Rich nations running out of time to curb oil and gas funding

A GROUP of developed nations will make a new push to resolve differences amid fading prospects for a deal to restrict funding of foreign oil and gas projects by their export credit agencies.

Organisation for Economic Cooperation and Development (OECD) members have held talks on an initiative put forward by European nations last November without reaching any consensus. They face a narrowing window to strike a deal before the US presidential election and Cop29 UN climate summit.

Fresh discussions will aim to overcome opposition to the plan from South Korea and Turkey, and take into account feedback provided last week by the US on the existing proposal, according to sources familiar with the matter, who requested anonymity to discuss private talks.

The OECD is seeking to expand a ban on the financing of unabated coal-fired power plants adopted in 2021. Members are scheduled to hold a virtual meeting in early October, with a vote on the issue possible as soon as November, some of the sources said.

An OECD spokesperson confirmed talks on the issue have taken place but declined to provide further details.

South Korea has opposed the European plan, citing concerns about energy security and fair competition, according to a document drafted by Korea Trade Insurance, the nation’s export credit agency, and published under a Freedom of Information request.

Turkey has argued the proposal is not feasible on national security and energy security grounds, according to the document.

A spokesperson at Korea Trade Insurance declined to comment further, saying the OECD talks are confidential. A White House spokesperson did not immediately respond to requests for comment. The Turkish energy ministry and Turk Eximbank both declined to comment, while the country’s finance ministry was not immediately available for comment.

Some OECD members “are making concerted efforts to reach a consensus on prohibiting public financing for fossil fuel projects”, said Kim Kyoheung, a lawmaker with South Korea’s opposition Democratic Party, and who made the request for the document. “But the Korean government is undermining these efforts, causing talks to reach a stalemate.”

Restricting export credit agencies is seen as a potentially important tool in curbing the flow of financing to fossil fuels projects. Group of 20 nations offered more than US$30 billion for such ventures in 2022, led by Canada and South Korea, according to data compiled by Oil Change International, a climate advocacy group.

Total investment in fossil fuels in 2023 was about US$1.1 trillion, of which about 75 per cent was allocated to oil and gas, the International Energy Agency said in a report last year.

The US last week provided feedback on the European plan though it stopped short of offering a formal counter proposal, some of the sources said. US negotiators are encouraging any agreement to prioritise transparency and to acknowledge the complexities of determining the climate impact of new projects, according to a US official, who asked not to be identified while the talks are ongoing.

The US could ultimately put forward an option that would aim to restrict financing of unabated fossil fuel projects based on their emissions intensity, some of the sources said.

OECD members had been expected to reach an agreement ahead of the Cop29 summit opening Nov 11 in Azerbaijan, according to the Korea Trade Insurance document. A week earlier in the US, voters could elect Donald Trump, who used his first term to encourage more US funding for foreign coal projects.

If Trump wins, “the laggard countries within the OECD” will “have no incentive to agree to anything”, said Nina Pusic, a public finance strategist at Oil Change International.

Most OECD members have agreed in principle on the overall goal of ending state financing for fossil fuel projects, although they requested further discussions on the scope of proposed revisions, the Korean document said.

OECD decisions must be reached by consensus, and in formal negotiations and other consultations, many countries are represented by foreign, trade or finance ministers along with representatives from their export-credit agencies. For the US, that typically means a Treasury Department official is sitting alongside a representative of the US Export-Import Bank, which last year authorised roughly US$1 billion in finance for foreign fossil fuel projects. BLOOMBERG