Ending public funding for fossil fuels globally would not solve this problem alone, but it is a fundamental first step to something better.
Recent years have seen government figures talking a good game on the UK’s record as a “climate leader”, arguing that domestic emissions reductions go far beyond what most other countries have achieved.
In the run up to COP26, now postponed until November 2021, some commentators have taken this at face value and have been talking up supposedly climate-friendly announcements by government as part of a legacy - first for Theresa May, now for Boris Johnson - of redefining a new, positive role in the world for a “Global Britain”.
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Sadly this is a view built on smoke, mirrors and dodgy accounting tricks.
Investments
Last year, Carbon Brief argued that the UK’s omission of international aviation and shipping figures from carbon budgets could be in breach of the Paris Agreement.
Despite appearing to make climate-friendly announcements at the UK-Africa Investment Summit in January the government later revealed that 90 percent of the energy deals struck at the event were in fossil fuels. And, as the Labour MP Nadia Whittome highlighted in a session of the Environmental Audit Committee this month, the UK still plays a significant role in financing and subsidising fossil fuel projects overseas.
Ending public funding for fossil fuels globally would not solve this problem alone, but it is a fundamental first step to something better.
Under the terms of the Paris Agreement, the UK is required to make global financial flows “consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. But despite this, recent analysis by Global Justice Now shows that £3.875 billion of UK public funding has supported fossil fuel projects overseas since the agreement was signed.
These investments support incredibly damaging projects such as fracking in Argentina and China, oil refineries in Bahrain, and power plants that run on heavy fuel oil (HFO) and diesel in Cameroon, Kenya, Ghana, Guinea and Mali. These investments are made in the interests of private profit rather than the public interest, enforcing fossil fuel dependency on global south economies and frustrating attempts to tackle fuel poverty via a just transition to renewable energy.
Development funds are legally required to contribute to poverty reduction, yet the UK is still pouring aid money into fossil fuels at a significant rate despite evidence that the climate emergency impacts poorer communities the hardest. The UK has invested £568 million in fossil fuels overseas via the aid budget since the Paris Agreement was signed, and the government’s development bank, CDC Group, has invested £520 million in fossil fuel projects in the past decade alone.
When we also take into account the amount of fossil fuel support provided by UK Export Finance (UKEF), it rises to £3.875 billion given to fossil fuel projects overseas since the Paris Agreement was signed.
Privatisation
These projects will cause significant environmental damage by locking in high carbon emissions and expanding fossil fuel infrastructure across the global south for generations to come.
But the UK’s investment strategy is also helping to privatise energy systems across the world, extracting further profit from south to north and undermining national governments’ abilities to respond the crisis on their own terms.
A project to privatise the Nigerian energy system, financed by UK aid and run by Adam Smith International, was found to have caused “higher prices, poor service and regular blackouts”, whilst a Public-Private Partnership to provide gas to the Ghanaian energy system has pushed huge costs onto public revenues amidst an already severe debt crisis.
It is time to recognise the destructive impact of UK investment policy, historically and in the present, on the environment and global south economies. Consecutive Conservative governments have been intent on using aid and trade policy to re-establish the UK’s economic power over the global south.
To have any chance of tackling the climate emergency, we must oppose these policies and instead focus our efforts on developing a Global Green New Deal in partnership with workers, communities, trade unions and civil society across the world.
Challenge
Fortunately, we are now at an opportune moment to challenge the government’s record. Parliamentary attention is increasingly turning towards what a "green recovery" from the Covid-19 pandemic will look like, while civil society voices (such as the #BuildBackBetter campaign) are calling for measures to ensure a more just and sustainable economy.
If the prime minister and COP26 President Alok Sharma want to demonstrate genuine climate leadership ahead of the postponed climate talks next year, then a good first step would be to end all overseas fossil fuel finance and put forward a plan to massively increase climate finance for a just transition to renewable energy.
Overseas fossil fuels investments made by the UK are made via numerous different channels and includes projects involved in power generation, extraction, storage, distribution and manufacturing involving fossil fuels. At times, the government has given the impression that its fossil fuel commitments have dramatically decreased in recent years by selectively quoting individual channels out of context.
For example, in January Andrew Stephenson MP stated that “UK direct bilateral ODA classified as being for oil and gas extraction amounts to £102,000 in the last five years” (emphasis added).
The truth is, however, that the UK’s overall overseas commitments are far higher. Global Witness have demonstrated that the Private Infrastructure Development Group (PIDG), an investment fund that has received over $1 billion in aid money from the Department for International Development (DfID) 2002-18, has invested $750 million in fossil fuel projects in the global south (with a little under a third of that having been invested in the past four years).
Transition
Another key fossil fuel financer is CDC Group. CDC is basically a development bank that finances private companies and private equity funds in the global south with the aim of creating jobs, supporting economic growth and lifting people out of poverty through “trickle down” economics.
