Originally published by Oil Change International on May 27, 2022.

BERLIN – Today G7 climate, energy and environment ministers issued a communique committing to end public finance for fossil fuels by the end of this year. The statement echoes the joint commitment made by 39 countries and institutions at the November 2021 climate negotiations and states that G7 governments will “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022”. The G7 make this commitment to advance national security interests and accelerate the international clean energy transition, which they recognize requires phasing out investment in the unabated fossil fuel sector.

In response, experts at Oil Change International and Friends of the Earth Japan issued the following statement: 

Laurie van der Burg, Public Finance Campaign Co-Manager at Oil Change International said: “The G7 commiting to end public finance for fossil fuels and shift it to clean is a massive win. In the context of Russia’s fossil-fueled war and signs that some of the G7 members who agreed to end their public fossil finance last November may backslide by pursuing new gas investments, this statement is a timely reconfirmation that the most viable pathway to energy security is prioritizing public finance for clean energy. These promises should now urgently be turned into action. Strong implementation is needed — both for the G7 to shift their $33 billion a year in fossil fuel finance and for them to be able to encourage even more countries to join them.”

Susanne Wong, Asia Program Manager at Oil Change International said: “Japan joining this G7 commitment is a significant step forward for people and our planet. Japan is the second largest provider of international public finance for fossil fuels and the only G7 member that did not sign a commitment to end public finance for fossil fuels at the COP26 climate talks last year. If Japan implements this commitment with integrity, it will directly shift $11 billion a year from fossil fuels to clean energy and have a much larger indirect impact given Japan’s influence on other financiers in Asia and around the world. This requires that Japan stop financing the expansion of gas infrastructure across Asia and globally and stop promoting technologies that would extend the lifetime of dirty coal plants. If Japan follows through and truly shifts its fossil finance to clean energy, this will help to speed the just energy transition we so desperately need.”

Ayumi Fukakusa, Climate and energy campaigner from Friends of the Earth Japan “Japan is the second largest provider of public finance to fossil fuels so this is a significant step. However, Japan has a bad track record of implementing its commitments. Last year, the G7 committed to end new direct government support for international coal power projects by the end of 2021, but Japan still intends to support two new coal projects in Indonesia and Bangladesh. Japan must implement its commitments with integrity to shift the actual flow of money. Also, Japan has not committed to a full coal phase-out domestically and is still constructing new coal power plants. Now Japan must accelerate the decarbonization of its electricity sector without relying on destructive energy such as nuclear as well as prioritizing energy saving and energy efficiency.”

###

Contact: 

Nicole Rodel – nicole [at] priceofoil.org
Laurie van der Burg — laurie [at] priceofoil.org

Notes: 

  • The $33 billion per year quoted above is from a recent G7 factsheet from Oil Change International, Friends of the Earth U.S., Asian People’s Movement on Debt and Development, Friends of the Earth Japan, and International Institute for Sustainable Development based on data from the open-access Public Finance for Energy Database (energyfinance.org), a project tracking financial flows to fossil fuels and clean energy from G20 bilateral development finance institutions (DFIs), export finance agencies (ECAs), and the multilateral development banks (MDBs). From 2018-2020, G7 governments spent over $100 billion on public finance for fossil fuels.
  • The countries and the institutions that previously signed the joint Glasgow statement on public finance in November 2021 include: Agence Française de Développement (AFD), Albania, Canada, Costa Rica, Denmark, Banco de Desenvolvimento de Minas Gerais (BDMG), The East African Development Bank (EADB), El Salvador, Ethiopia, Fiji, Finland, Netherlands Development Finance Company (FMO), France, Germany, Mali, Marshall Islands, New Zealand, Moldova, Portugal, Slovenia, South Sudan, Spain, Sri Lanka, Switzerland, the European Investment Bank, The Gambia, The United Kingdom, the United States and Zambia.
  • Last week, 120+ CSOs released letters to 11 Glasgow Statement signatory countries with specific recommendations for implementation on their fossil free public finance commitments: Canada, Germany, Netherlands, Italy, France, Portugal, United Kingdom, United States, Costa Rica, El Salvador, and New Zealand
  • An April 2022 briefing from Oil Change International on recent trends in international public finance for fossil fuels, and how these financial flows could be used instead to unlock a globally just transition.
  • Oil Change International data on energyfinance.org shows that most international public finance for energy has flowed between wealthy countries rather than supporting development in the Global South. Poor contract terms, debt traps, and disproportionate ownership by foreign multinationals have meant fossil finance has usually undermined, not supported development when it does flow to low-income countries.
  • legal opinion by Professor Jorge E Viñuales from the University of Cambridge and Barrister Kate Cook of Matrix Chambers argues that governments and public finance institutions that continue to finance fossil fuel infrastructure are potentially at risk of climate litigation.

On September 30, one of Japan’s major non-life insurance companies, Tokio Marine Holdings announced a policy to tighten its restrictions on underwriting coal-related business. The new policy states that “Tokio Marine Group will not provide new underwriting capacities or financing to coal fired power generation projects or thermal coal mining projects, regardless of whether they are newly constructed or not. However, we may grant exceptions for projects with innovative technologies and approaches, such as CCS/CCUS and mixed combustion, with the aim of achieving the goals of the Paris Agreement, based on careful consideration.” While we see it as a certain progress, we consider that the policy needs to be further strengthened to achieve the 1.5 degrees Celsius goal of the Paris Agreement.

In its new policy, Tokio Marine regards CCS/CCUS and mixed combustion as innovative technologies and approaches to achieve the goals set in the Paris Agreement. However, it remains uncertain whether these technologies will become commercially viable within the timeline consistent with the 1.5 degrees Celsius goal of the Paris Agreement and for mixed combustion whether greenhouse gas (GHG) emissions are sufficiently reduced when looked at the whole cycle including mixed fuel’s production and transportation. Therefore, it is not appropriate to include CCS/CCUS and mixed combustion as innovative technologies and approaches to achieve the goals of the Paris Agreement.

In addition, no commitment has been made to reduce emissions in the underwriting portfolios, which is a critical effort to achieve the 1.5 degrees Celsius target. At the Insurance Development Forum held on June 8, UN Secretary-General Antonio Guterres called on insurance companies to end fossil fuel insurance by stating that “we need net zero commitments to cover your underwriting portfolios, and this should include the underwriting of coal ? and all fossil fuels”. The three major non-life insurance companies including Tokio Marine should immediately set a goal to achieve net-zero emissions by 2050 for their underwriting portfolios. In the meantime, all the three Japanese mega banks have already pledged net zero GHG emissions in their lending and investment portfolios by 2050. It is becoming more obvious that the Japanese non-life insurance sector is lagging behind.

Moreover, the International Energy Agency (IEA) concluded in its report, “Net Zero by 2050, A Roadmap for the Global Energy Sector” published on May 18, that new fossil fuel mining operations cannot be approved by the present year 2021 and the electricity sector should have net-zero emissions globally by 2040. Therefore, in order to achieve net zero emissions by 2050, it is necessary to end underwriting not only for coal mining and coal-fired power generation but all fossil fuel mining, transporting and power generation projects, including oil and gas.

This statement was published by Japan Center for a Sustainable Environment and Society (JACSES), Kiko Network, Friends of the Earth Japan, 350.org Japan and Mekong Watch.

This project is supported by:

賛同団体