International Public Funds Are Fuelling a Dash for Gas in Developing Countries—Report
Public institutions providing four times as much finance for natural gas as for wind or solar, despite climate commitments
June 7, 2021—International financial institutions are providing four times as much funding for gas projects in low- and middle-income countries as for wind or solar, according to a new report from the International Institute for Sustainable Development (IISD).
From 2017 to 2019, gas projects in low- and middle-income countries received an average of nearly USD 16 billion per year of international public finance, with 60% of this coming from the World Bank and three governments: Japan, China, and the United States. International financial institutions have continued to prioritize gas during the COVID-19 pandemic, the study finds—more than 75% of development banks’ support for fossil fuels went to gas projects in 2020.
“International public finance is driving a new dash for gas in the Global South, undermining global climate efforts and imperilling countries’ economies by locking them into high-carbon energies of the past and risking stranded assets,” says Greg Muttitt, lead author of the report.
The report reveals that gas is not needed to meet countries’ energy needs since renewable alternatives are available, including for power, buildings, and light industry technologies. For most uses, the study shows, renewables are already cheaper than gas or expected to become cheaper by 2030.
To avoid far-reaching climate and economic liabilities, researchers say that countries in the Global South need international public finance to lead the way in supporting clean energy. The report recommends that international finance institutions end all support to gas exploration and production, new gas power plants, and other long-lived gas infrastructure, such as pipelines.
Instead, the study suggests that these institutions should invest in helping the Global South develop resilient, sustainable economies by integrating renewable energy into power grids, promoting technology sharing, and supporting universal clean energy access. Public finance plays a disproportionate role, setting the trend for wider investments and unlocking private capital.
“We are at a fork in the road,” says Muttitt. “Some international financial institutions, including the European Investment Bank, have decided to exclude new gas and oil funding in line with the Paris Agreement goals. But others continue to back gas. As countries like Australia and the United States massively expand their liquefied natural gas exports, the public money supporting new gas infrastructure looks more geared to serving powerful interests than helping Southern countries meet their needs.”
The report emphasizes that new gas development is not consistent with the Paris Agreement. The just-published Net-Zero by 2050 report from the International Energy Agency notes that there is no need for investment in new fossil fuel supply. According to 1.5°C scenarios published by the Intergovernmental Panel on Climate Change, global gas consumption must decline by 55% between 2020 and 2050 and unabated gas power generation by 87%. While gas advocates claim it can be a “bridge fuel,” IISD experts say that bridge has now collapsed due to the urgency of curbing emissions, the availability of renewables, and the extent of methane leakage from gas infrastructure.
“The United States is currently reviewing whether to end new oil and gas finance, and there is pressure on the World Bank and others,” Muttitt says. “While investments and policies are starting to move away from coal and oil, the key debate now is about the third fossil fuel: gas.”
The International Institute for Sustainable Development (IISD) is an award-winning independent think tank working to accelerate solutions for a stable climate, sustainable resource management, and fair economies. Our work inspires better decisions and sparks meaningful action to help people and the planet thrive. We shine a light on what can be achieved when governments, businesses, non-profits, and communities come together. IISD’s staff of more than 120 people, plus over 150 associates and consultants, come from across the globe and from many disciplines. With offices in Winnipeg, Geneva, Ottawa, and Toronto, our work affects lives in nearly 100 countries.
You might also be interested in
Governments Must Live Up to Promises to Stop Funding Oil and Gas Internationally
At COP 26, 39 countries and public finance institutions signed the Glasgow Statement on International Public Support for the Clean Energy Transition. How can signatories get back on track to meet their commitments by the statement's 2022 deadline?
Renewable energy, not gas, is the answer to South Africa's long-term energy security
Amidst soaring gas and oil prices and global shifts in energy markets, many decision makers in the private and public sectors in South Africa seem intent on investing in gas. But if we really want long-term energy security – and a just transition to a low carbon economy – we must look to renewable energy.
Countries could shift USD 28 billion/year from fossil fuels to clean energy
A new report shows Glasgow Statement signatories must urgently implement their COP 26 pledge to end new international public support for fossil fuels by the 2022 deadline.
Guerra de Ucrania pone en riesgo los compromisos de la COP26 de Glasgow: IISD (in Spanish)
Los países que se comprometieron en la COP26 a dejar de financiar la extracción internacional de combustibles fósiles van camino de incumplir sus objetivos debido a la búsqueda de alternativas al gas ruso por la guerra de Ucrania, según un informe del Instituto Internacional para el Desarrollo Sostenible (IISD).