Reaction to new U.S. Fossil Fuel Energy Guidance for Multilateral Development Banks

FOR IMMEDIATE RELEASE

August 16, 2021

Contact:
Collin Rees, collin@priceofoil.org
Bronwen Tucker, bronwen@priceofoil.org

Oil Change International reaction to new U.S. Fossil Fuel Energy Guidance for the Multilateral Development Banks
Today, the U.S. Treasury Department released updated fossil fuel energy guidance for the multilateral development banks (MDBs), in line with U.S. President Joe Biden’s January Executive Order 14008. 

The guidance rules out U.S. support for nearly all MDB finance for coal and oil projects, including through policy-based operations and financial intermediaries, while endorsing continuing financing of midstream and downstream gas projects if certain conditions are met. These conditions allow the U.S. to continue to vote in favor of midstream and downstream gas projects in poor and vulnerable developing countries where no clean energy alternatives are feasible, where there are strong development, energy security, or energy access benefits, and where the project is aligned with the Paris Agreement as outlined by the joint MDB Paris-alignment methodology. 

In response, Oil Change International experts released the following statements: 

Bronwen Tucker, Research Analyst at Oil Change International: 

“The Biden Administration had a clear opportunity to take a stand against financing for fossil fuels at MDBs, but it is in danger of missing the mark. Any credible analysis of the clean alternatives, development impacts, and Paris Agreement alignment the guidance says it will test for would find that new gas projects should not be financed. Unfortunately there is little in today’s announcement that makes clear how the U.S. will apply these conditions in its voice and vote at the MDBs. 

“The U.S. has a large sway at the MDBs, and so it’s critical that President Biden and Secretary Yellen add clear and strict details to their proposed gas finance conditions immediately. Otherwise up to 40% of the total fossil fuel finance from the MDBs where the U.S. is a member could continue. That’s $1.6 billion per year for gas pipelines, power plants, and LNG terminals that the climate and frontline communities can’t afford.”

Collin Rees, Senior Campaigner at Oil Change International: 

“President Biden and Secretary Yellen’s refusal to oppose public finance for all fossil fuels is deeply concerning. Even one penny of public money going to deadly fossil gas projects is unacceptable in the midst of our climate emergency.

“New gas projects are not aligned with the Paris Agreement. Clean alternatives are already cheaper than gas almost everywhere, and this guidance could saddle the lowest-income countries with out-of-date energy and lead to frontline communities continuing to face deadly impacts from gas projects. Instead of doubling down on gas, Biden and Yellen should focus on ensuring adequate U.S. and MDB support to pursue a just transition to renewable energy in these countries.

“Today’s announcement is proof that the era of public finance for fossil fuels is coming to a close, but gas continues to be a deadly sticking point. The United States can’t be a credible climate leader at COP26 while using public money on fossil fuels — climate leaders don’t support new gas projects.”

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Notes for Editors: 

– The U.S. Treasury’s new fossil fuel energy guidance at MDBs can be found here: https://home.treasury.gov/system/files/136/Fossil-Fuel-Energy-Guidance-for-the-Multilateral-Development-Banks.pdf

– The UK, European Union, and the European Investment Bank have all made recent commitments to stop public financing of all fossil fuel projects with rare exceptions. The International Energy Agency and United Nations Secretary General have provided important signals in the same direction, calling for governments to end finance for new fossil fuel projects and phase out fossil fuels — including gas — if we are to limit warming to 1.5C.

– In the case the Treasury Guidance conditions are not well applied, Oil Change International data shows that up to 40% of the total fossil fuel finance from MDBs from 2018 to 2020 — USD 1.6 billion per year —  could continue to be supported by the United States under these new guidelines. This is the amount that went to midstream and downstream gas project finance in IDA, fragile and conflict-affected, and small island developing states the U.S. Guidance states they may continue to vote in favor of. This includes finance from the MDBs where the United States is a member: World Bank, Inter-American Development Bank, Asian Development Bank, African Development Bank, and European Bank for Reconstruction and Development. 

– Earlier this year, after passing a policy to end its international public finance for fossil fuels with rare exceptions, the United Kingdom announced that it would “convene a vision for how other countries, public and private financial institutions and multilateral development banks can accelerate the energy transition by collectively shifting international support from all forms of fossil fuels to clean energy.” The UK is also the COP26 host, and so this Summit is an important opportunity for international leadership on fossil free public finance.