New Zealand implements policy to live up to commitment to end international fossil fuel finance raising pressure on Australia to follow suit

Aotearoa New Zealand has joined a growing list of countries making good on a key pledge from the UN COP26 climate summit in Glasgow last year, by releasing a new policy ending almost all support for fossil fuels via the New Zealand Export Credit Office (NZEC). The policy was released shortly before Canada, the second largest international provider of international fossil fuel support after Japan, released its policy to deliver on the same commitment.  

While recent analysis shows that NZEC has not historically been a large provider of fossil fuel support or of energy finance more broadly, the publication of this policy shows that New Zealand is committed to uphold its multilateral commitment to end fossil fuel finance, and that others must follow suit. 

At the last year’s UN climate summit, COP26 in Glasgow, 39 countries and institutions, including Aotearoa New Zealand, committed 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. If all signatories follow through on their pledges with integrity, this will directly shift USD 28 billion a year from fossil fuels to clean energy and help shift even larger sums of public and private money.

Realizing this shift is critical to tip the international public finance balance in favor of clean energy. Between 2019 and 2021, the G20 countries and Multilateral Development Banks (MDBs) provided nearly two times as much public finance for fossil fuels (USD 55 billion) as for clean energy (USD 29 billion) every year. 

Aotearoa New Zealand’s new policy clarifies that it will not provide support to fossil fuel sector activities including: exploration, extraction, production, transportation, storage, and refining of oil, fossil gas, and coal, fossil fuel-fired plants, and supporting infrastructure. This applies to all of NZEC’s contracting parties as well as the end-beneficiaries of the goods or services supported, where this is possible to determine. The policy covers all NZEC’s products and services, including support for domestic supply chain transactions and export transactions, making it one of the strongest policies currently in place for aligning Export Credit Agencies (ECAs) with climate goals.

The policy provides an exemption for continued support for generation and other downstream activities in developing countries and in humanitarian crisis contexts. A 1.5°C alignment criterion applies to such support, which  if implemented with integrity should not lead to any new guarantees for long lived fossil fuel-powered generation infrastructure, as this is incompatible with 1.5C and alternatives are available and affordable and can ensure security of supply. 

Aotearoa New Zealand joins the UK, France, Finland, Denmark, the European Investment Bank, Sweden, Belgium, the Netherlands and, most recently, Canada, in publishing policies restricting fossil fuel finance to deliver on the COP26 commitment. Countries that have yet to deliver on their promise to end fossil fuel finance with only 3 weeks left of the end of 2022 deadline include Germany, Spain, and Italy. The United States has adopted a policy, but it is not publicly available.

Aotearoa New Zealand now stands in a strong position to expand this leadership to the OECD Arrangement on Officially Supported Export Credits, of which it is one of ten negotiating country members. Oil and gas restrictions under the OECD Arrangement are essential to align Export Credit Agencies with a 1.5°C warming limit and ensure public finance is utilized to support the transition to fully renewable energy systems worldwide. 

This leadership in mandating aligning international public finance with climate goals must be also taken on by neighboring country Australia. Export Finance Australia supported an average of 78 million USD in fossil fuels per year from 2018-2020, and has an opportunity to join the Glasgow pledge and shift this finance to help tip the global public finance for energy balance in favor of clean energy. 

Nina Pušic, Export Credit Agency Climate Strategist, Oil Change International, said:

“Aotearoa New Zealand’s strong implementation of its pledge to end international fossil finance is especially welcome as we await remaining signatories that have yet to deliver on their pledge,  Italy, Germany and Spain, to take similar action. In addition, this move can encourage neighboring country Australia to follow suit and join efforts to shift international public finance to clean energy.

The logical next step for New Zealand’s government and its Export Credit Agency (NZEC) is to internationalize these restrictions at the OECD the next time negotiators meet in March 2023. New Zealand has an opportunity to work together with other first mover countries like the UK and the EU to table a proposal for robust, OECD-wide oil and gas export finance restrictions. This is critical to get on track to limit global warming to 1.5°C and live up to climate commitments.” 

Alva Feldmeier, Executive Director, 350 Aotearoa (New Zealand) said:

“The announcement from the Export Credit Office to restrict public finance for fossil fuel energy is an important first step from our government to align our public finance principles with the changes needed to keep global warming below 1.5 degrees. But more action is required.

The next logical step for New Zealand’s climate leadership on public finance is to go a step further and cover the Crown Financial Institutions (CFI’s) who have millions invested in fossil fuel companies such as Gazprom, Shell, OMV, and ExxonMobil. Our people-powered movement has been campaigning on the Accident Compensation Corporation to divest from fossil fuels since June 2020. During this time we have seen the Minister of Finance advise the CFI’s to further their divestment efforts and we’ve witnessed the public entities implement new investment practices to lower their carbon-intensive shareholdings. We are holding out for policies that mandate the full-exclusion of public finance for fossil fuel companies. If it’s wrong to wreck the planet – it is wrong to profit from it.”

Barry Coates, Founder and CEO, Mindful Money, said:

“This is a welcome policy announcement from the New Zealand government. It follows previous policies to ban offshore oil and gas exploration, mandatory climate disclosure and the exclusion of fossil fuel companies from default superannuation funds. These are welcome steps, but domestic action on decarbonisation has been too slow and has done little to reduce emissions. Mindful Money is calling for the government to ramp up finance for climate solutions, including stronger action through Crown Financial Institutions, Callaghan Innovation, NZ Capital Growth Partners and government agency procurement and programmes.

We now need our Australian neighbors and other countries to end export credits for fossil fuels. There is no excuse for export credits or any other public subsidies to continue propping up fossil fuel production.”

Luke Fletcher, Executive Director, Jubilee Australia said:

“We welcome this announcement from across the Tasman that New Zealand is stepping up to end public financing for overseas fossil fuel projects. New Zealand’s move shows Australia how to be a good neighbor to our Pacific friends, who are already facing the brunt of climate impacts. The Albanese Government should immediately follow the example from Aotearoa and commit to the Glasgow statement.”

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