This article comes from the spring 2020 edition of the FORESIGHT Climate & Energy magazine, which was largely written before, or at the beginning of, the Covid-19 pandemic.
UK public money finances dirty energy in some of the world’s poorest countries
As the UK was getting ready to host the latest international climate talks, COP26, in Glasgow in November 2020, Prime Minister Boris Johnson vowed the country would halt all foreign aid for coal-powered plants and coal mines (the talks were postponed until 2021 because of the Covid-19 pandemic). His commitment was both headline-grabbing and disingenuous. The UK has already virtually halted such financing for coal projects since 2002, although some British public money does still flow to oil and fossil gas projects overseas. The UK, despite its North Sea oil and gas reserves, is seen as a leader on climate change. It has so far phased out more than half its domestic coal power plants and in November 2017, at the COP23 climate summit, the UK and Canada launched the global Powering Past Coal Alliance of 100 countries, cities, regions and organisations. As of 2018, the UK was the fourth best placed G7 country in terms of ending domestic and overseas financing for fossil fuel projects, says the Overseas Development Institute. The London-based think tank ranked the UK behind France, Germany and Canada (notwithstanding its vast tar sands production and thousands of kilometres of new oil pipelines) and ahead of Italy, Japan and the US. UK public money finances dirty energy in some of the world’s poorest countries. The NGO Global Witness recently found the UK government’s Private Infrastructure Development Group (PIDG), which is 75% funded by domestic taxpayers, spent more than $750 million or half of all its energy spending on fossil fuels from 2002-2018. Some of PIDG’s money came as overseas development assistance from the governments of Germany, Netherlands, Switzerland, Sweden and Australia. Sixty-four per cent ($477.5 million) of PIDG’s fossil fuel investments went to fossil gas projects, while a further 19% ($143 million) financed oil-fired plants and projects, says Global Witness. PIDG’s recent investments included power plants that use heavy fuel oil in Senegal, $23.8 million on a new gas plant in Togo and $31 million to expand a gas plant in Cote d’Ivoire. “PIDG claims its purpose is to combat poverty and improve lives,” says Adam McGibbon, senior climate campaigner at the NGO. “By funding climate change, it is doing precisely the opposite, all the while being propped up by UK public money.” PIDG says its 2019-2023 strategy explicitly commits to renewable energy in future investments to align with global obligations made through the Paris Agreement. When investing in gas projects, the agency says it ensures they displace the use of heavy fuel oil, meet urgent electrification needs, do not displace cleaner alternatives and are part of a transition to low carbon power generation. “In the past we only funded heavy fuel oil where stringent tests were met, such as no viable alternative in the short to medium-term for base load in the poorest countries,” says PIDG. The decreasing price of renewables, especially solar, means renewable options are becoming more attractive, but this trend does not necessarily address the base load need of a number of very poor countries where we operate, adds the organisation. It is a common misconception that renewables generation must be backed up by fossil fuels or nuclear. Worst case scenario
The UK government’s cross-departmental Prosperity Fund used aid to finance two projects in China to promote British expertise in fracking while also spending, from 2016 to 2018, some £2 million from the Overseas Development Assistance budget on 16 oil and gas extraction projects, including in Brazil, Mexico, China, Myanmar and India, says Global Witness. The Cabinet Office insists the Prosperity Fund has never funded conventional or non-conventional oil and gas extraction projects. In January 2020, the flagship BBC television programme Newsnight, in conjunction with NGO Greenpeace, reported that UK Export Finance (UKEF), a government agency, has financed, in the last decade, £6 billion of fossil fuel projects. These projects included oil refineries, power plants and liquefied gas extraction, although no coal, sometimes involving the world’s largest oil and gas companies. When complete, the projects will emit 69 million tonnes of carbon a year, more than 15% the UK’s carbon emissions or equivalent to all of Portugal’s annual greenhouse gas emissions. The emissions are “worst case” estimates, possibly with a high margin of error, says the agency, which insists it no longer provides new support for thermal coal mining or coal power plants overseas in the form of direct official development assistance, investment and export credit or trade promotion. “The UK is committed to working with countries across the world to unlock their renewable energy potential and support their transition away from fossil fuels to cleaner alternatives,” it says. These reports suggest the UK’s financing is less green than its PR suggests, but the country is “probably no better or worse than any other”, says Michael Mehling from the Massachusetts Institute of Technology, US and Strathclyde University, Scotland. “Is the UK a climate sinner in a sheep’s garb or is it trying hard to change? No country is free of hypocrisy,” he states, acknowledging that such financing is complicated, not always well-coordinated and takes time to change.
Disclosure is important, but insufficient
The road from transparency to actual financial regulatory changes that require far fewer fossil investments and emissions reductions is long, says György Dallos, an economist with Greenpeace. In 2015, Mark Carney, the UK prime minister’s climate advisor and former governor of the Bank of England, proposed a climate disclosure task force. “Four and a half years later we still don’t have compulsory climate disclosure in the UK financial system and are far away from financial regulations that really help address the climate crisis with the necessary urgency,” Dallos states. Globally, more than transparency for complex public finance is needed by those seeking a faster energy transition, agrees Steve Herz, senior international policy advisor for climate and energy at the Sierra Club, a US environmental pressure group. “We need countries to agree to stop providing public welfare to fossil fuels. They did it for certain coal projects through the OECD and they agreed in principle to phase out fossil fuel subsidies through the G20,” he says. “We need to see real implementation of the agreements we have and more restrictive new agreements.”
TEXT Ros Davidson
PHOTO Anton Ivanov, MH STOCK