MPs call for halt on support for fossil fuels in developing nations

Of the £2.6bn which the UK's export credit agency spent supporting energy exports abroad between 2013 and 2018, 96% was funnelled into fossil fuel projects, mostly in developing nations.

The six-month inquiry began last December 

The six-month inquiry began last December 

That is the key conclusion of the Environmental Audit Committee’s (EAC) inquiry into the sustainability efforts being made by UK Export Finance (UKEF), following claims that the body's financing of fossil fuels overseas is at odds with the aims set out in the UK's Clean Growth Strategy.

Published today (10 June), the EAC’s report summarising the findings of the inquiry reveals that UKEF spent £2.4bn on fossil fuel related projects in low and middle-income countries between 2013 and 2018, compared to £200m on clean power.

By doing so, experts told the EAC, UKEF risks “locking” low-income nations “into high-carbon dependency” for years to come, by removing financial risks from fossil fuel projects in developing nations. The panel of MPs has claimed this is unacceptable at a time when the Intergovernmental Panel on Climate Change (IPCC) is recommending that global carbon emissions should come down to zero by 2050 in order to safeguard the livelihoods of millions of people – a recommendation the UK is set to legislate on this summer.

The EAC report also noted differences between how UKEF allocates overseas energy funding for developed nations and developing nations. During financial year 2017/18, 96% of the agency’s energy support for high-income countries went to support renewables, while the proportion for low and middle-income nations stood at just 0.6%. The EAC has claimed that this disparity goes against the UK’s commitment to the Paris Agreement, which includes a clause to align finance flows with a 1.5C or 2C pathway.

“The Government claims that the UK is a world leader on tackling climate change, but behind the scenes, the UK’s export finance schemes are handing out billions of pounds of taxpayers money to develop fossil fuel projects in poorer countries,” EAC chair Mary Creagh said.

“This is unacceptable. It is time for the government to put its money where its mouth is and end UKEF’s support for fossil fuels.”

Mounting pressure

Founded in 1919, UKEF acts as the UK’s export credit agency, providing guarantees, insurance and reinsurance to UK firms investing overseas.

It has come under increased scrutiny in recent years from policymakers, green groups and members of the public alike for operating without a “cap” on the amount of funding it can provide for fossil fuel projects abroad. WWF, for example, has argued for years that the greenhouse gases (GHGs) emitted by the projects it supports in developing nations are inconsistent with wider UK policies on decarbonisation – and that this disparity will only grow wider if the UK chooses to legislate for net-zero by 2050.

Similarly, former UN Secretary General, Ban Ki-moon has claimed that a “recalibration” of UKEF’s policy is necessary for the UK to meet international climate obligations. 

In order to rectify this trend, the EAC is recommending that the Government should introduce a 5% cap on lending to fossil fuel projects through UKEF – particularly those in low and middle-income nations – as soon as possible, with a view to removing them from its portfolio entirely during 2021. These moves, the Committee claims, could help UKEF align its work with achieving net-zero, and therefore a 1.5C trajectory, for 2050.

The EAC report also calls for UKEF to report on the forecasted and actual emissions of all energy projects it supports, both separately and as a portfolio total.

In order to ensure that its move away from high-carbon projects does not impact economic and social sustainability, the EAC is additionally recommending that UKEF published a statement outlining how it will support a “just transition”. Government, it claims, should complement this move by legislating to ensure that its compliance with international climate commitments are aligned with the UN’s Sustainable Development Goals (SDGs), which additionally account for factors such as gender equality, access to sanitation and education and human rights in supply chains.

Energy Minister Claire Perry has previously stated that the Government is committed to creating a “just” low-carbon transition and will only legislate – with the support of the business community – for a low-carbon domestic economy which does not exclude any regions or social classes. On the SDG front, the UK Government is currently undertaking its first voluntary review into the domestic delivery of the Global Goals, after research from UKSSD revealed that the nation was only performing well on 24% of targets considered relevant.

Nonetheless, the EAC has dubbed Governmental support for high-carbon and otherwise unsustainable projects abroad "the elephant in the room". 

Sarah George



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