Public finance for fossil fuels

The Australian government continues to support the expansion of the fossil fuel industry by using public funds to finance fossil fuel companies and projects.

This is partly done through the Export Finance and Insurance Corporation (EFIC) – our national export credit agency (ECA) – while further public financing is provided to fossil fuels through our role in a number of international finance institutions (IFIs). Read more about each of these by clicking the headings below.

The information and figures quoted on this page have been partly guided by a report from Oil Change International and the Overseas Development Institute: Empty promises: G20 subsidies to oil, gas and coal production, released in November 2015.

EFIC is Australia’s ECA, which is a semi-governmental financial institutions that provides loans, insurance and guarantees to support the international operations of local companies, or to projects that hold some national value. ECAs often lend far more than commercial banks and offer long-term, low-interest debt that makes a project much more bankable.

While EFIC doesn’t lend to local coal projects, it loaned over $1 billion to the massive Ichthys LNG project of the coast of Northern Australia at the end of 2012.

On top of this, EFIC provided a total of more than $400 million in finance to national and international fossil fuel projects in 2013 and 2014.

Australia also holds shares and plays a significant role in two IFIs, otherwise known as multilateral development banks, the World Bank Group and the Asian Development Bank. Through Australia’s involvement in these institutions, we have contributed a total of almost $300 million worth of finance to the global fossil fuel industry over the past two years.

We are also one of 57 prospective founding members of the proposed Asian Infrastructure Investment Bank (AIIB), having agreed to take the sixth largest share in the soon to be operational institution.

Worryingly, it seems AIIB will impose even looser environmental benchmarks for projects that it lends to than other IFIs, with no mention of emissions caps or avoidance of coal power generation in its Draft Environmental and Social Framework document.

So it seems highly likely that Australian public money will be funnelled through AIIB and used to finance huge, dirty coal power developments in Indonesia and other developing nations throughout Asia.

Dragging our heals on climate progress

Finance ministers from the OECD group of wealthy nations met in Paris in mid-November, reaching an agreement to stop financing the highest polluting new coal power plants.

Originally proposed by Japan and the US, the deal ensures that all new coal plants will only be eligible for OECD government finance if they have the latest technology and lowest emissions possible, and if cleaner alternatives are unviable.

However, Australia had to be dragged kicking and screaming into the deal, only agreeing after watering it down to allow some small, higher emissions plants to be built in developing countries. It seems the Turnbull government is struggling to throw off Tony Abbott’s pro-coal ideology. Read more about the OECD deal here.

As our close neighbours in Asia continue their period of rapid development over the coming years, we need to ensure that their rising energy demands are met with clean, renewable sources. This deal goes some of the way to ensuring that, but falls short of what is truly needed – a clear plan to completely phase out all government subsidies to fossil fuels in the very near future.

Australia’s recalcitrance on fossil fuel subsidies was again on display at the Paris climate negotiations, where our government officials refused to sign an agreement to phase out fossil fuel subsidies, once again putting the interests of big polluters ahead of our environment, climate and health.