When governments fund fossil fuels, it’s time to take them to court 

Comment: A new wave of climate litigation is targeting state institutions that are still providing public finance for fossil fuels, despite pledges to turn off the funding tap

It's time to take to court the governments that fund fossil fuels

A warning sign for a natural gas pipeline is seen as natural gas flares at an oil pump site outside of Williston, North Dakota, March 11, 2013. (REUTERS/Shannon Stapleton)


Today’s climate crisis is already worse than scientists predicted, yet governments continue to pour billions of dollars of public funds into the single-biggest source of greenhouse gas emissions: fossil fuels.

Activists have been protesting against this for years, and now we’re seeing the fight spill into courtrooms. In the face of climate breakdown, civil society is sending a clear message: governments that continue to use taxpayers’ money to fund fossil fuels should expect a lawsuit.

Litigation has the power to make or break fossil fuel expansion. With more than 2,000 cases filed across the globe since 2017, climate litigation has, so far, focused on the shortcomings of government or company policies, challenging inadequate emissions reduction targets or reparations linked to climate damages. Today, we’re seeing a new wave of climate litigation focused on institutions that channel public finance towards fossil fuels – with recent lawsuits in Australia, the UK, Mozambique, Brazil, South Korea and beyond.

These lawsuits allow citizens to take back control over their public finances and force public financial institutions – whose investments are notoriously opaque – to become more transparent. One critical step governments can take to avoid such lawsuits is to live up to their commitments and come to a global agreement on oil and gas export finance restrictions at an Organisation for Economic Cooperation and Development (OECD) meeting coming up in mid-March.

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The UK, Canada and EU already tabled a proposal for such restrictions which, with sufficient support, can succeed in limiting public finance for fossil fuels. This would free up billions of dollars that can be reinvested in reliable, affordable and secure renewable energy, efficiency measures, and facilitating a just transition.

To achieve this, getting the US on side is key, after which remaining OECD members will likely follow. If President Biden is serious about tackling climate change, it’s vital that he backs strong measures to stop international finance for fossil fuels.

Despite the US, as well as several G20 countries and major multilateral development banks (MDBs), committing to end international public finance for fossil fuel projects by the end of 2022, they continue to pour billions of dollars into international fossil fuel projects. Data also shows that far more public money goes into fossil fuels than renewables or energy efficiency measures.

G20 governments and MDBs provided at least $55 billion for fossil fuels each year from 2019-2021, while allocating only $29 billion to renewables. Bankrolling these toxic industries is fundamentally incompatible with limiting global heating to 1.5C, which, according to the International Energy Agency, requires an immediate stop to investments in new coal, oil, gas and Liquefied Natural Gas (LNG) infrastructure.

State support for gas exports

A crucial part of this fight is holding Export Credit Agencies (ECAs) and similar development institutions accountable. ECAs are government-owned or controlled institutions that provide financing, often at subsidised rates, to large infrastructure projects around the world. ECAs are the world’s largest public financiers of fossil fuels, providing seven times more support for fossil fuels ($34 billion) than clean energy projects ($4.7 billion) between 2019 and 2021.

Without government-backed finance, these projects may not otherwise go ahead. This is especially true for the expansion of more than 80% of new LNG exports over the last decade. While President Biden’s recent announcement of a pause in approvals for new LNG export terminals in the US is welcome, we need to make much more rapid progress to stay within safe planetary limits. A crucial part of this fight is holding ECAs to account and governments to comply with international law.

Civil society groups are turning to the courts. The NGO Jubilee is suing Export Finance Australia and the Northern Australia Infrastructure Facility for failing to adequately report the environmental effects and climate impacts linked to their financing activities, which play a crucial role in determining how ECAs disclose relevant information.

Last year, Friends of the Earth UK took the UK’s ECA to court over its investment in a major LNG project in Mozambique. Friends of the Earth argued that the $1.15 billion in export finance support was unlawful, inconsistent with the latest science, and incompatible with the Paris Agreement. Although the court ruled in favour of the ECA, the case exerted enough pressure to stop funding for new overseas fossil fuel projects. Without the publicised court battle flagging the issue for the UK public and policymakers, this result may never have been achieved.

In Brazil, the human rights NGO Conectas sued the Brazilian Development Bank for failing to assess the negative climate impacts of its investments. Similarly, South Korean ECAs were challenged over the funding they provided for the Australian Barossa gas pipeline project, which would run through a protected marine park, forcing the financiers to review the necessity of LNG imports, as well as their environmental impacts.

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At COP26, 34 governments, including a majority of OECD members, signed up to the Clean Energy Transition Partnership (CETP), pledging to end international public finance for unabated fossil fuels by the end of 2022. Despite this, governments are failing to keep their promises and continue to fund international fossil fuel projects.

The Jubilee case comes at a time when Australia announced its commitment to the CETP – we now need to see policies follow commitments. Put simply: when governments make promises, they need to keep them, or the courtroom awaits.

Maria Alejandra Vesga Correa is a legal officer in the global public finance team at Oil Change International. Leanne Govindsamy is programme head for corporate accountability and transparency at the Centre for Environmental Rights. Lorenzo Fiorilli is a lawyer working on public finance, energy markets and competition with ClientEarth.

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