The UK government is supporting overseas fossil fuel projects that would become unprofitable if emissions were reduced in line with the Paris Agreement, according to analysis by thinktank Carbon Tracker.
While the UK is phasing out domestic coal use, and aims to reduce carbon emissions to net-zero by 2050, the government still supports polluting projects overseas through its export credit agency, UK Export Finance (UKEF).
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Critics say that the UK should abandon these projects if it is serious about meeting the goals of the Paris Agreement, which limits global average temperature rise to 1.5C. The government’s climate actions are under particular scrutiny this year, as the country prepares to host the next UN climate summit.
“These projects are already hard to justify, and if the new post pandemic economic model results in a permanently lower oil price trajectory, it will make such investments look very poor value for British taxpayers compared with renewable alternatives,” said Philip Dunne, the Conservative MP who chairs parliament’s Environmental Audit Committee, which investigated the credit agency last year.
“As we move towards a low-carbon world, the UK – as environmental leaders – cannot be supporting these projects and UKEF must adapt its business model to support UK renewable technologies to help developing countries meet their energy needs for the future,” he said.
Efforts to reduce energy use pose a financial threat to fossil fuel projects, especially the most expensive ones. As users prioritise the cheapest sources of energy, investments in expensive extraction face becoming “stranded”, as there is no longer a market for the product.
Two of the major fossil fuel projects supported by UKEF, in Ghana and Brazil, face becoming stranded assets in a Paris-compliant world, according to Carbon Tracker. Continuing to invest in these projects not only undermines the UK’s climate efforts, but could also be financially harmful, the NGO’s report says.
Green MP Caroline Lucas criticised the government for putting both the climate and the economy at risk through the investments.
“How the prime minister can continue to claim climate leadership when his Government is using public money to fund fossil fuel projects overseas just beggars belief,” she said. “The fact that these projects are liable to become stranded assets just makes it even worse. Funding fossil fuel development in this way isn’t just hypocritical, it’s a waste of public money too.”
Despite concerns by activists, stern words from the former UN secretary general, and a parliamentary investigation, UKEF has continued to invest in fossil fuels overseas. Last year, UKEF’s latest annual report showed an 11-fold increase in support for fossil fuel projects compared with the previous year, up to over £2 billion,
Failure to integrate climate change concerns into UKEF’s mandate risks creating inconsistencies that could undermine the government’s wider strategy on climate change, warned the Carbon Tracker report.
“When some UK government institutions are acting decisively to prevent climate change, yet at the same time, UKEF are helping finance projects that rely on continued fossil fuel growth, it may create the perception that the right hand doesn’t know what the left is doing,” said Andrew Grant, Head of Oil and Gas at Carbon Tracker. “At a pivotal time in setting the decarbonisation pathway for the coming decades, those looking to the UK for leadership will want to see a joined-up approach.”
Image © Petr Štefek, Wikimedia Commons