Press Release (Monday September 30 2019)
Government rejects EAC’s call to end support for fossil fuel energy projects overseas and allows eleven times increase in “dirty” investment by UK Export Finance
The Environmental Audit Committee’s UK Export Finance Report published in June identified an ‘unacceptably high’ level of support for fossil fuel projects in poorer countries and called for an end to Government investment in new fossil fuel energy projects from 2021.
UK Export Finance’s Annual Report 2018-19, published later that month, revealed a ballooning in support for fossil fuel projects over a 12-month period.
Environmental Audit Committee Chair Mary Creagh MP said:
“It is unbelievable that, despite an elevenfold increase in support for fossil fuel energy projects last year, the Government has rejected our call to end taxpayer money being poured into new high carbon projects by 2021.
“We called for the Government to commit to only back British business export projects that support the UK’s climate goals. Their refusal to do so completely undermines the Government’s commitment to get to net zero emissions by 2050. “People expect their political leaders try to stop, not accelerate, the pace of climate breakdown.”
UK Export Finance agreed to share with EAC the exact support figures for fossil fuels and renewable energy projects for 2018/19.
- UKEF’s 2018/19 figures show support for fossil fuel energy projects increased eleven times from £183 million in 2017/18 to £2.049 billion maximum liability in 2018/19.
- Support for renewable energy projects fell from £69 million to £46 million maximum liability.
Among key recommendations in UK Export Finance Report with Government Response:
ENDING FOSSIL FUEL INVESTMENT:
We recommend that UKEF’s fossil fuel investment should finish by the end of 2021.
At the very least, UKEF should follow Sweden’s Export Credit Corporation (SEK) in introducing a 5% cap on gross lending to fossil fuel operations (coal oil and gas) as a proportion of total support.
From Government response:
- “To end UKEF’s support for fossil fuel projects by the end of 2021 would not achieve an effective or “just” transition for UK workers into the low carbon economy and would be too rapid to support the transition that the UK’s oil and gas industry is beginning to make towards lower carbon and renewable energy sources. ln developing countries, energy security is a key component for development and poverty alleviation and these countries will continue to need to use a mix of energy sources.”
- “We would note that, in introducing its cap on fossil fuel support, SEK does not have the same “just transition” considerations as does the UK since Sweden does not have a significant oil and gas sector.”
TRANSITION TO NET ZERO:
UKEF to commit to only support British businesses in projects that support the UK’s climate goals.
From Government response:
- “The projects UKEF supports can have positive developmental and climate impacts, however UKEF’s primary statutory mandate is to support UK exports. UKEF’s support is demand-led and provided where overseas buyers have chosen to procure from the UK supply chain and are seeking financing support.”
UK Government should set out how UKEF will work towards net-zero emissions by 2050 to show climate leadership and a willingness to align the UK’s domestic and international approaches to job creation and climate change.
From Government response:
- “UKEF is working with other government departments to ensure that UKEF appropriately takes into account the UK’s international climate commitments, including the Paris Agreement, in its activities. However, the emissions released by UKEF supported projects overseas will be subject to the limitations imposed by the Nationally Determined Contributions agreed by host governments as part of their Paris Agreement commitments rather than any commitments made by the UK. The emissions from these projects are owned and managed by other countries and not the UK or UKEF.”
RINGFENCE MONEY TO SUPPORT DEVELOPING CLEAN TECHNOLOGIES:
UKEF returned £500m to the Treasury in the last 5 years. Noting that key technologies to achieve net-zero emissions are still to be developed fully, we recommend that Treasury ringfences at least 20% of money returned by UKEF from all historic category A (highest risk to environment) projects as well as all projects with forecast emissions of more than 25,000 tonnes of CO₂equivalent per year, for at least the next ten years. This money should be invested in renewable energy and low-carbon transition research and development.
From Government Response:
- “The Government recognises the importance of supporting renewable energy and low-carbon transition research and development, but does not agree with the proposed approach. Hypothecating income in this way would restrict our ability to respond flexibly to changing priorities or react quickly to unforeseen circumstances… The UK is already a world leader in clean growth.”
UK Export Finance (UKEF) is the operating name of the Exports Credits Guarantee Department, the UK’s export credit agency (ECA). Its mission is “to ensure that no viable UK export fails for lack of finance or insurance, while operating at no net cost to the taxpayer.” UKEF works with around 70 private credit insurers and lenders to help UK companies access export finance.
Over a five-year period, 21% of UKEF’s support (£2.6 billion) went to the energy sector.