Australia keeps promise to end international finance for fossil fuels, boosting hopes of OECD deal next week

The Australian government today published its policy to align its financing with the Clean Energy Transition Partnership (CETP, sometimes called the Glasgow Statement), fulfilling a promise it made a year ago to end the use of Australian government finance to fund fossil fuel projects abroad.

At the COP28 UN climate summit in Dubai, Australia signed the Clean Energy Transition Partnership, committing to end its international public finance for fossil fuel projects within a year. Recent research shows the CETP is working, with most signatories eliminating or considerably reducing their international fossil fuel financing. Collectively, signatories cut their international public finance for fossil fuels by up to two thirds since signing the agreement, a drop of USD 15 billion a year. Australia’s new policy will contribute to this progress.

Australia’s new policy will end the government’s public finance for fossil fuel projects overseas, which largely come from its government export credit agency, Export Finance Australia, with the new policy published online today by the Department for Foreign Affairs and Trade.

Although Australia has not been a major global provider of public finance for fossil fuel projects (providing an average of $78 million a year in finance for fossil fuel projects between 2019 and 2021) it has been involved in controversial projects that have caused Export Finance Australia to become the subject of legal action.

While campaigners are critical of Australia’s climate policies in many other areas – not least its status as one of only five Global North governments responsible for a majority of the entire world’s planned expansion of new oil and gas fields thorough 2050 – the publication of the Australian CETP policy is important progress. Australia must build on this progress to ensure a comprehensive approach to phasing out oil and gas in line with the 1.5C temperature rise limit. 

The publication of Australia’s policy helps increase momentum for a global, binding deal that can end $41 billion a year in oil and gas export financing at the OECD, where Australia will be among countries partaking in final negotiations next Tuesday, 10th December. With the EU, US, UK, Canada, Norway, Australia and New Zealand all supporting fossil fuel restrictions a deal is within reach. This would free up significant sums in public money for clean energy instead. 

A deal would be difficult to undo by any one country, making this a last opportunity for President Biden to reach a ‘Trump-proof’ climate deal. With Australia aligning its financing with the CETP, this creates a further incentive for Australia and other CETP countries to create binding OECD rules restricting export finance for fossil fuels from all OECD countries, creating a ‘level playing field’ for trade. Reportedly, Korea and Türkiye are the last countries that still need to be convinced to support the agreement.

Adam McGibbon, Campaign Strategist at Oil Change International, said:
“Australia’s move to cut off fossil fuel financing abroad adds crucial momentum to next week’s OECD negotiations, where ending $41 billion in global fossil fuel funding hangs in the balance.

“The clock is ticking for Prime Minister Albanese. With Korea and Türkiye as the final holdouts, his diplomatic influence could help seal a deal that not only accelerates our clean energy future but protects it from political reversals. One phone call could help change the course of climate action.”

James Sherley, Climate Justice Campaigner at Jubilee Australia, said:
“We welcome recent legislation in the Australian parliament, writing CETP into law and effectively ending Export Finance Australia as a pipeline for fossil fuel expansion.

“Though Australia is a major coal and gas exporter, the Albanese government is taking steps to honour its commitments to phase out public support for the international fossil fuel sector. If we can do it, so can Korea and Türkiye.”

NOTES TO THE EDITOR: 

• The new Australian policy is 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).
• Oil Change International has compiled this implementation tracker that outlines country-level progress on implementation of the CETP.
• Oil Change International’s Public Finance for Energy Database shows that between 2020 and 2022, G20 governments and the multilateral development banks (MDBs) provided $142 billion in international public finance for fossil fuels, almost 1.4 times their support for clean energy in the same period ($104 billion). 
• A deal to end export finance for fossil fuels at the OECD would shift $41 billion a year out of fossil fuels, freeing it up for clean energy.
• 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. More background on the role international public finance plays in shaping energy systems is available in this Oil Change International briefing.