Analysis by Global Justice Now shows that CDC has invested over half a billion pounds of aid money in just eleven projects in fossil fuel-related infrastructure since 2013. This includes $144 million in a company that operates coal-burning cement factories, $68.5 million in a HFO/diesel power plant in Kenya, $39 million in another HFO/diesel power plant in Guinea, and $120.5 million in two gas-powered plants in Bangladesh.
The government argues that these investments do not contravene their Paris Agreement commitments on the basis that they take the place of higher carbon alternatives, a point supported by the International Development Committee’s statement that “the only context in which it is acceptable for UK aid to be spent on fossil fuels is…as part of a strategy to pursue net zero global emissions by 2050”.
But this argument has been called a “total red herring” by Baroness Sheehan, and campaigners argue that any fossil fuel projects established now will lock in high carbon emissions for generations to come.
Even worse, recent parliamentary questions have revealed that many of these projects aren’t “transition” projects using gas power at all, but instead use much dirtier and more polluting fuels that release dangerous particulates into the atmosphere. CDC currently has £213 million invested in power stations that use HFO, crude oil or diesel as a primary or secondary fuel, while £157 million of PIDG’s investments use diesel or HFO as a primary fuel.
Financing
While the use of international development budget to finance fossil fuels is perhaps a more shocking misuse of funds, these figures are far smaller than the amount of fossil fuel support given by UK Export Finance.
Founded in 1919, UKEF is the UK’s export credit agency which provides finance and insurance to companies that export UK goods and services and to help UK companies invest overseas.
Recent analysis has shown that, between 2010 and 2017, UKEF gave 97 percent of its energy support to fossil fuel projects. Despite being told by MPs that its level of fossil fuel financing was “unacceptably high”, in 2017/18 UKEF invested a further £2 billion in fossil fuels – an eleven-fold increase on its previous annual level.
With now less than a decade to redesign global energy systems and economies and avoid breaching planetary tipping points, we hope, these investments are unsustainable and unjustifiable.
Ending them should be a top priority for all governments, international institutions and multilateral investors; but this alone won’t be enough.
Transition
Part of the difficulty in encouraging governments to end this type of investments is that there has not yet been the necessary investment in renewable energy to be able to meet the growing energy demands of many economies in the global south. Fossil fuels are being touted as the easiest way to expand energy access to marginalised communities. But just because something is easier doesn’t mean it’s right.
In fact, the improved cost competitivity of renewables in many cases means that they are a much better way of ending energy poverty for the approximately one billion people around the world without access to electricity.
A rapid energy transition would require far greater international co-operation and finance than has been apparent to date. It would also need genuine, thorough consultation with communities, workers, trade unions and civil society to ensure that it is a just and equitable process, that retrains workers and extends their rights, paid for by corporations and governments who are the most to blame for climate change. Fortunately, the International Labour Organisation has published guidelines for such a transition.
Increasingly, it appears that what we need is some form of Global Green New Deal that combines and end to fossil fuel financing and a just transition with finance for loss and damage to frontline communities, investment in universal basic services to meet everyone’s needs, massive investment in well-paid green jobs and public transport, and the acceptance of climate refugees.
We also need to recognise that climate crisis is a corporate power problem, and that shifting control of energy from multinationals to publicly controlled energy systems is crucial to increase the accountability, transparency and sustainability of how global energy is managed.
It is unjustifiable that the private sector, hand in hand with financiers in the global north, are profiting from their control of energy in the global south and locking frontline communities into fossil fuel dependency for generations to come.
Leadership
Such a project would be designed not just to reduce carbon emissions, but to tackle the vested interests and injustices at the heart of our economies that have brought us in to crisis point time and time again.
While some say this is utopian, for many it is the only route to survival, but it would require significant public and political pressure from below. That is why many civil society activists are beginning to organise internationally to make it happen. If it is going to show genuine “climate leadership”, then the UK government would stop pursuing a narrow vision of national self-interest and support these efforts.
There are many good reasons why activists and communities in the global south should be wary of states like the UK wanting to show “climate leadership” – for one, it is about 270 years too late, and what’s more it smacks of the same colonial “we know best” attitudes that were used to justify Empire and fossil fuel expansion in previous centuries.
But there are ways in which the UK and countries in the north can play a significant and positive role. Any rapid divestment from overseas fossil fuels and funding of a just transition will come at a significant cost; not just to finance the scaling up of renewables and improving of energy access, but also to pay any financial penalties to investment funds for exiting these investments early.
The Covid-19 crisis has demonstrated that, particularly with low interest rates, governments are able to provide vast amounts of finance to respond in an emergency.
Now is such an emergency, and the impact of the pandemic, while devastating globally, has enabled us to imagine a new world. Any green recovery from this must be a green recovery; if it is not, and we see a return to fetishized growth and increased emissions, then we are surely doomed.
Ending public funding for fossil fuels globally would not solve this problem alone, but it is a fundamental first step to something better.
This Author
Daniel Willis is a policy & campaigns manager focussing on international development and climate justice at Global Justice Now.
Image: Sri Kolari, Greenpeace.