Time for Swedish leadership in carbon-free export finance

Despite positive steps taken by Swedish export credit agencies to stop its support to fossil fuel extraction and exploration, supporting projects in the oil and gas value chains is still allowed. Now is the time for Sweden to show climate leadership and to phase out export support to all fossil fuel energy projects, a new Swedwatch policy paper argues.

Significant progress has recently been made in the climate policies of Swedish export credit agencies. Since Swedwatch’s 2020 report on export finance to coal infrastructure in South Africa, export finance support to coal has been completely phased out. Furthermore, export credit agencies Exportkreditnämnden (EKN) and AB Svensk Exportkredit (SEK) have almost fully terminated support to projects relating to extraction of oil and gas, and established a Scientific Climate Council advising on issues related to the climate transition.

While this is encouraging, a new Swedwatch policy paper highlights that there is still a discrepancy between Sweden´s export credit system and its overall climate policies. Under current policies, projects in the oil and gas value chain, including power plants, refineries, and pipelines as well as transport and storage of fossil fuels, can still be supported. For instance, in 2019 EKN issued a 715 MSEK export loan guarantee to the natural gas plant in Luján de Cuyo in Argentina, which is part of gas infrastructure extending to the fracking fields of the Vaca Muerta shale formation in Patagonia. This is inconsistent with Sweden’s aim to be one of the world’s first fossil-free welfare nations, as well as the temperature goals of the Paris Agreement.

“Once a gas power plant or an oil refinery is built, its likely to be in operation for 30 to 40 years. As shown by the International Energy Agency’s net zero emissions scenarios, there is no room in the EU and OECD’s carbon budget for any new oil or natural gas-fired plants to be installed between now and 2035, and very little room for least developed countries to rely on this technology”, says Davide Maneschi, Programme Officer at Swedwatch.

Export credits to oil and gas projects granted by EKN 2019-2021

*The total amount is unknown due to secrecy being applied on information related to certain transactions. Data for 2021 concerns the period January-April. EKN’s exposure to fossil fuel energy projects between January 2019 and April 2021 amounted to less than 1% of EKN’s total transactions.

While the policy paper urges Sweden to align export credit policies with its climate goals, it also argues for climate policies to adopt a just transition perspective by valuing equity and justice for vulnerable communities, including workers.

“Climate transition literature support the notion that transitions adopting a rights-based approach, taking into account the impacts of the climate transition, are more likely to succeed. These impacts should however not be an excuse for delaying climate policy action”, says Maneschi.

Swedwatch also argues that Swedish policy makers should advocate for stricter policies in international fora, such as the OECD, and to join existing transnational initiatives. Ahead of the COP26 climate conference in November in Glasgow, the United Kingdom – which in March 2021 phased out export support to fossil fuel energy projects except in limited circumstances – has engaged in diplomatic efforts to secure signatories to a statement committing States and public finance institutions alike to ending public finance for fossil fuels. Meanwhile, Denmark and Costa Rica just launched the Beyond Oil and Gas Alliance (BOGA), a coalition of countries committing to phase out oil and gas production as well as public finance for fossil fuels.

“As other countries are now moving to align the export support space to international climate goals, Sweden should take the opportunity and join these initiatives, creating momentum at an international level for a transition away from fossil fuels”, says Maneschi.

More information:
Company responses:  Statement from EKN and SEK

Read the full policy paper

Related Swedwatch investigation:
Up in smoke: Human rights and environmental impacts of exportcredits to coal. The case of South Africa (2020)