The UK is set to end financing for oil and gas projects overseas — a move that will strip out billions in underwriting loans to energy projects — as it works to burnish its green credentials ahead of a major climate summit.
Support for overseas fossil-fuel energy projects has totalled more than £3.5bn over the past five years but will be halted sometime next year, though no date was set for when the new policy will take effect and the government said there would be “limited exceptions”.
The policy is the latest environmental initiative by Boris Johnson, who will make the announcement at the UN climate summit that the prime minister is co-hosting on Saturday, which marks the fifth anniversary of the Paris climate accord.
The government’s support for overseas fossil-fuel projects, mainly in the form of project finance provided by UK Export Finance (UKEF), had been highly controversial and criticised for years by environmental groups that argued it was a poor use of taxpayer money.
The biggest energy project supported by UKEF last year was a liquefied natural-gas facility in Mozambique. UKEF provided $1.15bn in financial support, through a mix of direct loans and underwriting, to the UK exporters involved.
Ending our hypocritical position on fossil fuels financing is a basic prerequisite for being a credible host
However, that project is facing a legal challenge from environmental charity Friends of the Earth, which has accused UKEF of allegedly failing to conduct a transparent assessment of the environmental risks.
The new policy still allows for new oil and gas projects to be approved during a “consultation period” which ends on February 8, and also notes that “there will be very limited exceptions for gas-fired power plants and other projects”.
Rachel Kennerley, a campaigner for Friends of the Earth, welcomed Mr Johnson’s announcement, but added that: “There are these exemptions, these loopholes, and when it comes to oil and gas, there can be no exemptions.”
UKEF currently has eight oil and gas projects under consideration, which could, in theory, be approved before the new policy is put in place.
More than 70 world leaders will join in Saturday’s climate summit, in what is seen as a warm-up act for the UN climate conference known as COP26, which will be hosted by the UK in Glasgow.
In an effort to show its leadership on climate, the UK announced last week that it would cut its carbon emissions by 68 per cent by 2030, compared with 1990 levels, which is the toughest target of any major economy.
In his speech on Saturday, Mr Johnson is expected to urge other world leaders to follow suit.
In a statement on Friday night, he said: “I’m pleased to say today that the UK will end taxpayer support for fossil-fuel projects overseas as soon as possible. By taking ambitious and decisive action today, we will create the jobs of the future, drive the recovery from coronavirus and protect our beautiful planet for generations to come.”
However, opposition politicians were quick to say that the move was not enough.
“Ending our hypocritical position on fossil fuels financing is a basic prerequisite for being a credible host of COP26,” said Ed Miliband, shadow business secretary. “Now ministers need to concentrate on an ambitious agreement in Glasgow which meets the goals of the Paris Accord to limit global warming to 1.5 degrees.”
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