A push to get rich nations to end their export credit support for overseas oil and gas projects has failed, after opposition from South Korea and Türkiye – and only late and lukewarm support from the United States.
The European Union, UK, Canada and Norway have been trying to get the 38 countries in the Organisation for Economic Co-Operation and Development (OECD) to agree to expand a 2021 ban on support for coal to the other planet-heating fossil fuels – oil and gas.
But South Korea and Türkiye opposed this effort, according to a document released by a South Korean government agency and seen by Climate Home. With pro-fossil fuel Donald Trump becoming US president on January 20, campaigners following the OECD talks said negotiators had given up trying to reach a deal.
An OECD spokesperson confirmed on Tuesday that governments had been “unable to reach an agreement to further restrict the provision of support for fossil-fuel related projects”, although “this issue may be revisited in the future”. Talks will continue in March but, because of Trump’s election as the incoming US leader, expectations of a breakthrough are low.
Missed chance
Climate campaigners lamented the lack of progress by OECD countries before Trump takes office. Kate DeAngelis, deputy director of international finance at Friends of the Earth US, said she had been “pretty hopeful that they were going to reach a deal” but “in the end, they failed”.
Dongjae Oh, gas lead at Korean campaign group Solutions for Our Climate, told Climate Home that “given the change in US administration, the 2024 momentum was a key moment for positive change – and it has been deeply regrettable to see talks stall, even with the majority of countries supporting the fossil fuel-finance restrictions”.
According to analysis from Oil Change International, the export credit agencies of OECD governments provide about $40 billion in support to foreign fossil fuel projects every year, with the vast majority going to oil and gas projects.
For example, before it promised to end support for fossil fuels in 2021, the UK’s export credit agency provided $300 million in loans to British companies working on a project to extract gas in Mozambique.
A joint UK-Canadian proposal and a separate one from the European Union would have committed governments – with some exceptions – to end their support for foreign projects that produce, transport, store, refine or distribute fossil fuels.
Opponents revealed
These OECD negotiations take place in secret, with no journalists or observers allowed to attend. But the Korean Trade Insurance Corporation (K-SURE) was present at the negotiations in March and June 2024. The organisation wrote up a summary of the talks and countries’ positions, which was released to a member of the Korean National Assembly – and an English translation has been seen by Climate Home.
It said that South Korea, Australia and Türkiye were opposed to the export credit proposals while the US, Japan and Switzerland were “reserved”.
According to K-SURE, South Korea argued that the ban would unfairly affect developing countries which are not members of the OECD and said there is a need to consider the pace of the green transition.
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Türkiye said that fossil fuels should be reduced only gradually, without disrupting energy supply chains and energy security, and Australia said it was “unable to accept the current proposal”.
In March, according to K-SURE, the US argued that options other than a blanket ban should be considered, while Japan pushed for more exceptions and Switzerland wanted additional time for discussions between Swiss ministries.
In June, K-SURE reported that most countries other than South Korea and Türkiye agreed on the “fundamental direction” of the ban but differences remained on the details.
“South Korea conveyed its dissenting opinion,” K-SURE noted, while Türkiye said the proposal was “not feasible” because of national and energy security.
Trump deadline
The talks continued – and, according to DeAngelis, intensified after the election of Donald Trump on November 5 last year “put a fire under the Biden White House to take this seriously and really engage in the talks”.
Oil Change campaign strategist Adam McGibbon told Climate Home there were several rounds of talks throughout November and December, but those talks broke down without agreement on December 20.
McGibbon, DeAngelis and Oh criticised Türkiye and especially South Korea for opposing the agreement. South Korea is a leading producer of the ships that carry liquefied natural gas, and its export credit agencies often loan companies the money to buy them.
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“Continuing to hinder global climate ambitions in the year ahead would be harmful both for domestic development and Korea’s global ambitions,” Oh said.
But DeAngelis believes the US should take “a lot of the blame” for only supporting the proposal late and for failing to persuade South Korea to agree to it, as she said the US had done for the previous OECD ban on coal finance.
Next steps
DeAngelis said that while the OECD talks seem to have stalled for at least the four-year period of Trump’s presidential term, climate campaigners would encourage countries to sign up individually to the Clean Energy Transition Partnership (CETP).
This initiative was launched at COP26 in 2021 and commits countries and public finance institutions to end overseas support for fossil fuels. Its members now number 41 after Norway and Australia joined at COP28. While the OECD only addresses export credit agencies, the CETP also includes support from development finance institutions and contributions to multilateral development banks.
Research released last August by the International Institute for Sustainable Development (IISD) found signatories were largely delivering on their promise, with their collective fossil fuel financing in 2023 amounting to $5.2 billion – a decrease of two thirds from the pre-CETP baseline. This, IISD said, was “a historic achievement”.
DeAngelis said campaigners are trying to get South Korea and Japan to join the CETP, particularly if there is a change of government in Korea after the current political turmoil triggered by the suspended president’s short-lived declaration of martial law.
The OECD spokesperson said that, when it comes to limiting international support for fossil fuel projects, any government “that wishes to do so is free to join those who have already voluntarily adopted more restrictive terms and conditions for such transactions”.
(Reporting by Joe Lo; editing by Megan Rowling)