Picture: REUTERS/DAVID GRAY
Picture: REUTERS/DAVID GRAY

The UK has corralled about 20 nations, including the US, to pledge to stop funding foreign fossil fuel projects, though the effect of the deal is undermined by the absence of key countries.

China and Japan hadn’t been expected to sign. Italy, a co-chair of COP26 climate talks, declined to sign, according to two people familiar with the situation. Germany remained in the balance late on Wednesday. A German spokesperson declined to comment; an Italian spokesperson wouldn’t comment.

A one-page statement will be unveiled on Thursday at the COP26 climate talks in Glasgow. 

The pact isn’t binding and would still allow limited support for foreign fossil fuel ventures. It excludes some of the biggest funders of fossil fuel projects and allows for exemptions. But it does mark a further tightening of the flow of money from public development banks to oil, gas and coal. 

The countries and four financial institutions signing the statement are set to include Canada, the US and Denmark — which announced a similar plan on its own on Wednesday. The European Investment Bank is also on board.

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The pact applies to new, direct public support for unabated fossil fuel energy projects — and sets a target date of the end of 2022. It has exceptions in “limited and clearly defined circumstances”. 

The UK also announced a separate pledge by dozens of institutions and countries to phase out coal power, including 18 nations, such as Vietnam, Poland and Chile, making such a commitment for the first time. 

Under the pact, nations aim to stop the use of coal-fired power generation in the 2030s and 2040s, and agreed to end investments in the sector both domestically and overseas. Still, the plan appears to fall short of the UK hosts’ initial COP ambition to “consign coal to history”. 

Both the Group of Seven and Group of 20 (G20) have already agreed to stop financing overseas coal projects. The UK, US and the EU have already announced restrictions on foreign fossil fuel finance. 

But the new initiative on overseas fossil fuel finance would force some to go further: the US, for example, would have to block funding from regional development banks such as the US Export-Import Bank and US International Development Finance Corporation, one of the people said. 

International public finance now is lopsided in favour of fossil projects. In 2020, the G20 nations alone contributed nearly $600bn to oil, gas and coal projects, according to BloombergNEF estimates.

The COP unit didn’t respond to a request for comment on the plan to end funding of foreign fossil fuel projects.

Bloomberg News. More stories like this are available on bloomberg.com

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