Twenty countries, including the United States and Canada have agreed to stop public funding of fossil fuel projects abroad by the end of 2022 and instead steer spending into clean energy.
The commitment has been termed as a “historic” step by climate change campaigners, although it did not include major Asian countries responsible for the bulk of such financing abroad such as China.
The deal goes much further than the pledge by the G20 countries to halt overseas funding of coal powered energy plants.
The twenty countries that signed the pledge include Denmark, Finland, Italy, Costa Rica, Gambia, Ethiopia, the Marshall Islands, New Zealand and five development institutions including the European Investment Bank and the East African Development Bank.
“We will end new direct public support for the international unabated fossil fuel energy sector by the end of 2022,” they said in a declaration.
This covers coal, oil and gas projects that are “unabated”, which means they burn fossil fuels without using technology to capture the resulting CO2 emissions.
The deal allows for exemptions in unspecified “limited” circumstances, which however must be consistent with the Paris Agreement’s target to cap global warming at 1.5C.
According to an analysis by Oil Change International, a non profit organization, countries that signed the pledge have together invested nearly $18 billion on average each year in international fossil fuel projects from 2016-2020.
No Asian countries were included.
China, South Korea and Japan are the biggest backers of foreign fossil fuel projects in the G20, with most of that support going to oil and gas projects.
COP26 is also increasing pressures on financial institutions and governments to stop funding coal, oil and gas projects responsible for producing the greenhouse gas emissions that are driving climate change, both at home and abroad.
“The world has no more space or time left to accommodate the expansion of fossil fuel energy,” said Lidy Nacpil of the non-profit Asian Peoples’ Movement for Debt and Development.
Earlier this year, while Britain stopped direct government support for new fossil fuel projects overseas, on Wednesday, Denmark said it would do the same, with exemptions for some gas projects that meet “strict conditions” until 2025.
The European Investment Bank has also committed to end oil and gas project funding by this year.
According to analysts at Bernstein, investments of around $2 to 4 trillion per year in low-carbon sectors and industries until 2050 to keep the global temperature from rising by more than 1.5 degrees Celsius.