Climate Action or Imposed Energy Poverty? The Hypocrisy of COP26 Fossil Fuel International Finance Bans

By the end of the United Nations (UN) COP26 climate conference, almost forty nations and finance institutions, the vast majority of which are North American or European, agreed to ban public financing for international fossil fuel projects by 2022. Notably, the agreement neglected to apply such measures to the signatory countries themselves. If acted upon, this ban will likely hinder economic growth and cast doubt on aspirations for modernity in much of the developing world. This agreement pins the burden of decarbonization on the very nations least responsible for global warming and in most need of economic development.

The United Nations Framework Convention on Climate Change convened world leaders and national delegations for the 26^th Conference of the Parties (COP26) climate conference in Glasgow, Scotland, during the first half of November 2021. Earlier in the year, seven European countries committed to ending state-backed financing for fossil fuels—including coal, oil, and natural gas—in other countries. It is notable that this ban encompasses all fossil fuel projects, in addition to coal, which is a relatively new development. By the end of the conference, 34 governments and five government-affiliated finance institutions agreed to ban public financing for international unabated fossil fuel projects by 2022.

Wealthy country hypocrisy

The announcement was cheered by civil society organizations and environmental institutions as a demonstration of commitment to climate action. But, in general, these organizations fail to adequately value the UN’s eighth Sustainable Development Goal to “promote inclusive and sustainable economic growth.” Preventing countries in Sub-Saharan Africa and Southeast Asia from taking advantage of their fossil energy resources will make economic development a nearly impossible feat.

Historically, economic growth in wealthy nations has, in large measure, been fuelled by fossil energy. What’s more, economic growth and adaptive infrastructure development continue to be primary modalities for prospering in a warming world. While renewable energy will play an increasingly relevant role, why should economically developing nations be expected to only rely on renewable energy when such a standard is not applied to wealthy countries? That many of the signatory nations still intend to run their economies using natural gas for the foreseeable future is nothing short of hypocrisy. Indeed, during COP26, amid natural gas price spikes, the Financial Times reported that the U.K. held talks with Qatar to increase liquified natural gas imports. The U.K. has been a steadfast advocate for international fossil fuel finance bans, but it seems this standard does not apply at home. A U.K. spokesperson later disputed the report. Most importantly, anthropogenic climate change is driven by greenhouse gas (GHG) emissions stemming from the industrial revolution at the end of the 18^th century. Low-income countries deserve to experience the benefits of their own industrial revolution. In this regard, wholesale decarbonization is the responsibility of wealthy nations, and global climate ambitions cannot stunt economic growth in emerging economies.

Further, these bans are likely to have far reaching detrimental financial impacts on emerging economies. Importantly, the terms of the fossil fuel investment ban include an obscure exception for fossil fuel projects “consistent with a 1.5°C warming limit,” as mentioned in the Paris Climate Agreement, which, ironically, also stipulates nationally differentiated climate action. The effect of this agreement remains unclear, but the outcome could be catastrophic. The signatories account for over 40% of the OECD’s export finance and at least $18 billion in annual international fossil fuel financing, or 10% of the G20’s $188 billion yearly total. To be fair, several low-income nations and finance institutions from the global south are among the agreement’s signatories. And while wealthy nations and members of the COP26 leadership team are quick to highlight this supposed diversity of supporters, the geographic trend of these countries is quite clear: they are mostly wealthy western European, northern European, or North American countries that are disproportionately responsible for climate change and continue to depend on fossil energy. John Murton, the British COP26 Envoy, celebrated the effort’s success on Twitter, posting a map of the signatories, seemingly not recognizing the mostly segregated picture it portrays.