Germany Continues to Breach International Climate Pledge, Increasing Outlier Status 

The German government is set to further distance itself from international norms and jeopardize energy security and affordability, releasing a draft policy today for Euler Hermes, the German export credit agency, which would allow the agency to eliminate 40% of the climate assessments it carries out when approving finance for international projects.

At the 2021 UN climate conference in Glasgow, Germany joined the Clean Energy Transition Partnership (CETP), pledging to end its international public finance for fossil fuels. The German government has never fully fulfilled its pledge, and has approved USD 1.5 billion in fossil fuel finance since joining the agreement, making it the second largest violator. Earlier this month, Oil Change International revealed how Germany is already breaching its current policy, with German public finance enabling fossil fuel expansion in the Brazilian Legal Amazon. Meanwhile, many of Germany’s peer countries – including France, the UK, Canada, Spain and others have helped bring down international public finance for fossil fuels by 78% compared to pre-CETP levels.

The new German policy – out for consultation until 9th October – retains loopholes from the 2023 policy for financing gas power plants, where plants can be funded if they are ‘hydrogen-ready’ or if they start to use hydrogen in 2035. This allows plants to be financed with vague promises that they might use hydrogen – an expensive technology largely produced from fossil fuels – in the future. Similarly, gas plants can be financed if they promise to use Carbon Capture & Storage (CCS) – an unproven technology with a 50-year history of failure – from 2035. In effect, this allows gas plants to be financed despite climate science saying no more can be built.

In an email to consultation respondents, the German export credit agency notes that their proposed changes will “eliminate 40% of climate assessments”, meaning that there will be less scrutiny on Germany’s international financing. This represents a watering-down of the government’s 2023 policy on international fossil fuels, falling even further short of Germany’s 2021 promise. 

This weakening of Germany’s export finance policy would undermine the country’s international credibility, expose taxpayers to growing financial risks from stranded fossil fuel assets, and risk putting Germany in breach of its obligations under international law. Amid growing urgency to reduce reliance on fossil fuel imports and transition to homegrown, affordable renewable energy, Germany’s guidelines should instead be strengthened.

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

“This proposed policy is anti-science – it runs against everything that the world’s scientists are telling us. No new fossil fuel infrastructure can be built if the world is to meet climate targets, nor does it make economic sense, and yet this watered-down policy will allow less climate assessment of projects and will allow fossil fuel infrastructure to be built today if project owners make vague promises about using false solutions like hydrogen and CCS in their projects in 2035.

“To reduce fossil fuel import dependency and accelerate Germany’s transition to the reliable and affordable renewables that will boost Germany’s economy, Germany should strengthen, not weaken its policy.”

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Notes to the editors: 

• The consultation document is available in German here and English here.
• At the 2021 COP26 UN climate summit in Glasgow, 39 countries and institutions – including many EU states, the United States, and Canada – launched the Clean Energy Transition Partnership (CETP, sometimes called the Glasgow Statement), committing to end direct international public finance for fossil fuel projects. Norway and Australia joined the CETP at the 2023 COP28 summit in Dubai. (Full list of signatories here).
• The IPCC’s AR6 report highlights 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.