World News

A Canadian-led proposal to end international oil subsidies is dying with the incoming Trump administration

A deal to end public funding for offshore oil projects – which Canada led in a global partnership – has died in the face of key stakeholders and the incoming administration of US president-elect Donald Trump.

Canada, and the UK and the European Union, proposed by 2023 to end financing through export credit agencies – government agencies that support foreign trade – for oil and gas projects abroad and divert money to clean energy.

The United States under President Joe Biden supported the agreement after the presidential election in November of last year, starting the race to get the agreement before Trump's inauguration. In the end, it wasn't enough time.

The Organization for Economic Co-operation and Development (OECD) confirmed in a statement sent to CBC News that an agreement was not reached despite months of negotiations.

In the OECD, a unanimous agreement is required for any agreement. Despite the delay in US support, other countries that participated were Turkey and South Korea, due to energy security and economic concerns.

Trump, who has said he wants to expand oil drilling and is filling his cabinet with leaders friendly to the oil industry, is not expected to support the deal to cut fuel costs.

Prime Minister Justin Trudeau and Environment Minister Steven Guilbeault appear at the UN climate conference COP26 in Glasgow, 2021. Canada and other countries are joining the proposals in the conference to reduce the financial limit of the community of fossil fuels. (Sean Kilpatrick/The Canadian Press)

Nina Pušić, climate strategist for export finance at Oil Change International, an advocacy group following the talks closely, said it was “a huge missed opportunity on climate.”

“I think the big picture is that if we want to reach the goals of the Paris Agreement, we need our public money to finance the clean and fair energy transition, instead of digging a hole for fossil fuels,” Pušić said. .

How public finances drive dangerous fossil investments

The proposal by the OECD, a group of 38 developed countries, stems from a pledge made at the 2021 UN climate conference in Glasgow to end these types of fossil fuel subsidies and divert money to clean energy.

The proposal is aimed at a specific type of fossil fuel subsidies – those offered by export credit agencies for international projects. Government financing that helps to postpone projects that may be risky and have difficulty obtaining initial funding from private investors and banks. Once public funds are available, projects may have an easier time securing additional private funding.

In Canada that organization is Export Development Canada (EDC), which provides financing, bond and insurance products for international projects involving Canadian businesses, with the aim of promoting trade between Canada and other countries.

US President Joe Biden's administration initially did not support the OECD talks to end international financial aid, but supported the talks after the election in November. In the end it was too late.
US President Joe Biden's administration initially did not support the OECD talks to end international financial aid, but supported the talks after the election in November. In the end it was too late. (Evan Vucci/The Associated Press)

“One of the reasons why export credit agencies are also very important is that they de-risk investments. So they provide a loan guarantee or some kind of project cover, which then invites private sector investment,” said Pušić.

“That's why they provide such an important type of role in this environment to support the petroleum industry.”

The US Export-Import Bank, for example, offered a US$500 million loan for a gas project in Bahrain in 2024 and a US$100 million loan for an oil refinery in Indonesia in 2023. In the final days of the Biden administration, the bank approved. another $500 million for a large hydroelectric plant in Guyana.

Export Development Canada, the country's export credit agency, finances oil and gas projects internationally and domestically. Committed to ending direct international financing of oil and gas.
Export Development Canada, the country's export credit agency, finances international and domestic oil and gas projects. Committed to ending direct international financing of oil and gas. (Sean Kilpatrick/The Canadian Press)

Why did some countries hold the agreement

One of the biggest obstacles, South Korea, blocked the talks due to concerns about its domestic industries supporting liquefied natural gas (LNG). South Korea is the world's second largest fossil fuel investor, largely due to being a major builder of LNG carriers, which transport fuel around the world.

“However, given the global energy transition that is already underway, Korean companies that maintain an outdated focus on fossil fuel projects will find themselves lagging behind,” said Dongjae Oh, who heads gas industry research at the Korean think-tank Solutions for. Our Weather.

“The best thing to do to maintain competitiveness is not to invest in renewable energy systems,” he said.

Korean officials also expressed concern that the country was not ready to transition away from fossil fuels for its energy needs, and needed more time, according to Oh. He said Korea spent about US$10 billion in foreign investment in 2020-22, and that amount is likely to increase.

The way forward for countries

Kate DeAngelis, deputy director of economic policy at Friends of the Earth US, said that countries like Canada that support the proposal should continue to negotiate despite the political changes in Washington.

“It's important to remember that under the first Trump administration, OECD countries were able to tighten the restrictions on coal that were put in place,” said DeAngelis.

“These governments cannot use that as an excuse to drop the ball.”

Incoming US President Donald Trump has pledged to boost oil production and is not expected to support any international proposals to defund fossil fuels.
US President-elect Donald Trump is committed to promoting oil production and is not expected to support any international proposals to defund fossil fuels. (Alex Brandon/The Associated Press)

In 2023, Canada announced that it would be finish “Inefficient” fossil fuel subsidies — subsidies that encourage high carbon emissions and hinder the transition to cleaner energy. Despite this, report by the Environmental Defense advocacy group found that Canada is still spending billions on oil and gas subsidies.

Meanwhile, EDC they promised ending direct financing of international petroleum projects, but it is also a a major sponsor of domestic oil and gas.

DeAngelis said despite the lack of an OECD agreement, countries can double down on existing pledges by eliminating loopholes and participating in all residual subsidies.

“States are very good at making commitments. The hardest part is making sure they stick to them,” DeAngelis said.


Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button