UK Export Finance told to stop funding fossil fuel projects
MPs warn practice is undermining the nation’s international climate and development targets
Mary Creagh Credit: PA
Parliament’s Environmental Audit Committee has told UK Export Finance to stop using taxpayers’ money to support fossil fuel projects by 2021.
MPs on the committee said the credits guarantee agency gave an “unacceptably high” level of support for fossil fuel projects in poorer countries that undermined the nation’s international climate and development targets. UKEF reports to international development secretary Liam Fox and is strategically aligned with the Department for International Trade, however it is a department in its own right and not an agency.
The Environmental Audit Committee’s latest report follows criticism from the International Development Committee, which dubbed government policy “incoherent” because UKEF backed carbon-based projects at the same time as the Department for International Development sought to fund alternative schemes.
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In a stark illustration, the International Development Committee said that UKEF had provided £4.8bn in support for fossil fuel projects between 2010 and 2016 while DfID had given £4.9bn to the International Climate Fund over broadly the same period, ostensibly seeking to mitigate damage caused by fossil fuels.
In the new EAC report, MPs said the vast majority of UKEF’s support for fossil fuel energy focused on low- and middle-income countries and risked locking them in to “high-carbon dependency for decades to come”.
Committee members said that 96% of the funding support that had been given for UK global energy exports over the past five years had been directed towards fossil fuel projects, and that UKEF’s involvement represented a major enabling role by removing risk and sending investor signals.
MPs said UKEF should follow the lead of other export credit agencies, such as Sweden’s, and introduce a cap on lending to fossil fuel projects before ending support completely by the 2021 deadline. They said that UKEF should also align its work with the target of achieving net zero emissions by 2050.
Committee chair Mary Creagh said it was time for the government to act by legislating to ensure UKEF’s compliance with the UK’s obligations under the Paris Climate Agreement and other national and international climate and environmental commitments.
“Achieving net zero emissions by 2050 will mean ending our addiction to dirty fossil fuels,” she said.
“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."
A case study flagged by the committee also appeared to question the extent to which UKEF funding actually supported UK business.
It said that during 2017-18 Turkish company ENKA UK had received £578m in two phases of support from UKEF for its role in delivering two “critical” power projects in Iraq as a subcontractor of US-headquartered conglomerate General Electric.
The committee said that ENKA UK was a subsidiary of Turkey’s largest construction company and had revealed in evidence that it planned to open an office in Birmingham that would have employed 12 staff.
The committee said UKEF chief executive officer Louis Taylor had told an evidence session that around £197m of the funding would be committed to making UK content part of the power plants. The figure represented 40% of the second phase funding of £490m.
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