Last week on 5th December 2023 at COP28 in Dubai, the Australian Government signed onto the Clean Energy Transition Partnership (CETP), also known as the Glasgow Statement. Taking this pledge, Australia has committed to stop giving taxpayer money to overseas fossil fuel projects. This includes both export credit as well as financing through the foreign aid program.
This article will take a deep dive into what export credit is, why it's important nationally and globally, and explore the years of work Jubilee and other organisations did to lay the groundwork for this announcement.
The CETP deliberately targets Export Credit Agencies (ECAs), which are the largest public financiers of fossil fuels globally. ECAs are publicly owned or backed financial institutions, set up by governments to provide financial support to local companies who export or do business overseas. ECAs generally provide finance at cheaper than market rates, and Australia’s own ECA - Export Finance Australia (EFA) – is also only allowed to support projects or companies who’re unable to get private financing. In its purest form, an ECA provides cheap financing to businesses so they can get the ball rolling and find or grow the markets they can sell to overseas.
Although on paper Australia doesn’t seem to be the biggest public financer of overseas fossil fuels[1], it plays a crucial role in getting risky projects off the ground. Early public financing attracts and brings on board private financing. It reassures banks who may otherwise be hesitant to finance risky fossil fuel projects, and without EFA’s support some projects may never get off the ground.
The role export credit plays in fossil fuel expansion
Firstly, export credits enable the development of huge amounts of new fossil fuel projects globally, with G20 countries' ECAs giving an estimated US $33.5 billion a year to fossil fuels. Meanwhile, last week’s COP28 talks – hosted by a petrostate with record numbers of fossil fuels lobbyists attending - conceded that the world must transition away from fossil fuels. Scientists and energy policy experts have long pointed out that we can’t keep global warming under 1.5°C unless we stop all new fossil fuel projects. Turning off the export finance tap is critical to this.
Secondly, export credit finance was crucial to prying open the gas fields of northern Australia and helped expand the existing coal sector. EFA – known as EFIC back then – poured over a billion dollars into Australian fossil fuels in the 2010s, mostly towards new export gas projects.
Japanese, Korean and Chinese ECAs underwrote this mass scaling up of fossil fuels to an even greater extent. Overseas ECAs subsidised new coal and gas projects in Australia to the tune of AU $36 billion over this period. These countries pumped ECA finance into Australian projects to supply fossil fuels to their own domestic energy companies who are the primary customers and consumers of our coal (China) and gas (Japan and Korea). This is a strategy these countries use beyond Australia – for example, Japan is today one of the world’s largest public financiers of fossil fuels and is pouring money into similar projects across Asia.
Australia’s blocking role in OECD negotiations
Australia joining the CETP is important because up until now Australia has generally played a blocking role at the OECD working group on export credits. This little-known working group is a key influence on export finance policy and terms of finance. After years of negotiation and despite Australia’s efforts to derail action, the OECD working group finally agreed to stop financing new coal projects from 2021 onwards.
The United Kingdom and European Union recently proposed to expand this restriction on OECD countries financing coal to include upstream oil and gas projects. Though it was clear on the ground that Australia was not blocking change as much as it did under the previous LNP government, they took a lukewarm position. Rather than aligning with OECD countries who want to stop giving public money to fossil fuels, Australia has tended to stand shoulder to shoulder with countries like Japan and Korea who have financial reasons for propping up Australia’s fossil fuel industry so are pumping ECA money into expanding Australian fossil gas.
Australia and Norway finally changed their stance at COP28 last week. They joined the majority of countries in the OECD working group on export credits who are now - at least in principle - committed to ending overseas public finance for fossil fuels. We now have a real chance to turn off the export finance tap which has been flowing into the fossil fuel industry for a decade.
If Australia keeps the promises it made by signing the CETP, this could be a big deal in the fight to combat the climate crisis. It could lead to policy change with major impacts nationally and globally – we’ll just have to watch closely and see if the government lives up to their promise in the next 12 months.
Note: Australia’s CETP commitment is also important to other fights to stop public financing of fossil fuels beyond ECAs, such as multilateral development banks ending their support of fossil fuels – which is explored further in our recent Hidden Cash report.
Jubilee Australia’s export credit journey
It’s clear that big policy wins are never achieved alone. Every affected community speaking out, every government official taking a stand, and every civil society organisation action affects our climate future in ways that are hard to pin down.
That said, when Australia announced joining the CETP, many groups reached out to congratulate Jubilee Australia on its role in this win. We wanted to share our reflections on our decade and a half of work, because this is also a story about how people make change happen. Evidence-based advocacy is often a long, hard and sometimes lonely journey, especially on big issues that can feel overwhelming, intractable and hard to communicate. We can often feel like our losses are many, and our wins are few.
