strong signal for clean energy,” but added: ” President Biden must ensure that the entire federal government is aligned with this important climate protection initiative.

And he said it would be critical for the United States to limit the policy space it has carved out to allow fossil fuel financing under exemptions for development and national security issues.

It means “make sure you do an alternative analysis that is genuinely credible, and then make sure you actually push renewables as the first option,” he said. “This means that it is not renewables that have to prove that they are better than fossil fuels, but that fossil fuels have to prove that they are better than renewables.”

Karl Mathiesen contributed to this report.

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