EU must urgently review its outdated policy on export credits

Despite promises to make financial flows consistent with a low-carbon economy, EU member states continue to provide financial support to the fossil fuel industry through export credits. It is time that the EU Commission replaces its outdated policy with new and ambitious regulation, prohibiting export support to oil and gas, says Swedwatch in a policy paper published today.

-Export credit agencies are the world’s largest international public financiers of fossil fuels. In the EU, the lack of an ambitious regulatory framework allows for oil and gas projects to continue to be supported through state-backed export finance, undermining EU contributions to climate goals. This gap needs to be urgently addressed, says Davide Maneschi, climate change program officer at Swedwatch.

Export credit agencies (ECAs) have a critical role in the energy transition, as they de-risk large scale infrastructure and energy projects. However, in the period 2019-2021, some six years after the Paris Agreement was signed, G20 export credit agencies provided seven times more support for exports of fossil fuel projects than for clean energy.

Between 2015 and 2020, ten of Europe’s largest ECAs granted support for about €30 billion to fossil fuel-related activities. While some EU member states prohibit this kind of support, others continue to allow for state-backed investments in fossil fuels. Recently, Italy adopted a new policy allowing for continued support to oil and gas for many years to come and Germany has not yet adopted a policy which is coherent with its climate commitments.

-Even if a few EU countries have taken the initiative to phase out fossil fuel support from export finance, the EU has a key role to play in implementing a policy that puts an end to fossil fuel-related export finance by all member states. This would ensure that the EU is at the forefront of the climate transition, and create a level playing field for national ECAs, says Davide Maneschi.

In a policy paper published today, Swedwatch calls on the European Commission to promptly initiate a reform of the regulatory framework on the activities of ECAs, ensuring that they are aligned with the Paris Agreement 1.5°C climate change mitigation goals and EU climate objectives. The framework needs to be accompanied by strong policy measures accelerating climate finance and contributing to a just energy transition towards a low-carbon and climate-resilient development.

-EU governments and public entities must use public finance to prioritize investments that truly address the climate crisis and forward climate justice. This includes a stop for support to the fossil fuels industry and the promotion of a just energy transition with human rights at the centre, says Davide Maneschi.

In the policy paper, Swedwatch also calls on the EU to beware false climate solutions and ensure that unproven and potentially counterproductive fossil-fuel based technologies do not receive favourable export finance support.

Carbon capture and sequestration, carbon markets, hydrogen and ammonia are often purported as solutions to climate change but can in fact increase dependence on fossil fuels and delay the phaseout of coal, oil, and gas.

Read more here:
EU must urgently review its outdated policy on export credits - Swedwatch

The policy paper "Key considerations for sustainable European
export finance" is attached.