TALKS on a plan by wealthy nations to throttle tens of billions of dollars in public support for oil and gas projects have broken down without agreement, weeks before President-elect Donald Trump takes office.
The EU, UK, US and other countries had sought the deal to limit export-credit agency finance for global fossil-fuel projects under the umbrella of the Organization for Economic Co-operation and Development, a group of market-based economies. While improving transparency in export financing remains a target, the likelihood of a broader deal to curb support for hydrocarbon projects is now remote, said senior US officials, who asked to speak anonymously as the deliberations are private.
The failure is a blow for climate activists, who saw the proposed finance curbs as a critical way to free up funding for emission-free energy projects around the globe. Where the US under departing President Joe Biden had rallied behind additional restrictions, these are unlikely to win support under Trump, who has campaigned on promises to unleash American oil and gas development and is pushing allies to buy more US energy.
“Transparency measures are not good enough,” said Adam McGibbon, a campaign strategist at the Oil Change International advocacy group. “We cannot afford another penny for fossil fuel expansion if we want to preserve a liveable planet.”
Although the EU advanced a plan last year, talks only began in earnest on a new, US-proffered compromise approach in November, after Trump won the presidential election. The negotiations had previously stalled for months because of concerns from the US Export-Import Bank, an independent agency whose charter prohibits denying financing against any particular industry, sector or business.
During a meeting in Paris in November, the US proposed incorporating a technology-neutral, emissions-based threshold for financing that was seen as compatible with the charter. That policy innovation allowed the US to support the EU proposal while still maintaining fidelity with the statutory constraints imposed on the US bank, one of the officials said.
Troubled talks
BUT it wasn’t enough. Weeks of frenzied negotiations—including a session in Paris and subsequent virtual meetings—couldn’t overcome concerns about national security, competition and emissions accounting advanced by South Korea and Turkey. Countries also wrestled with technical questions around the appropriate methodologies for calculating the emissions of various energy projects, necessary to ensure transparency and national-level compliance, one of the officials said.
OECD members have a longstanding agreement that effectively allows them to use export-credit agencies to give preference to domestic companies in international deals without running afoul of World Trade Organization rules. The club’s 38 countries have an incentive to abide by OECD policies governing the practice since they help ensure a level playing field. For years, the group has precluded support for unabated coal projects; the latest effort would have put most oil and gas limits off limits too.
Export-credit agencies in OECD countries financed an average of $41 billion annually in oil and gas projects, according to data compiled by environmental advocates.
Even in the US, that finance has continued to flow, despite Biden’s pledges to cut it off. Seven days into his presidency, Biden directed US agencies to “promote ending international financing of carbon-intensive fossil fuel-based energy.” And in December 2021, the US signed onto an international declaration committing to “end new direct public support for the international unabated fossil fuel energy sector,” except in very limited circumstances.
Just this week, the US export-import bank is set to vote to approve a loan potentially worth $527 million to help Guyana develop a natural gas project. Corporate beneficiaries identified by the bank include the energy company Lindsayca Inc., the engineering firm CH4 Systems and oil major Exxon Mobil Corp.
Environmentalists want the administration to keep trying for the OECD deal. Negotiators are planning to continue trading messages until early January, at least, one of the officials said.
“The Biden administration needs to use these last few weeks to increase pressure on Korea and Turkey, the final hold outs,” said Kate DeAngelis, international finance program manager for the environmental group Friends of the Earth. “It’s not over until Trump officially takes power. A failure to continue to fight and negotiate will be a tremendous loss for Biden’s legacy and the climate.”
