Reports suggest Boris Johnson keen to end UK loan guarantees for oil and gas projects overseas amid reputational concerns for the UK ahead of COP26
The Prime Minister is set to order a review of the UK's support for overseas oil and gas projects in an effort to align the government's overseas finance strategy more closely with its domestic climate goals, according to reports.
The Sunday Times reported yesterday that Boris Johnson has called for a review of the use of loan guarantees provided to fossil fuel projects through UK Export Finance (UKEF), the government's overseas credit agency, amid fears of undermining the UK's global climate leadership aspirations ahead of COP26 next year.
UKEF has been attracting growing criticism over its support for carbon intensive projects overseas. A BBC Newsnight investigation in January found the agency had financed £6bn of fossil fuel projects around the world since 2010, and separate statistics published by Parliament's Environmental Audit Committee show that between 2013 and 2018, 96 per cent of UKEF's support of global energy projects went to fossil fuel ventures.
More recently the agency attracted ire over its decision to provide £900m of loans and guarantees to help develop a gas pipeline project in Mozambique, which studies suggest could hike up the country's greenhouse gas emissions by 10 per cent in the construction phase alone.
The Mozambique deal has also courted controversy within government, drawing criticism from Johnson as well as Business Secretary Alok Sharma and Foreign Secretary Dominic Raab, amid concerns that the agency had been "operating outside proper ministerial oversight", according to The Sunday Times.
The review ordered by the PM could result in UKEF ending its support for fossil fuel projects altogether to refocus its efforts on green energy, the newspaper adds.
Critics have frequently pointed out the government's ongong support for overseas fossil fuels is completely at odds its Paris Agreement commitments and net zero ambitions, and threatens to undermine diplomatic efforts to corral other nations to step up their climate efforts as the UK gears up to host COP26 in Glasgow next year.
Commenting on The Sunday Times' report, a UKEF spokesperson confirmed that the Prime Minister had asked the government to keep support for carbon-intensive oil and gas projects "under review", but refuted claims - attributed to government sources - that Johnson had been "bounced into" supporting the controversial Mozambique project by UKEF.
"The Prime Minister has asked that the government keeps its support for the fossil fuels industry under review to ensure the UK reaches its net zero target by 2050," the spokesperson said. "The government was not bounced into supporting the project. It was supported by several government departments given the strong credentials of the project."
Reports that a review has been ordered by the PM have been welcomed by Labour MPs, charities and green business groups.
The Aldersgate Group commended the potential review as "a strong step forward that we will be watching, given our recommendation for a climate aligned mandate for UKEF".
Warmly welcomed news that @10DowningStreet has announced a review of UK export credit finance funding fossil fuel projects around the world. A strong step forward that we will be watching, given our recommendation for a climate aligned mandate for UKEFhttps://t.co/ugu7xrEos4— Aldersgate Group (@AldersgateGrp) July 27, 2020
Meanwhile aid and development charity CAFOD's lead climate and energy analyst Dr Sarah Wykes also welcomed the news. "CAFOD research has shown that almost 100 per cent of UKEF support for energy goes to fossil fuel projects," she commented. "So that it is encouraging recognises that UKEF support, including recently a huge gas plant in southern Africa, poses a grave risk to the government's climate leadership and credibility as COP26 host."
And Shadow climate change minister Matthew Pennycock - who wrote to Sharma in late June urging the government to end the financing of new overseas oil and gas projects, and to review the decision to underwrite the Mozambique LNG project - today said he "welcomed the change of approach" but stressed that it "must happen without delay" in order to aid the low carbon transition.
It follows similar reports late last month suggesting the government was taking steps to end support for overseas fossil fuels projects.
The government has also taken a number of recent steps to bolster UKEF's green credentials in recent months. This year's Budget included a pledge to provide £2bn of credit finance to overseas 'clean growth' projects, while in January the PM confirmed that the agency would no longer support coal projects.
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