These commitments represent important steps on the way to achieving a global climate transition and are the fruit of intensive efforts by advocates for reform, especially from civil society and pro-active governments. In the context of the global energy crisis following Russia’s invasion of Ukraine, however, governments of the G7 factored out “publicly supported investment in the gas sector [that] can be appropriate as a temporary response […]” from the previous COP26 commitment (G7 Germany, 2022, p. 5). This is a clear backslide given the long-lived nature of liquefied natural gas (LNG) infrastructure that may well spur new and additional production and use of fossil gas well beyond the current energy crisis, especially if ‘temporary’ remains a term for an undefined period. At the same time, this exception allowed Japan to endorse the G7 Leaders’ Communiqué.
In addition to the commitments and initiatives mentioned above, it is necessary to consider the highly concentrated nature of public support for fossil fuels in a limited number of countries among the G20. According to OCI (2024b), between 2020 and 2022 ECAs provided an annual average of USD 32 billion in fossil fuel finance of which 74% came from Canada, Korea, and Japan alone. For some countries, like Canada, most of this support is granted at the domestic level and is therefore unaffected by the COP26 Statement (Censkowsky et al., 2022a). Other G20 countries including Russia, India and Saudi Arabia either use other public or private channels to support fossil fuel energy investments, or vastly under-report on their energy sector finance.
This data snapshot demonstrates the insufficiency of commitments emerging from the current coalition and club landscape, especially in the case of Canada (high share of domestic fossil fuel support), China (outside of all commitments, no Participant to the OECD Arrangement) and South Korea (no G7 member, no COP26 Statement signatory). It is hence an urgent priority of working towards enlarging existing clubs and coalitions while not backsliding on their ambition. Indeed, the IEA has repeatedly called for ending all new fossil fuel supply developments on the path to Net Zero, including fossil gas, by the end of 2021 (IEA, 2021, 2022, 2023). Meanwhile, Tienhaara et al. (2022) report more than 55,000 new upstream O&G projects in 159 countries for which a final investment decision is expected between 2022 and 2050 that would need to be cancelled in line with the IEA Net Zero pathway. Many of these projects benefit from public support, including
export finance for necessary equipment and risk insurance, or multilateral investment treaties that play a major role in protecting investments in the fossil fuel industry against all kinds of risk, including transitional climate risks (OECD, 2022a).
In the past, ECAs “have done little to steer their portfolios in one direction or another […] [and] the respective portfolios to date mostly reflect the composition of the national export industry (E3F, 2022, p. 2). This noteworthy observation was the baseline and key motivation for Perspectives Climate Research to develop a dedicated methodology to assess the alignment of ECAs with the Paris Agreement (Shishlov et al., 2021a). Based on these assessments, we seek to inform ongoing reform processes through targeted policy recommendations for governments and ECAs to drive climate action in the global export finance system. In short, the methodology consists of five assessment dimensions, 18 key questions and 72 concise benchmarks against which an ECA portfolio and strategy as well as relevant government policy are assessed.