Bright Blue says UK Export Credit Agency has made progress in curbing support for fossil fuel infrastructure, but bolder green financing policies are still needed
The UK should use its continuing presidency of COP26 to bring its export credit agency into alignment with the Paris Agreement in a bid to motivate other governments to follow suit, according to a new report from think tank Bright Blue.
The report, titled Greening UK Export, applies an original assessment methodology developed by the Climate Perspectives Group to comprehensively assess the alignment of UK Export Finance (UKEF) with the Paris Agreement and assess the climate performance of Export Credit Agencies (ECAs) in five countries. It concludes that while the UKEF still needs to do significant work to be aligned with the Paris Agreement, the study shows the UK is in a leadership position.
As part of the study, ECAs were given one of four grades, based on the extent of their alignment with the goals of the Paris Agreement, which agency deemed to be ‘unaligned’, have made ‘some progress’, be ‘Paris aligned’, or be pursuing ‘transformational’ policies.
The agencies were scored based on the transparency of their activities; their mitigation measures, including both their ambitions for restricting or excluding fossil fuel projects, their climate impacts, and their emission reduction targets; the extent to which their finance is making a positive contribution to the global net zero transition; and their engagement with stakeholders, including their ‘pro-activeness’ in promoting green policies when working with governments.
Under this criteria, the Greening UK Export report gave the UKEF a overall rating of 1.23/3.00, scoring best on engagement, and least well on the setting of climate impact and emission reduction targets.
As such, the score gives the UK a grade of “some progress” and means it is currently outperforming the four other countries in the study, Canada, Japan, Germany and Netherlands, which were all deemed “unaligned”.
Bright Blue said the UK’s relatively strong rating is most notably due to its recent decision to halt official export finance support for fossil fuel projects – with limited exceptions – in overseas businesses from 2021, as well as the UK’s recent leadership role at COP26.
Ryan Shorthouse, chief executive of Bright Blue, said there was now an urgent security need for all export credit agencies to halt support for new fossil fuel projects and help accelerate the transition to clean energy infrastructure.
“The cost of living crisis, caused by the sharp increase in the global wholesale price of energy and exacerbated by the justified international response to the Russian invasion of Ukraine, shows why the UK and our allies across the developed world must work towards fully phasing out taxpayer support for international fossil fuel projects, and gas in particular, and cultivate green energy markets,” he said. “As the UK still holds the COP Presidency until COP27 in Egypt later this year, there is an opportunity for the UK to continue to show bold global leadership on climate change by bringing UKEF into full alignment with the Paris Agreement, and encouraging other countries to do the same with their own Export Credit Agencies.”
A Opinium poll of 750 UK exporting firms conducted in conjunction with the report found nearly three quarters of all UK exporters would like UKEF to play a major role in promoting low-carbon exports globally. Fully 83 per cent said they would favour UKEF providing better financing terms for exports of low-carbon goods and services, while 62 per cent of UK exporting firms said UKEF should provide worse financing terms for exports of high-carbon goods and services.
Igor Shishlov, senior consultant for Perspectives Climate Research, added: “The latest climate science unequivocally points to the need to leave most of the known fossil fuel reserves in the ground. In this light, export credit agencies as public finance institutions must reflect climate commitments of their governments and fully phase out support to fossil fuels, including natural gas, and ramp up support to renewable energy.”