Our journey with export credit started 14 years ago, when we decided to look into EFIC (as EFA was then known) possibly considering giving a large loan to ExxonMobil’s PNG LNG project. This was the first major gas project proposed in Papua New Guinea, a country that the climate crisis has since then hit very hard. Oil Search, a PNG-based company with strong Australian links, was a co-venturer and gas giant Santos also had a stake in the project.
Jubilee Australia took the baton passed from civil society organisations who campaigned to reform EFIC in the 1990s and 2000s. We decided to make advocating for transparency and accountability in EFIC one of our organisation’s main priorities in the first half of the 2010s. We wrote submissions, we met with EFIC and government officials, and we published more research in 2012, which was two years before PNG LNG began production. Our research revealed the government’s decision to support the project was a poor one, in part caused by EFIC’s lack of transparency.
Despite this, Australian governments – whether led by Rudd, Gillard or Abbott – ignored our demands for change. They handed down new policies and new statements of expectations, such as ordering EFIC to focus more on small businesses, and empowering them to provide more support to domestic businesses looking to export their products instead of those who operate overseas. Nonetheless, EFIC did little to become more transparent.
By 2016, we turned our focus towards EFIC’s fossil fuel policies. Around this time, EFIC changed their name to Export Finance Australia (EFA). In the next few years, EFA slowed down its support for new fossil fuel projects, but continued to re-finance existing projects. In the meantime, the Coalition government built new pipelines for funnelling taxpayer money into fossil fuels, such as the Northern Australia Infrastructure Facility (NAIF), which is housed in and supported by EFA. NAIF has enthusiastically financed new export-focussed fossil fuel projects in the north of the country.
But by 2020, change began. In the lead-up to the UK hosting COP26 in Glasgow, Boris Johnson’s government announced a review of its policies, and by December 2020 of that year Britain announced its ECA would not finance any future fossil fuel projects. (Although, we note that the UK’s ECA had already financed the highly controversial Mozambique LNG project in 2020).
Notably, it was a Conservative government who led this change, which signalled that in many countries more rational decision-making on public financing isn’t a ‘right’ or ‘left’ issue. Instead, they did the election math that there was a new generation of voters who were far more concerned about the climate crisis and the need to adapt the economy to changing climate realities.
The UK announcement became a critical turning point in the fight to stop public financing of overseas fossil fuels. At COP26 in 2021, thirty-four countries, including the USA, Canada, Germany and Spain, immediately joined the Clean Energy Transition Partnership.
In 2021, we published two reports about public finance and fossil fuels: Hot Money, which interrogated EFA and NAIF’s financing, and Fossil Fuel Pushers, which examined overseas ECAs’ role in expanding Australian fossil gas.
In May 2022, voters changed the government and elected crossbench and minor party MPs on the promise of climate action. We urged Australia to join the dozens of other countries who had already signed the CETP agreement to commit stop financing fossil fuels overseas. Many allies in the environmental, human rights and accountability movements across Australia, the Pacific and the world joined our call.
After two years of our intensive advocacy, the Albanese Government last week announced that Australia would finally join the CETP. The Jubilee Australia team celebrated what could become one of our most lasting public policy achievements – but only if the government keeps its promise in how it implements the agreement. In addition to thanking the government for this announcement, we have also set out a minimum standard for meaningful action they need to take to live up to their commitment.
Many organisations have campaigned on or supported our campaigns on EFIC and EFA over the years including AID/WATCH, Oxfam Australia, the Human Rights Law Centre, Animals Australia, the Australia Institute, and Market Forces. More recently, allies on this critical issue have also included ActionAid, the Australian Conservation Foundation, Oil Change International, 350.org, Climate Action Network Australia, the Australian Religious Response to Climate Change, and Diplomats for Climate Action.
Following our win, now is not the time for complacency. While many countries live up to the spirit of their CETP pledge, there are still cases of countries who have exploited loopholes to excuse their ongoing financing of fossil fuels. Moreover, 14 years on from EFIC approving financing to the PNG LNG project – financing which they haven’t yet paid back in full - TotalEnergies, ExxonMobil and Santos (which bought Oil Search) are finalising a new fossil gas project in Papua New Guinea’s Gulf Province, confusingly called Papua LNG. Reports are circulating that they’re approaching Export Finance Australia and other ECAs for finance, so the stakes couldn’t be higher right now.
Note: Australia signing the CETP is an encouraging step – but in the next 12 months the government will plan how it will implement it and decide whether this will be a historic change or end up a broken promise. To learn more about what needs to happen next click here.
[1] EFA gave between AU $100-200 million of financing to fossil fuel projects in both 2018/19 and 2019-20, for example, but very little in the years immediately before and after.