Asked by
To ask Her Majesty’s Government what assessment they have made of
the impact their document Aligning UK international support for
the clean energy transition guidance, published on 31 March, will
have on international fossil fuel investment; and what
discussions they have had with other Governments about
implementing such guidance.
(Con)
The Government are grateful for the positive response from
international partners to this new world-leading UK policy
position. We have held productive discussions with like-minded
countries on this agenda, including through our G7 presidency and
broader initiatives, such as the E3F export finance coalition. It
is encouraging to see an increasing number of similar commitments
from key partners, such as the United States, in aligning their
support towards clean energy.
(Ind
Lab)
My Lords, I very much welcome the Government’s new policy ending
support for overseas fossil fuel projects, but the CDC is able to
make investments in financial institutions, which, in turn, will
continue to make investments in fossil fuels. How are the
Government going to stop public money supporting fossil fuels in
this way?
(Con)
The noble Baroness will understand that the CDC has an
independent board, but its policy is fully aligned with the
Government’s by excluding fossil fuel investments, except under
certain tightly limited circumstances. As such, the policy
excludes future investment in the vast majority of fossil fuel
subsectors, including coal, oil and upstream gas exploration and
production. It has invested over $1 billion of climate finance in
the past three years and set a target for 30% of all new
commitments, in 2021, to be on climate finance.
(Lab)
The Government’s guidance states:
“Support for unabated gas fired power generation is conditional
on: a country having a credible NDC”—
nationally determined contribution—
“and long-term decarbonisation pathway to net zero by 2050 in
line with the Paris Agreement”.
There are other conditions. How do the UK Government reach this
determination? Is this made known to companies and published
before any applications for export finance support are made? Will
the Government have a traffic light system for this?
(Con)
As I said, the guidance document was very tightly worded and
there is a set of tightly defined criteria that must be met
before any support for unabated gas power is approved. This
judgment as to whether the criteria are met will be based on all
available evidence sought from the relevant project sponsor, the
financing institution, the partner Government and the advice of
experts in the relevant department or departments. Based on this
evidence, and in borderline cases with the approval of relevant
Ministers, proposals will be judged either to meet the tightly
defined criteria and approved or not. I am afraid I have no
knowledge of the intention to introduce a traffic light system.
(LD)
Will the Government use the opportunity of the G7 meeting later
this week and COP 26 at the end of the year to seek international
support for reform of the capital requirement and Solvency II
regulations, so that risk weightings relating to the funding of
fossil fuel exploration and exploitation adequately reflect the
macroprudential risk that such activities pose to the
international financial system and the global economy as a whole,
not to mention the future of the planet?
(Con)
I thank the noble Lord for his question and might write to him on
some of the detail. I can say that the UK is a leader in
ambitious climate action, both domestically, with the most
ambitious emissions-reduction target in the group, and
internationally, doubling our international climate finance to
£11.6 billion from 2021 to 2025. This policy decision and its
swift implementation demonstrate our commitment and, over the
coming months, we will work closely with like-minded partners to
see similar principles adopted elsewhere. When the Prime Minister
launched the UK’s presidency of COP 26 in February last year, he
pledged our ambition for COP 26 to be the point where the world
comes together,
“with the courage and the technological ambition to solve
man-made climate change”.
We want to see our policy act as a catalyst for others, while
still providing finance for the right projects in countries that
desperately need power.
(Con) [V]
My Lords, if, as we are told, power from renewables is cheaper
than power from fossil fuels, would this measure not be
unnecessary, since no developing country would want to build
fossil fuel power stations? If, however, that assertion about the
cheapness of renewables is a fib, and our policy is to reduce the
supply of cheap fossil fuel power and to force countries to rely
on more expensive renewables, how will this help poor countries
to develop?
(Con)
Solar and wind are indeed now cheaper than existing coal and gas
power plants in most of the world. Investments in fossil fuels
will become increasingly risky, including for developing
countries. Shifting away from fossil fuels is compelling, from
both a climate and an economic perspective. The priority for the
UK is to support renewable energy as the default choice, enabling
us to continue to support developing countries to meet their
growing energy needs and increase access to electricity, in line
with both the sustainable development goals and the Paris
Agreement. The UK has launched the Energy Transition Council to
bring together political, financial and technical leaders, but
one still has to remember that 600 million of the population of
Africa have no access to any electricity.
(Con)
My Lords, I am delighted to support this policy and welcome its
emphasis on renewables. Will my noble friend take this
opportunity to confirm that there will be a moratorium on
fracking activities, either in this country or abroad, which the
Government might be tempted to support? While I support helping
countries urgently in need of power, it seems odd that UK Export
Finance provided £47.6 million of support to build two of the
largest solar plants in Spain. Will my noble friend confirm that
there were no worthy projects in this country that were perhaps
deprived of support from UKEF, as a result?
(Con)
I can confirm to my noble friend that there is already a
moratorium on fracking in the UK. I have been told that the UK
also does not support international fracking. The moratorium came
in following events during fracking operations at the end of
2019, and the Government confirm that we will take a presumption
against issuing any further hydraulic fracking consents. This
sends a clear message to the sector and to local communities
that, on current evidence, fracking will not be taken forward in
England. I am not sure of the exact details of the solar project
in Spain, but I can confirm that export finance is given to
projects where there is a significant benefit to the UK supply
chain. If I have got that wrong, I will write and correct.
(LD)
My Lords, in announcing the ending of support for fossil fuel
projects abroad, there was mention of exceptions for some
projects. I wonder whether the Minister could give a list of
these or, if more appropriate, just mention a few now and write
to me with a complete list.
(Con)
There are a number of exemptions from this, one of which is
providing support and promoting exports that improve the
efficiency, health and safety, and environmental standards of
existing assets. We will also support projects that assist with
the decommissioning of existing fossil fuel assets and support
gas power where it is part of a credible emissions-reduction
plan, in line with the Paris Agreement. This goes back to the
question from the noble Lord, , on how we
will evaluate these projects. The investment must not delay or
diminish the transition of that country to renewables and there
must be no risk of it becoming a stranded asset due to climate
change factors.
(GP)
Is it not slightly hypocritical of our Government to pontificate
on this issue when they are funding, through the British
taxpayer, a fossil fuel plant project in Mozambique?
(Con)
The Mozambique project is one of huge controversy. It was
supported by UK Export Finance in July 2020 under previous
policies and would not be approved today. It has now
contractually committed to that support. UKEF will continue to
monitor that situation closely. All support provided by UKEF has
been in line with the scope of the new policy since March, which
ends new direct financial or promotional support for the fossil
fuel energy sector, other than in the limited circumstances I
have outlined. It aligns support with clean energy.
(LD) [V]
My Lords, one of the many exemptions to the policy is for
countries that do not have a reliable or complete electricity
grid—for example, Nigeria, where the UK recently invested in a
gas and diesel power company. Do the Government intend to put an
end date on this exemption or will we continue to support fossil
fuel-generated power indefinitely?
(Con)
I know that there are agreements in the policy to review it at
certain intervals and I suspect that we will allow these
exemptions until the next policy review. But, as I said, there
are 600 million people in Africa with no access to electricity,
and we cannot hold back development where we can assist by
providing some form of grid or power system in the interim.
