UK taxpayer funds will no longer be used for overseas fossil fuel projects

The UK government has revealed that it will end foreign funding for oil and gas projects as it works to become a global leader on climate change.

The decision, announced on Saturday at the UN Climate Ambition Summit, means that UK taxpayer funds will no longer be used to support overseas fossil fuel projects. The move could see energy projects lose billions in underwriting loans.

Over the past four years, British taxpayers have supported £21 billion ($27.8 billion) of overseas fossil fuel developments through trade promotion and export finance.

Britain’s new policy still allows for new oil and gas deals to be approved during a “consultation period” due to end on 8 February. There will also be “very limited exceptions for gas-fired power plants and other projects” as part of the new plan. Climate crisis activists welcomed the announcement, calling it a “huge win for climate movement” urging other countries to follow suit.

The UK has also submitted its new national climate plan -or nationally determined contribution - to the UN's climate body, which confirms its pledge to cut greenhouse gas pollution by at least 68% by 2030 from 1990 levels. 

The UK has spent over £3.5 billion over the last five years on overseas fossil fuel projects. While the UK government hasn’t set an official end date, it is thought foreign financing will end sometime next year. Environmental groups have criticised the UK government’s support for foreign fossil-fuel projects — mainly in the form of project finance provided by export credit agency UK Export Finance, and have called it a poor use of taxpayer money. Last year, UKEF provided over $1 billion (£757 million) in financial support to a liquified natural gas facility in Mozambique, Africa. UKEF provided support through a mixture of underwriting and direct loans to the UK exporters involved.

But the project faces a legal challenge from the environmental charity Friends of the Earth, which alleges that UKEF has failed to carry out a transparent assessment of the environmental risks. 

Meanwhile CDC, the UK's development finance institution, has announced its own new Fossil Fuel Policy and Guidance on Natural Gas Power Plants to demonstrate how it complies with the new government policy.

In July 2020, CDC published its new Climate Change Strategy setting out a plan to achieve net zero emissions across its portfolio by 2050. The new Fossil Fuel Policy excludes new investment in the vast majority of fossil fuel subsectors, with just a few exceptions remaining. For example, it will only pursue investments in gas-fired power stations if they fulfil the requirements our new Guidance on Natural Gas Power Plants. The guidance provides a methodology for considering natural gas power plant investments in the context of the Paris Agreement. It requires an investment to be transitionary to net zero by demonstrating alignment with a country’s pathway to net zero emissions by 2050.