Leaders’ Club Cuts Fossil Fuel Finance but Falls Short on Clean Energy Support
Signatories of the Clean Energy Transition Partnership (CETP) have cut their international public finance for fossil fuels dramatically since signing the agreement but are underdelivering on the clean finance pledge, a new report shows.
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Leaders’ Club Cuts Fossil Fuel Finance but Falls Short on Clean Energy Support
Countries need to scale up finance for renewables faster and close loopholes that allow continued fossil fuel investment.
August 28, 2024 — Signatories of the Clean Energy Transition Partnership (CETP) have cut their international public finance for fossil fuels dramatically since signing the agreement but are underdelivering on the clean finance pledge, a new report shows.
Under the CETP, 39 countries and public finance institutions made a world-first pledge at the 2021 United Nations Climate Change Conference (COP 26) to end international public finance to fossil fuels. A year after the deadline, most CETP signatories—including Canada, the United Kingdom, France, and the European Investment Bank—have met their promise. Collectively, signatories sent USD 5.2 billion to the fossil fuel sector in 2023, a reduction of up to two thirds from a 2019–2021 baseline. The pact is working.
However, signatories are making less progress on their commitment to prioritize support for clean energy. In 2023, CETP members delivered USD 21.3 billion to clean energy, an increase of just 16% from the 2019–2021 baseline and less than the USD 26 billion delivered in 2022. Most of this went to developed countries—Spain, Germany, and Poland were the three biggest recipients. Of finance to lower- and lower-middle-income countries, 83% was delivered as loans, contributing to the worst debt crisis in history.
Natalie Jones, lead author of the report and policy advisor at the International Institute for Sustainable Development, says: “It’s great to see leaders axing international public finance to coal, oil, and gas, which is incompatible with a safe climate. Now they must match that with scaled-up investment in clean energy for all, including targeted support for the countries that need it most.”
Some CETP members either failed to update their policies or partially restricted fossil fuel finance but left big loopholes. The United States, Italy, and Germany reduced but did not eliminate support for coal, oil, and gas, while Switzerland increased it.
Adam McGibbon, campaign strategist at Oil Change International and report co-author, says: “The CETP is a global success story that’s having a real-world impact in shifting finance away from fossil fuels—but this is despite the broken promises of the U.S., Italy, Germany, and Switzerland. These countries need to live up to the promise they made in Glasgow or face growing international pressure to change.”
If fully implemented, the CETP could shift USD 28 billion a year from fossil fuels to clean energy. With the next round of climate talks in Baku, Azerbaijan, this November set to focus on finance, this would send an important signal, the report highlights.
The report Out With the Old, Slow With the New, published today, sets out five ways for CETP members to build on their progress:
- Adopt robust fossil fuel exclusion policies across all agencies providing international public finance if they have not yet done so.
- Set ambitious targets for scaling up clean energy finance, with exclusions for unproven solutions like blue hydrogen and carbon capture and storage.
- Target support to countries that need it most, with grants and highly concessional instruments for lower-income countries.
- Update national and institutional policies and strategies to prioritize international support for clean energy.
- Match international policies with domestic climate leadership by ending domestic fossil fuel finance and subsidies, banning new licences for oil and gas production, and phasing out fossil fuel extraction on a globally just and 1.5°C-aligned timeline.
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