What are ECAs?
Export credit agencies (ECAs) are primarily public entities that provide corporations with government-backed loans, guarantees, credits and insurance, usually to support exports overseas. ECAs are an important source of public finance for the private sector. All member countries of the Organisation for Economic Cooperation and Development (OECD) have at least one ECA.
How are ECAs funding fossil fuels?
In recent years, banks and other private lenders have been backing out of fossil fuel projects as they recognise the huge financial risks posed by climate change. Governments with an interest in seeing these projects succeed are turning to ECAs to bankroll and encourage further investment in the projects.
ECAs generally support projects through guarantees or early-stage loans. This support bolsters confidence in the projects, thereby attracting private lenders and investors who would otherwise consider the projects too financially risky. Without this early support from ECAs, many major fossil fuel projects would never get off the ground.
How are ECAs undermining a just transition?
People around the world are calling on governments to shift to renewable energy sources by means of a just transition. This includes local ownership of renewable energy projects, the creation of local jobs and access to energy for all.
Fossil fuel support from ECAs disproportionately benefits corporations based in the Global North and impedes a just energy transition in the Global South. Fossil fuel development is increasingly concentrated in the Global South, as are the associated harms to local people and their environment. New oil, gas and coal projects lock in fossil fuel dependence for these countries’ economies despite many of these countries having excellent potential for growth in renewable energy.
A sample of major ECA-supported fossil fuel projects
Mozambique LNG and Coral South — fossil fuel projects that are fuelling the climate crisis and violence
In 2011 one of the world's largest gas reserves was found in northern Mozambique. ECAs from all over the world — including from China, France, Italy, South Korea, Japan, Netherlands, South Africa, the UK and the US — along with other financial institutions and multinationals have since been involved in financing the USD 20-billion Mozambique LNG project and USD 8-billion Coral South project.
The on land constructions forced hundreds of families from rural communities out of their homes and away from their farmland and fishing ground. Furthermore, since 2017 a violent conflict has been raging in the region. Human rights and environmental groups warn that the project is worsening the conflict and fueling violence from armed militias.
Barossa LNG in Australia — a proposed carbon-dioxide emissions factory with a LNG by-product
The Barossa gas project in Australia is en route to become the world's most carbon-intensive gas project. If it goes ahead, the project will further accelerate climate change by venting millions of tons of greenhouse gases into the atmosphere. It will also put at risk local community livelihoods and globally significant biodiversity.
Barossa LNG has already received nearly USD 200 million in ECA financing from Korea's KEXIM. Additional financing for the project is being considered by KEXIM, Korea's K-SURE and Japan's JBIC.
Cirebon 2 coal plant in Indonesia — a project linked to corruption and risks for climate and local life
A consortium of Japanese, South Korean and Indonesian companies are constructing a 1000-MW coal-fired power plant in the West Java province of Indonesia. Besides the risks to climate, the project carries various environmental and social risks. These risks result from, among other things, the lack of appropriate measures to restore threatened livelihoods; the lack of adequate technology for pollution control; an inadequate environmental impact assessment; and the lack of sufficient public participation in the plant's development process.
ECA laggards among G20 countries
Countries ending ECA support for fossil fuels
COP26 in Glasgow marked a breakthrough in terms of ending public support for fossil fuels. At the conference, 35 countries and four public finance institutions committed themselves to end international public finance for unabated fossil fuels by the end of 2022 and instead prioritize support for the clean energy transition. A list of signatories can be found here. The signatories include big contributors to fossil fuel investment such as Canada, UK, USA, Germany and Italy.
This is a major achievement. With strong implementation, this initiative has the potential to directly shift at least $24 billion in government-backed finance out of fossil fuels on an annual basis. For this to happen, it is essential that the statement is implemented with integrity. Read the full joint CSO letter about the COP26 Statement here.
ECAs are shrouded in secrecy
Governments publicly disclose very little — if any — information about the oil, gas and coal projects they support through ECAs. While many ECAs adhere to the OECD’s due diligence and transparency recommendations, these guidelines are weak, voluntary and largely ineffective. Only three ECAs have committed to adopting the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
This means governments are funneling taxpayer money to the fossil fuel industry without telling the public much about it. Without detailed and timely disclosure, the public is unable to accurately assess the full extent of ECAs' support for fossil fuels.
Organisations around the world are asking their governments / ECAs to:
1. End all ECA support for coal, oil and gas
Governments must close the loopholes in the OECD coal sector understanding in order to stop support for all coal-related projects, including coal plants, mining and transportation. It should also cover indirect coal lending through financial intermediaries and be extended to countries outside the OECD, like China and other emerging economies. Governments should implement an OECD sector understanding stopping all support for oil and gas, including related infrastructure. Read the Joint Statement of 175 CSOs here.
2. End oil and gas financing
ECAs must make new domestic and international commitments to end all support for oil and gas projects, including exploration, related infrastructure and power plants. These international efforts should take place at both at the OECD level and at the level of the International Working Group on Export Credits. Without these changes, ECAs will inhibit the necessary transition to renewable energy sources.
3. Ensure transparency and accountability
Governments must ensure alignment of all public finance with the Paris goals and improve transparency and reporting standards. This must include a) requirements for ECAs to provide the amount and type of financing, b) specifics on the projects supported and c) timely accounting of the full life cycle and lifetime emissions of the projects they support.
Call on your government to immediately end all ECA support for fossil fuels
Campaign resources and updates
Spain’s export credit agency restricts fossil fuel finance, but leaves major gas loopholes
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