[ad_1]
It was not so long ago that it was easy for public banks and other financial institutions to finance new fossil fuel projects. However, the tide may be changing as the world is facing a worsening climate crisis.
Case in point: after Traditional owners filed an injunction over a Santos gas development near the Tiwi islands, South Korea’s export credit agency announced it would Consider reconsideringIts financial support.
“Environmental and legal risks” is one reason given by the Export-Import Bank of Korea (Kexim) for the delay in deciding on a loan of up to US$330 million for the project. This could put a halt to its financial viability.
Public financial institutions are under renewed pressure to change lending practices after the world’s leading climate scientistsWe are strongly warning against any new fossil fuel infrastructure. Public banks in China, Japan, South Korea, and Japan are now facing difficulties in our region. Unprecedented scrutinyThey were responsible for financing the climate crisis.
Not only that, the Tiwi Injunction has once again shined a spotlight upon the role of export credit agencies like Kexim when pumping funds into new oil, gas, and coal projects.
Shutterstock
What is an export credit agency and why are they important?
The Kexim loan was intended to go to the Korean energy group SK E&S, which had PlannedTo export gas from the project into Asia. Without funding, it is possible that there will be no project.
That’s why Kexim’s move is so important. While export credit agencies are not the only funders of oil, gas and coal infrastructure, and not the largest either, they have been instrumental in developing many of the world’s most carbon intensive sectors.
Continue reading:
Green lending: The latest initiative of the world’s largest banks at COP26 is a step back
How? How? By locking in fossil fuel energy systems, by leveraging private finance, reducing risk premiums and shaping international standards that influence private bank policies. They have played a key part in enabling fossil fuel expansion.
These state-sponsored agencies have been invisible for decades. They are now visible. Their work is becoming more scrutinized. They borrow from national treasuries and public capital markets to finance export-oriented fossil energy projects.
That’s not to criticise all the work these agencies do. They’ve proven invaluable for nations like South Korea as they industrialised. They have made it possible for foreign buyers to obtain direct loans, insurance, and guarantees, which has helped increase their export competitiveness.
Shutterstock
Ending lending: Why export credit agencies need to fund clean alternatives
A revolution in global finance is necessary if the world wants to achieve the rapid transition to clean energy that is required to prevent the worst effects of climate changes. We need to take funding from fossil fuels, and channel it into clean energy.
Until recently, efforts have been made to reduce international public funding of fossil fuel projects by focusing on multilateral development banks like The World Bank and The Asian Development Bank. Both banks have responded slowly but surely. Their financing should be changedRetire from fossil fuels.
While that’s a positive step, bilateral funding bodies like export credit agencies are still stuck at square one. Research suggests that public banks are financing fossil fuel projects at a higher rate than multilateral development bank. These agencies were active in funding fossil fuel projects between 2013 and 2015. Oil and gas financingThe annual cost was US$32 billion. The United States, Japan, and Korea were the worst offenders.
Australia’s equivalent – Export Finance Australia – is hardly blameless. Between 2009 and 2020, our Agency loanedIt provided funding for new coal, oil and natural gas projects in excess of the funding it gave for renewable projects.
The pressure is growing
As governments finally take action, it is likely that the banks’ support for polluting sectors will end. This will result in corporate efforts to mobilize public and private financing.
That’s not to say there won’t be holdouts. In late 2021 at the Glasgow UN Climate Conference, developed countries, including the United States and Canada, were represented. committed to ending public funding for “unabated fossil fuel energy”. Australia, Japan, South Korea and South Korea weren’t among the signatories.
Read more:
Why banning African fossil fuel projects financing isn’t a solution to climate change
The announcement of Glasgow came just a month after that of the OECD AnnouncementIt would end export credit support to coal-fired power stations that cannot capture or store carbon dioxide.
Shutterstock
These steps are important, but they are not enough. Only one Canadian export credit agency has yet to commit to funding the goal of net Zero by 2050. This means that almost all of these agencies’ lending policies are still inconsistent with the Paris Agreement goals and renewed warnings by climate scientists.
In a year when unprecedented floodwaters have taken lives and livelihoods up and down Australia’s east coast, it is time for governments to revise the mandates of their export credit agencies. They can be a force for change by helping to invest billions in clean energy projects rather than in fossil fuel ones.
It will remain up to the local communities, such as the traditional owners of the Northern Territory, and environmental organizations to fight the taxpayer-funded banks.
