President Joe Biden is poised to back restrictions on international funding for oil and gas projects in a move that could free up billions of dollars for clean energy and crystallize his climate legacy.
It marks a shift from the United States’ approach over the past three years. Biden joined a group of wealthy nations in 2021 to restrict financing of coal-fired power plants in other countries but hasn’t support efforts to expand those restrictions to other fossil fuels.
Now, his administration and those of a handful of other rich countries are expected to call for curtailing public financing for oil and gas projects internationally at a virtual meeting Tuesday of the Organisation for Economic Co-operation and Development — a group of 38 countries that collaborate on issues of trade and finance — according to three people who are familiar with the administration’s plans.
“It will have a huge impact and, I think, really leave a strong climate legacy for the Biden administration,” said Kate DeAngelis, deputy director of international finance at Friends of the Earth.
The U.S. is expected to back a so-called emission threshold that would prevent the U.S. Export-Import Bank and other publicly funded export credit agencies from financing carbon-intensive energy projects. That would be in line with interim guidance by the Biden administration to end international fossil fuel financing that was never made public but was viewed by analysts at the Natural Resources Defense Council.
It’s likely the last chance the administration would have to push for an agreement at the OECD. President-elect Donald Trump, who has attacked climate science and promised to drill for more oil at home, is unlikely to support ending fossil fuel investments abroad when he takes office in January.
The move comes amid pressure by climate activists to deliver on a promise Biden made when he took office in 2021 to end overseas financing of all carbon-intensive fossil fuel projects. The U.S. joined dozens of other countries later that year at climate talks in Glasgow, Scotland, in agreeing to stop funding international fossil fuel projects before 2023. Reaching an agreement now, they say, would put rules in place that are tough to unwind, forcing the incoming Trump administration to comply with the deal or pull out of it.
A spokesperson from the Trump transition didn’t respond to a question about how the administration would treat such an agreement but said voters elected Trump based in part on promises he made while campaigning to lower energy costs for consumers.
“When he takes office, President Trump will make America energy dominant again, protect our energy jobs, and bring down the cost of living for working families,” spokesperson Karoline Leavitt said in an email.
Jake Schmidt, senior director for international climate at NRDC, thinks the Biden administration would have supported the agreement if Vice President Kamala Harris had won the election. But Trump’s victory might be pushing the administration to act more quickly.
“They clearly realized the end of the year is fast approaching and their ability to secure a climate win is rapidly winding down,” he said.
‘Finish the job’
The meeting will center on an export credit agency agreement among the European Union and 10 other wealthy nations: Australia, Canada, Japan, South Korea, New Zealand, Norway, Switzerland, Turkey, the United Kingdom and the United States.
It follows a 2021 deal by the U.S. and other rich countries in the Organisation for Economic Co-operation and Development to end public investments in coal power projects that don’t capture and store their emissions.
Earlier this year, the European Union proposed to extend the coal prohibition to cover oil and gas, except in limited circumstances that align with the Paris climate agreement, which aims to limit global temperature rise to 1.5 degrees Celsius.
The idea has earned the support of Canada, Norway and the United Kingdom, among others, but the U.S. has so far not backed it publicly or offered an alternative. That will change Tuesday, when the U.S. is expected to support a separate plan for establishing emission thresholds.
Export credit agencies currently offer billions of dollars in financing for fossil fuel projects, prompting pressure from climate activists who are calling on Biden to fulfill his earlier pledges.
But the U.S. Export-Import Bank has continued to approve financing for fossil fuel projects internationally despite a Biden executive order that instructed federal agencies to end such support.
That matters because although the Treasury Department represents the U.S. in OECD negotiations, the Ex-Im Bank would need to implement any decision reached under it. The Ex-Im Bank has previously said that its charter prevents it from discriminating against specific industries such as oil and gas.
Schmidt of NRDC said an emissions threshold could be seen as a “cleaner and clearer” way to set restrictions than the EU proposal, which could allow for more loopholes if countries don’t explicitly define what types of projects are compatible with the 1.5 C limit.
One remaining challenge, however, will be getting South Korea to join the agreement, particularly amid the political turmoil gripping the nation following a failed effort by President Yoon Suk Yeol to establish martial law. Agreements made at the OECD must be done by consensus.
Last month, three Democratic senators sent a letter to Treasury Secretary Janet Yellen and National Security Adviser Jake Sullivan urging them to use the Tuesday meeting “to fulfill a key and durable promise on international energy finance.”
“Having the senators weighing in was an important reminder that the White House needs to finish the job,” said Schmidt.
