MPs call for end of taxpayer support for fossil fuel projects from 2021: New Report: UK Export Finance
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The EAC has published its report into UK Export
Finance investigating the scale and impact of UK Export
Finance’s financing of fossil fuels in developing countries. It
reveals that most of UKEF’s investment undermines the UK’s climate
commitments. The report finds: UKEF’s activities are the ‘elephant
in the room’ undermining the UK’s international climate and
development targets UKEF’s support for fossil fuel energy is
unacceptably high...Request free trial
The EAC has published its report into UK Export Finance investigating the scale and impact of UK Export Finance’s financing of fossil fuels in developing countries. It reveals that most of UKEF’s investment undermines the UK’s climate commitments. The report finds:
Over a five-year period UKEF spent £2.6 billion to support the UK’s global energy exports. Of this, 96% (£2.5 billion) went to fossil fuel projects, with £2.4 billion going to fossil fuel projects in low and middle-income countries. Environmental Audit Committee Chair Mary Creagh said: “Achieving net-zero emissions by 2050 will mean ending our addiction to dirty fossil fuels. “The Government claims that the UK is a world leader on tackling climate change, but behind the scenes the UK’s export finance schemes are handing out billions of pounds of taxpayers money to develop fossil fuel projects in poorer countries. This locks them into dependency on high carbon energy for decades to come.
“This is unacceptable. It is time for the government to put its money where its mouth is and end UK Export Finance’s support for fossil fuels.”
Out of step with goals to tackle climate change: The Government must change UKEF’s mandate to ensure that support is aligned with the UK’s national and international commitments and in line with the IPCC and Committee on Climate Change’s recommendations. In May 2019, a report from the Committee on Climate Change (CCC) highlighted UK Export Finance as an area that "needs further progress," stating that in the UK “export finance is not aligned with climate goals, and often supports high-carbon investments.”
Case study - Enka UK: Turkish company, ENKA UK, received £88m for phase one and approximately £490m for phase two in support from UKEF as a sub-contractor of GE (General Electric) for its role in delivering "two critical power projects” in Iraq, UKEF's largest liability for an energy project in 2017/18. The Committee discovered that ENKA UK, a subsidiary of Turkey’s largest construction company, filed as a UK company the previous year without an office, staff or operations in the UK. In evidence the company said it intended to open an office in Birmingham with 12 staff. 8 staff recruited from outside of the UK are in post. UKEF’s support for ENKA UK was based instead on its public policy that they will support projects with a minimum 20% UK content, supporting UK providers of goods and services. The ENKA UK project is aiming at 40% UK content. The combined predicted GHG emissions from the two power plants is 6.88 megatons (6.88 billion kg) CO² equivalent each year, assuming the plants run solely on natural gas as the primary fuel.
Climate change leadership: UKEF’s support for fossil fuel projects is at odds with a number of declared measures to tackle climate change, including a statement by Theresa May in 2017 to put the UK “at the forefront of efforts to cut carbon emissions and develop clean energy” and a policy set out in the UK’s Clean Growth Strategy to “dedicate resources within the Department for International Trade to promote investment into the UK renewable energy landscape, develop this supply chain further and support UK exports”.
Exploitative: Evidence from an independent group of global leaders (The Elders) described the gap between domestic and international policy as a form of exploitation, with support for fossil fuel projects reviving “painful memories of past exploitative behaviour to see the UK and other rich, industrialised countries proclaim their good intentions and act in a progressive way at home, whilst effectively exporting their emissions to poorer foreign countries and leaving them to pay the price socially and environmentally.” Urgent change: MPs urge changes to UKEF’s climate-related practices to help tackle climate change, and welcome UKEF’s willingness to address climate concerns by phasing out support for coal. UKEF must rapidly end its support for high-carbon fossil fuel exports. Failure to do so could leave taxpayer money at risk through stranded assets at a time when innovation should be focused on low-carbon energy and energy transition. Among recommendations:
Legislation needed to enforce environmental accountability: The report finds that UKEF is unlikely to change to take more environmental factors into account unless there is a change in the policy or legal frameworks governing its mandate. Giving evidence, UKEF’s CEO Louis Taylor said that "within the statutory purposes of UKEF there is not a developmental or environmental statement in there at all,” though that in time there would be “progress on environmental standards."
Among recommendations:
Energy transition: The Committee heard conflicting evidence on whether UKEF's activities are supporting or hindering the process of moving energy production and supply from fossil fuels to low-carbon alternatives, in particular that support from UKEF is delaying the transition to low-carbon energy by supporting fossil fuel projects that would not otherwise go ahead.
Among recommendations:
Note to journalists: UK Export Finance (UKEF) is the operating name of the Exports Credits Guarantee Department, the UK's export credit agency (ECA). Its mission is "to ensure that no viable UK export fails for lack of finance or insurance, while operating at no net cost to the taxpayer." UKEF works with around 70 private credit insurers and lenders to help UK companies access export finance. Over a five-year period, 21% of UKEF's support (£2.6 billion) went to the energy sector. |