Business Maverick

International Finance

COP Deal to End Foreign Fossil Fuel Funding Has Key Holdouts

Joe Biden addresses a press conference at the COP26 UN Climate Change Conference in Glasgow on Nov. 2, 2021. Photographer: Brendan Smialowski/AFP/Getty Images

The U.K. has corralled about 20 nations to pledge to stop funding foreign fossil fuel projects, though the diplomatic win is tempered by the omission of China and Japan.

A one-page statement will be unveiled on Thursday at the COP26 climate talks in Glasgow, according to people familiar with the matter.It isn’t binding and would still allow limited support for foreign fossil fuel ventures. But it marks a further tightening of the flow of money from public development banks to oil, gas and coal.The win for the U.K. hosts of the climate talks is only a partial one as the deal is set to exclude some of the biggest funders of foreign fossil-fuel projects, including Japan, South Korea and China. And the pact would only apply to new, direct public support for unabated fossil fuel energy projects — with exceptions in “limited and clearly defined circumstances.”

The countries and four financial institutions signing the statement are set to include Canada, the U.S. and Denmark — which announced a similar plan on its own on Wednesday.

The U.K. on Wednesday announced a separate pledge by dozens of institutions and countries to phase out coal power, including 18 nations, such as Vietnam, Poland and Chile, making such a commitment for the first time.

Under the pact, nations aim to stop the use of coal-fired power generation in the 2030s and 2040s, and agreed to end investments in the sector both domestically and overseas. Still, the plan appears to fall short of the U.K. hosts’ initial COP ambition to “consign coal to history.”

Both the G-7 and G-20 have already agreed to stop financing overseas coal projects. The U.K., U.S. and the European Union have already announced restrictions on foreign fossil fuel finance.

Read more: Thunberg Appears; Fossil Fuel Deal in Play: COP26 Update

The new initiative on overseas fossil fuel finance would force many to go further: the U.S. for example, would have to block funding from regional development banks such as the U.S. Export-Import Bank and U.S. International Development Finance Corp., one of the people said.

International public finance now is lopsided in favor of fossil projects. In 2020, the Group of 20 nations alone contributed nearly $600 billion to oil, gas and coal projects, according to BloombergNEF estimates.

The COP unit didn’t respond to a request for comment on the plan to end funding of foreign fossil fuel projects.

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