The Organization for Economic Cooperation and Development has agreed in principle on a new list of purportedly “green or climate-friendly” projects that are set to benefit from more favorable financial terms for export support after years of closed-door negotiations.
But climate justice advocates on Tuesday denounced the club of high-income countries for including on the list several “fossil-based technologies” that generate planet-heating emissions and other “poorly defined” projects that could incentivize investments in fracked gas.
At issue is the OECD Arrangement on Officially Supported Export Credits, which governs the body’s Export Credit Agencies (ECAs). Participants in the arrangement—Australia, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland, Türkiye, the United Kingdom, and the United States—have long debated revising the OECD’s so-called Climate Change Sector Understanding, which was adopted in 2014 and determines eligibility for preferential financing.
“The OECD Export Credit Group should not be a piggy bank for the fossil fuel industry.”
Under the new agreement, projects related to (1) environmentally sustainable energy production; (2) CO2 capture, storage, and transportation; (3) transmission, distribution, and storage of energy; (4) clean hydrogen and ammonia; (5) low-emissions manufacturing; (6) zero- and low-emissions transport; and (7) clean energy minerals and ores will qualify for longer repayment terms and other flexibilities.
In response, Nina Pušić of Oil Change International (OCI) said in a statement that “the new scope of ‘green’ incentives under the OECD Arrangement is completely contradictory to what we know is needed to keep 1.5°C within reach.”
The Intergovernmental Panel on Climate Change and the International Energy Agency have stated unequivocally that expanding fossil fuel supply is incompatible with limiting global warming to 1.5°C above preindustrial levels, beyond which the planetary emergency’s consequences will grow even deadlier, especially for people living in low-income nations who have contributed the least to the crisis.
“Labeling problematic technologies that extend the lifetime of fossil fuel projects, such as carbon capture and storage, ammonia, and hydrogen, as ‘climate-friendly’ detracts from the critical work needed to reach 100% renewable energy-based systems,” said Pušić.
“Fossil-based technologies that are unproven at scale,” including carbon capture and storage as well as ammonia, exacerbate greenhouse gas pollution, OCI noted. Moreover, the OECD’s use of “vague, undefined terminology” such as “environmentally sustainable energy production” and “clean hydrogen” could open the door to bolstering ECA support for fracked gas, which has boomed since Russia invaded Ukraine last February.
Breaking 🚨 The @OECD has labeled gas and other fossil-based technologies as climate-friendly, promoting #FalseSolutions such as ammonia, CCS, and hydrogen in place of real climate action, despite calls from civil society to #StopFundingFossilshttps://t.co/yGk5Of0S7Z— Oil Change International (@PriceofOil) April 4, 2023
Not only does the OECD’s definition of what counts as “climate-friendly” run counter to peer-reviewed research showing the need to prohibit new fossil fuel projects and wind down existing ones, it also flies in the face of a recent joint position launched by more than 175 civil society organizations from around the world. That document outlines how the OECD Arrangement “can align with the Paris agreement warming target of 1.5°C by placing restrictions on export support for oil and gas projects and associated infrastructure.”
OECD ECAs “provide more public finance to fossil fuel projects than any other type of public finance institution, including the Multilateral Development Banks (MDBs),” OCI pointed out Tuesday. “From 2019-2021, G20 ECAs provided seven times as much export finance to fossil fuel projects ($33.5 billion USD) than for renewable energy ($4.7 billion USD).”
In the words of Kate DeAngelis from Friends of the Earth, “The OECD Export Credit Group should not be a piggy bank for the fossil fuel industry.”
“We reject the pretense that technologies like carbon capture and storage are ‘climate-friendly,’ which Export Credit Agencies would have us believe,” said DeAngelis. “Exporting credit agencies supporting these technologies extends a lifeline to the fossil fuel industry rather than encouraging the necessary shift toward a just energy transition.”
“The willingness of governments to extend favorable public financing terms to technologies that prolong reliance on fossil fuels… undermines climate action rather than advancing it.”
Steven Feit, senior attorney at the Center for International Environmental Law, said that the update to the OECD Arrangement, which is expected to take effect later this year, “fails to reflect the urgent need to end fossil finance and transition away from fossil fuels.”
“The willingness of governments to extend favorable public financing terms to technologies that prolong reliance on fossil fuels, such as carbon capture, or launder fossil gas into the economy, as do most hydrogen and ammonia projects, undermines climate action rather than advancing it,” said Feit. “Carbon capture, hydrogen, and ammonia are the primary avenues through which the industry seeks to legitimize itself in the wake of escalating climate catastrophe and climate action. Labeling these projects as ‘green or climate friendly’ perpetuates a false narrative and brings us further away from the urgent action needed today to phase out fossil fuels.”
Davide Maneschi, climate justice program officer for Swedwatch, said that “it is concerning to see the inclusion of technologies such as CO2 capture and storage, hydrogen and ammonia, and energy minerals and ores as climate-friendly investments by the OECD without fully considering their implications on the environment and human rights.”
“While these technologies may have the potential to reduce emissions, we cannot ignore the fact that criteria for what is considered ‘clean’ or ‘green’ are repeatedly stretched beyond any reasonable limit, and can come to be loopholes exploited to maintain the status quo,” said Maneschi. “When employed wrongly, these technologies have the potential to exacerbate climate change and further perpetuate inequalities in our society.”
“As we seek solutions to mitigate climate change,” he added, “we must prioritize investments that truly prioritize sustainability and justice for all, and put energy democracy at the center of the transition.”
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