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Italy breaks climate promise to end public financing for international fossil fuel projects, publishing ‘worst-in-class’ climate policy

Italy’s far right government has broken a major climate pledge to end public financing for international fossil fuel projects, instead producing the worst policy among countries that signed the 2021 commitment.

Italy breaks climate promise to end public financing for international fossil fuel projects, publishing ‘worst-in-class’ climate policy

  • Italy publishes policy that continues investments in new fossil fuel projects, breaking commitment made at 2021 UN COP26 climate summit.
  • Policy denies climate science and fossil fuel phase-out trajectories presented by the IPCC on the same day
  • Civil society calls for Italy to be kicked out of international agreement on fossil fuel finance phase-out (the Glasgow Statement)
  • Dangerous policy for Italy’s SACE export credit agency is by far the worst among group of countries that pledged action at COP26, campaigners say
  • Action confirms Italy’s climate laggard status, with a growing number of countries including UK, Canada, France, Denmark, Sweden, Finland, and New Zealand putting a halt to their fossil fuel finance

    ROME, ITALY — Italy’s far right government has broken a major climate pledge to end public financing for international fossil fuel projects, instead producing the worst policy among countries that signed the 2021 commitment.

    Just hours after the Intergovernmental Panel on Climate Change (IPCC) issued a ‘final warning’ that global emissions must fall, the Italian government late last night published a policy for the government export credit agency, Servizi Assicurativi del Commercio Estero (SACE). Reneging, on its promise, this policy allows fossil fuel support to continue long past the 2022 deadline, at odds with IPCC fossil fuel phase-out trajectories.

    SACE is the biggest public financier of fossil fuels in Europe. Between 2016 and 2021, SACE supported EUR 13.7 billion in fossil fuels. A study by Oil Change International last year revealed that SACE is considering financing for international fossil fuel projects with emissions equivalent to more than 3 times Italy’s entire annual emissions. 

    At the UN COP26 climate summit in 2021, 39 countries and financial institutions, including Italy, signed the Glasgow Statement on International Public Support for the Clean Energy Transition, committing signatories to end their direct international public financing for fossil fuels by the end of 2022, except in exceptional circumstances, and fully prioritize their public finance for the clean energy transition. A recent Oil Change International study showed that this commitment is already shifting USD 5.7 billion a year from fossil fuels to clean energy, and if all signatories meet their commitments, this will increase to USD 37 billion per year, a sum large enough to close the energy access finance gap estimated at USD 35 billion a year.

    The new SACE policy is directly/completely at odds with Italy’s Glasgow commitment. Instead of ending fossil fuel support by the end of 2022 as Italy promised, the policy allows support for gas extraction to continue until 2026, oil distribution until 2028, and oil transportation and refining until 2024. This is directly at odds with climate science. The Intergovernmental Panel on Climate Change’s (IPCC) and the International Energy Agency’s (IEA) credible scenarios that maintain a 50% chance to limit warming to 1.5°C have no new oil and gas extraction. In addition, there are no investments in new liquefied natural gas (LNG) infrastructure in IEA’s net-zero scenario.

    The policy also allows fossil fuel support for oil and gas at any time if any of a large number of ‘exemptions’ are met. These exemptions are vaguely-defined. For example, gas extraction can be supported if it supports ‘national energy security.’ Oil and gas transportation, storage and refining can be supported if it supports ‘energy security.’ For support for gas power in particular, eight separate possible exemptions are listed.

    The Italian government had already attempted to water down pledges to end fossil fuel financing late last year, lowering expectations for Italy’s own policy, but the policy now proves to be far worse than policies presented thus far by fellow signatories of the Glasgow Statement.

    Unlike Italy, the United Kingdom, Canada, France, Denmark, Sweden, Finland, New Zealand, and the European Investment Bank have almost completely ended their international support for fossil energy projects. These signatories leave no room for exceptions for investments in new gas fields or liquefied natural gas (LNG) infrastructure, showing that pursuing energy security goals can go hand in hand with efforts to end fossil fuel finance. 

    Adam McGibbon, Public Finance Strategist at Oil Change International said:

    “The Italian government’s fossil fuel restriction policy is a new low, with so many loopholes that it is effectively useless. This makes Italy a rogue state in Europe when it comes to climate change, and SACE will continue to be Europe’s largest fossil fuel financier. 

    “This policy simply denies the IPCC’s ‘final warning.’ SACE’s policy needs a complete rewrite, and until this happens, Italy should be kicked out of the Glasgow Statement.”

    Simone Ogno, Finance & Climate Campaigner at Recommon, said:

    “It’s clear that, behind the mantra of energy security, the interests being protected are those of multinational energy companies, commercial banks and export credit agencies such as SACE. 

    “If the gas framing was not enough, we also find approval for experimental and already unsuccessful technologies such as carbon capture, utilisation and storage (CCUS), not to mention the exemptions provided for the phase-out date of funding for midstream and downstream oil projects. We expected a poor implementation policy, but this is like not having any implementation at all.”

    NOTES

  • The Glasgow Statement was launched at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 26) in Glasgow. The 39 signatories (full list here) aim to “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022” and instead “prioritise our support fully towards the clean energy transition.” 
  • Oil Change International has compiled this implementation tracker that outlines country-level progress on implementation of the Glasgow Statement, which will be regularly updated in the lead up to and during COP27.
  • Oil Change International’s Public Finance for Energy Database shows that G20 countries and the major multilateral development banks (MDBs) provided at least USD 63 billion per year in international public finance for oil, gas, and coal projects between 2018 and 2020, 2.5 more than their support for renewable energy. 
  • In its latest report, the IPCC highlighted public finance for fossil fuels as ‘severely misaligned’ with reaching the Paris goals, but that if shifted, it could play a critical role in closing the mitigation finance gap, enabling emission reductions and a just transition. More background on the role international public finance plays in shaping energy systems is available in this Oil Change International briefing. 
  • A legal opinion by Professor Jorge E Viñuales from the University of Cambridge and Barrister Kate Cook of Matrix Chambers argues that governments and public finance institutions that continue to finance fossil fuel infrastructure are potentially at risk of climate litigation.
    In May 2022, 122 civil society organizations sent letters to signatories to the Glasgow Statement calling on them to meet their commitment. Letters to Germany, Italy, Canada, France, the US, and other non-G7 countries can be found here.

    More background on the role international public finance plays in shaping energy systems is available in this Oil Change International briefing.

    A legal opinion by Professor Jorge E Viñuales from the University of Cambridge and Barrister Kate Cook of Matrix Chambers argues that governments and public finance institutions that continue to finance fossil fuel infrastructure are potentially at risk of climate litigation.