Climate Colonialism Update: More Proposed Bans on Financing of Fossil Fuels (only for the poor)
Earlier this year, I wrote about the ban on the international financing of fossil fuels, proposed by Special Envoy John Kerry and others. I argued that such a ban would be particularly devastating for poor countries that are reliant on institutions such as the World Bank to finance much-needed energy projects. For now, the world’s richest countries (also the largest shareholders in the World Bank) have allowed the financing of natural gas projects when no other alternative is available. But this may not last long — the World Bank’s new Climate Action Plan says that for the World Bank Group’s private sector development arms — IFC and MIGA--85 percent of operations will be aligned with the Paris Agreement starting in 2023, and 100 percent of operations will be aligned starting in 2025.
European countries have followed suit—with much fanfare, the European Bank for Reconstruction and Development announced its full alignment of all activities with the goals of the Paris Agreement by end of 2022. This only affects the financing of fossil fuel projects in poorer client countries—the shareholders of EBRD are themselves free to develop whatever projects they choose and to set their own timelines to exit from coal. Germany opened a new coal plant this year and will increase imports of natural gas from Russia. In June, European Union energy ministers decided to prolong EU support for some cross-border natural gas projects in order to meet their priorities.
The United States is also following a contradictory path that will hurt poor countries. As Todd Moss and Gyude Moore write:
"As part of the Administration’s Climate Finance Plan, DFC announced it is aiming for a net-zero emission portfolio by 2040, which allows space for investing in very few new carbon-intensive projects. Based on the pledge, DFC could support, globally, up to one medium-sized gas power plant per year for the next ~8 years.
A pending bill in the Senate, introduced by Senator Bob Menendez (D-NJ) in April 2021, would move up DFC’s net-zero date, entirely eliminating the agency’s ability to support any natural gas projects. Menendez’s bill also would remove Power Africa’s current technology flexibility that would halt that initiative’s support for LPG cooking or gas-fired power on the continent."
But as Moss and Moore point out, the restrictions on natural gas projects apply only to poor countries. The European Energy Security and Diversification Act supports investments in natural gas projects as does the Eastern Mediterranean Security and Energy Partnership Act.
Africans must not be the target of climate colonialism. “Alignment with the Paris Agreement” is becoming code for banning critical energy projects in very poor countries. The $2 billion promised by the G7 to retire coal projects in developing countries is barely enough to cover costs in a single Indian state. Rich countries responsible for the vast majority of carbon emissions seem to be happy to pass on the burden to the world’s poorest people while placing few limits on their own consumption of fossil fuels.