Almost 40 governments and financial institutions which in 2021 pledged to end international public financing for fossil fuels have together “dramatically” reduced their support for coal, gas and oil projects worldwide over the past three years, fresh research released today indicates.
Under the Clean Energy Transition Partnership (CETP), 39 countries and public finance institutions made a world-first pledge at COP26 in Glasgow to end international public finance to fossil fuels within a year of signing the commitment “except for in limited circumstances”.
And today’s report suggests that, one year since the implementation deadline, most CETP signatories – including the UK, France, Canada and the European Investment Bank – have met that promise, which it said showed that “the pact is working”.
The UK’s export credit agency confirmed back in 2022 that it provided no support towards fossil fuel projects overseas for the 2021-22 financial year – the first time it had done so – in addition to setting new targets to reduce emissions exposure from the fossil fuel projects it has financed in previous years.
Other signatories which have also ended public financing for overseas fossil fuels – including from both development finance institutions as well as export credit agencies – include Denmark, Finland, New Zealand and Sweden, according to the report.
The report, published by the International Institute for Sustainable Development (IISD), shows that CETP signatories collectively sent $5.2bn in total to the fossil fuel sector in 2023, which marks a reduction of up to two-thirds from the 2019-2021 baseline average, when such financing stood at around $10bn-$15bn.
“Most signatories have eliminated or considerably reduced their fossil fuel financing,” the report states. “Fossil fuel finance is dropping even amongst signatories with policies that do not match the ambition of the CETP commitment.”
However, not all CETP members have managed to meet their met their individual pledge to end public financing for overseas fossil fuel projects, with report lamenting ongoing failures to update national policies and close financing loopholes in some nations.
Specifically, it shows the USA, Italy and Germany all reduced – but did not end – their support for international coal, gas and oil projects, while Switzerland’s public financing for overseas fossil fuel projects increased over the period.
Meanwhile, despite the overall reduction in international fossil fuel financing among CETP members, far less progress is being made by signatories on other commitments within the pact, it warns.
As part of the pact, CETP signatories also committed to prioritising public financing for clean energy, but today’s report shows that this financing collectively reached $21.3bn in 2023, marking a reduction from the $26bn achieved the previous year.
Overall, public clean energy financing from signatories has increased by just 16 per cent over between the 2019-21 baseline level and 2023, with most of that support going to developed nations, including Spain, Poland and the Germany.
Of the public clean energy financing delivered to lower and middle income nations, meanwhile, 83 per cent came in the form of loans – rather than grants or investments – which IISD said risked further exacerbating the global debt crisis.
IISD policy adviser Natalie Jones, lead author of the report, welcomed progress from CETP members on fossil fuel financing but urged them to ramp up support for clean energy worldwide – particularly in lower income nations – in order to help meet climate and renewable power goals for the end of the decade.
“It’s great to see leaders axing international public finance to coal, oil, and gas, which is incompatible with a safe climate,” she said. “Now they must match that with scaled-up investment in clean energy for all, including targeted support for the countries that need it most.”
In order to deliver on CETP goals, the report recommends signatories adopt robust fossil fuel exclusion policies across all public financing agencies, set ambitious targets for scaling up clean energy finance – including for less established technologies such as blue hydrogen and carbon capture and storage (CCS) – and to also target support to nation which need it most.
CETP nations should also updated their national and institutional policies and strategies to prioritise international support for clean energy, and to match international policies with domestic leadership by ending fossil fuel finance and subsides, banning new licences for oil and gas production, and phasing out fossil fuel extraction in line with a 1.5C world, it said.
If all CETP signatories fully implemented and achieved their commitments under the pact, IISD estimated the initiative could shift $28bn a year in current public financing for fossil fuels towards clean energy projects instead.
It comes as just months ahead of the upcoming COP29 UN Climate Summit in Azerbaijan, where various aspects green finance are expected to be the top priority during negotiations.
At last year’s COP28 Summit in Dubai, hundreds of nations signed up to a global goal to triple renewable energy capacity worldwide by 2030, and to double the rate of energy efficiency improvements by the same date – although experts have repeatedly warned that far more financial support is needed to deliver these goals, particularly in developing nations.
Adam McGibbon, co-author of today’s IISD report and a campaign strategist at Oil Change International, said that by delivering on their promises on financing, CETP members could send a strong message to the global economy ahead of the COP29 summit.
“The CETP is a global success story that’s having a real-world impact in shifting finance away from fossil fuels – but this is despite the broken promises of the US, Italy, Germany, and Switzerland,” he said. “These countries need to live up to the promise they made in Glasgow or face growing international pressure to change.”
IISD’s report today offers a snapshot of where the global energy transition stands today, confirming that while public financing for fossil fuels from leading economies is on the wane, the second half of the equation – urgently shifting that financing towards clean energy projects in developing nations – has yet to be solved. With COP29 around the corner, only time will tell as to whether the world’s richest nations manage to deliver on their CETP pledges.
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