Biden administration announces restrictions on overseas fossil fuel financing but remains silent on EXIM and other key agencies
WASHINGTON, D.C.- Today, in the lead up to President Biden’s Climate Summit, the U.S. International Development Finance Corporation (DFC) announced it will be net zero by 2040.
Kate DeAngelis, International Finance Program Manager at Friends of the Earth U.S., issued the following statement in response:
DFC’s broad-based restrictions on fossil fuel financing are a first for any U.S. institution, but still insufficient to address the true nature of the climate crisis. DFC should have taken the opportunity of the climate summit to once and for all end support for all fossil fuels immediately. In putting forward a net zero target, DFC is ignoring the lifetime and lifecycle emissions of its portfolio while putting off real climate action with dangerous and ineffective offsets.
Even more alarming is Biden’s silence on the Export-Import Bank, which provides billions of dollars every year to disastrous projects like Mozambique LNG and the Vaca Muerta fracking projects in Argentina. While the United Kingdom has shown true climate leadership by ending support for overseas fossil fuel projects, Biden has failed to take a whole-of-government approach to stop enabling overseas carbon emissions.
A full analysis of the announcement is below.
This announcement follows President Biden’s Executive Order on Tackling the Climate Crisis at Home and Abroad, calling on DFC and EXIM “to identify steps . . . [to] promote ending international financing of carbon-intensive fossil fuel-based energy while simultaneously advancing sustainable development and a green recovery.” In response, nearly 450 organizations called on the Biden Administration to immediately end all US public financing for fossil fuels, including natural gas.
In the past five years, DFC and its predecessor, Overseas Private Investment Corporation, approved almost $4 billion for overseas fossil fuel projects. In addition, EXIM has approved over $5 billion for fossil fuel projects abroad in just the last two years. Other agencies, including the U.S. Trade and Development Agency (USTDA) and Millennium Challenge Corporation (MCC), have provided technical assistance and policy guidance in support of overseas fossil fuel projects.
Friends of the Earth rapid response analysis of Biden’s announcement:
- DFC’s restrictions are not a blanket ban on fossil fuel financing unlike the approach of other development finance institutions like Swedfund. The announcement indicates the continued allowance of support for midstream and downstream gas projects that could result in only minor changes to DFC’s energy portfolio and financed emissions inventory. Moreover, it could allow for more support for disastrous projects like Rovuma LNG in northern Mozambique and Vaca Muerta fracking projects in Argentina. Considering that gas can be as bad for the climate as coal, DFC will have limited effect until it bans all support for fossil fuels from all sources, including financial intermediaries. Moreover, DFC’s inaccurate greenhouse accounting fails to assess the lifetime and lifecycle emissions of its projects, meaning that any targets will underestimate and, therefore, fail to properly mitigate DFC’s real climate impact.
- DFC’s net zero target will require carbon offsets, which have proven to be ineffective at reducing emissions at any significant scale and perpetuate environmental racism and compromise human rights, and undermine healthy, sustainable, and resilient communities and food systems. Reaching “net zero” will lead to massive demand for lands that can soak up ongoing emissions, which will result in landgrabs and the dispossession of Indigenous Peoples, peasants and local communities. Moreover, net zero by 2040 implicitly means that Biden is pushing the problem on to the next generation. In contrast, a “real zero” approach requires emission reductions at sufficient scale and speed to keep warming below 1.5°C. It requires all entities to bend their emissions curve towards zero immediately. DFC’s “net zero” target needs to be turned into a “real zero” target.
- Conspicuously missing is any commitment to curb fossil fuel financing by the U.S. Export-Import Bank (EXIM), which is the U.S. export credit agency and the largest source of U.S. Government financing for fossil fuel projects abroad. EXIM’s existing portfolio of supported projects emits tens of millions of tons of CO2 annually. EXIM fossil fuel financing includes nearly $5 billion for the Mozambique LNG project and nearly $1 billion for the Sasan coal plant and mine in India, which has caused at least 36 project deaths. A failure to address EXIM’s financing will allow for billions of dollars to continue to flow from the U.S. government to fossil fuel projects all over the world and potentially also domestically. This failure stands in stark contrast to the United Kingdom’s ending of its support for overseas fossil fuel projects as of March 31, 2021.
Also conspicuously missing is any commitment to curb U.S. public money that goes towards fossil fuels overseas through international financial institutions like the World Bank Group and the International Monetary Fund, even though they are addressed by the same Biden Administration Executive Order. These institutions finance billions in fossil fuel projects a year, and importantly, also influence policy changes in client countries that enable fossil fuel expansion and dependency. As a major–and in some cases the largest–shareholder in these institutions, the U.S. government, through the Department of Treasury, must issue an ambitious and accountable strategy on how the U.S. government’s “voice and vote” will be used on the Boards of Directors of these institutions towards phasing out support for coal, oil and gas and scaling up international support for a just transition and clean development pathway for workers and communities. This strategy must be released as soon as possible, in order to establish the U.S. position ahead of important relevant processes coming up like the release of the World Bank’s Climate Change Action Plan.
Expert Contact: Kate DeAngelis, (202) 320-4742, [email protected]