Government export finance agency's ongoing support of oil and gas projects overseas is harming the environment, tarnishing the UK’s reputation as a climate leader, and limiting its potential to create jobs, according to a new analysis published today
The UK's export credit agency could support up to 42,000 jobs around the UK by 2035 if it switches it support for overseas fossil fuel projects to renewables and clean energy infrastructure, according to a major new analysis from Vivid Economics.
The report, published this morning, argues the government's ongoing support of overseas fossil fuel infrastructure not only fuels environmental degradation and global warming, but is a huge missed opportunity to generate tens of thousands of UK jobs as part of a 'green recovery' from the coronavirus crisis.
The £2bn of financing spent by government agency UK Export Finance on oil and gas projects annually would create many more jobs if it was distributed to small clean energy companies and green technologies, the report claims, given that renewables tend to be more labour intensive.
Entitled UK Export Finance and domestic jobs, the report also argues that clean energy projects have greater need for UKEF support than fossil fuel projects because renewable companies tend to be smaller, with balance sheets that are less equipped to absorb risk on their own.
It stresses the government's climate leadership is undermined by its poor export finance record, highlighting that between 2013/2014 and 2019/2020 UKEF has provided £6bn in finance to oil and gas projects, compared to just £500m for the clean energy sector.
"The implied prioritisation of oil and gas is difficult to reconcile with the UK's aim to provide climate leadership, and also represents a lost opportunity to help UK industry create jobs in a rapidly growing export market," the report states.
The findings have been endorsed by politicians on both sides of the political aisle, with shadow climate change minister Matthew Pennycook stressing that UKEF's continued backing of fossil fuel projects was harming the planet and the UK's climate reputation.
"The credibility of our COP26 presidency depends on demonstrable leadership at home and abroad," he said. "The switch from financing polluting projects abroad to clean ones would not only deliver environmental benefits but could support significantly more jobs across the UK and set a bold example for other countries to follow. In making this necessary change, the government must bring forward a Just Transition Plan for British workers affected by it so that they can be retrained and reemployed in decent, well-paying and secure job in the growing and sustainable industries of the future."
And Alexander Stafford, Conservative MP for Rother Valley, also called on the government to heed the recommendations in the new analysis. "This report provides further confirmation that renewable energy is a huge employment opportunity for the UK, particularly for communities like mine in South Yorkshire," he said. "The government should act as soon as possible to switch UK export finance away from fossil fuels to renewables, to ensure we are well positioned to capture the export opportunities in this booming sector and to support small and medium sized companies in the renewables supply chain."
UKEF, which provides companies with access to government-backed loans, insurance policies, and bank guarantees that help enable international trade, has attracted criticism recently over its ongoing support for carbon intensive projects overseas. In July, it provided £900m of loans and guarantees for a gas pipeline project in Mozambique that studies suggest could hike up the country's greenhouse gas emissions by 10 per cent in the construction phase alone.
While several reports emerged over the summer claiming that the government intends to end its support for overseas fossil fuel projects, Ministers are yet to formally confirm any change in policy.
Nathan Bennett, public affairs manager at RenewableUK, emphasised there is no shortage of overseas demand for UK offshore wind engineering expertise, should the government decide to double down on support of overseas clean energy projects. "We know there is a significant opportunity for the UK to export offshore wind engineering expertise, components and services to the large European offshore wind market and the rapidly expanding global market, including China and the USA, which is expected to be worth £30bn a year overall by 2030," he said.
Bennett called on the government to increase funding for the Department for International Trade so that it could better support UK companies entering global markets.
A spokesperson from UKEF countered that the supporting the renewables sector was "of utmost priority" for the UK government. "UKEF is already contributing to this effort by providing financial support to UK businesses at the heart of the global transition to renewable energy," they said. "UKEF's capacity to support jobs in the renewables sector is set to grow as the renewables supply chain strengthens in the UK."
The report also comes in the same week as the latest report from the International Energy Agency reiterated that renewables projects now represent the most cost effective form of new generation capacity in much of the world.
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