US Guidance Restricts Support for Fossil Fuels at Multilateral Development Banks
On August 16, the U.S. Treasury Department released an updated guidance note restricting US support for fossil fuels at multilateral development banks (MDBs), in line with U.S. President Joe Biden’s January Executive Order 14008.
The guidance rules out U.S. support of MDB finance for upstream gas projects and nearly all MDB finance for coal and oil projects, including through policy-based operations and financial intermediaries. This will guide the U.S. “voice and vote” at the five MDBs they are members of, including Asian Development Bank, World Bank, Inter-American Development Bank, African Development Bank, and European Bank for Reconstruction and Development.
The guidance has conditions for “narrow support” of midstream and downstream gas projects when four criteria are all met. These conditions include projects in poor and vulnerable developing countries where no clean energy alternatives are feasible, where there are development, energy security, or energy access benefits, and where the project is aligned with the Paris Agreement as outlined by the joint MDB Paris-alignment methodology.
“We will work with MDB Management and shareholders to prioritize clean energy, innovation, and energy efficiency. When considering projects, we will advocate for MDB staff to assess these options first, and only consider fossil fuels if they are unfeasible,” states the guidance.
The US restriction on fossil fuels is a sign of growing momentum to end public finance for all fossil fuels including gas. The European Union, UK, and the European Investment Bank have all made commitments this year to stop public financing of fossil fuel projects. The International Energy Agency and United Nations Secretary General have provided important signals in the same direction, calling for governments to end finance for new fossil fuel projects and phase out fossil fuels — including gas — if we are to limit warming to 1.5C.
Susanne Wong, Senior Campaigner, Oil Change International:
“This move by the US government is an important sign that the era of fossil fuels is coming to an end. It’s time for governments and institutions in the region to put communities first and stop fueling the climate crisis with their continued support for fossil fuels.”
Bronwen Tucker, Research Analyst at Oil Change International:
“The U.S. has a large sway at the MDBs, and so it’s critical that President Biden and Secretary Yellen add clear and strict details to their proposed gas finance conditions immediately. At worst, up to 40% of the total fossil fuel finance from the MDBs where the U.S. is a member could continue. That’s $1.6 billion per year for gas pipelines, power plants, and LNG terminals that the climate and frontline communities can’t afford.”
Yuki Tanabe, Program Director, Japan Center for a Sustainable Environment and Society (JACSES): “Japan is the largest shareholder of the Asian Development Bank and the 2nd largest shareholder of the World Bank. Therefore, Japan should follow the US move.”
Notes for Editors
- The U.S. Treasury’s new fossil fuel energy guidance at MDBs can be found here: https://home.treasury.gov/system/files/136/Fossil-Fuel-Energy-Guidance-for-the-Multilateral-Development-Banks.pdf
- In the case that the Treasury Guidance conditions are not well applied, Oil Change International data shows that up to 40% of the total fossil fuel finance from MDBs from 2018 to 2020 — USD 1.6 billion per year — could continue to be supported by the United States under these new guidelines. This is the amount that went to midstream and downstream gas project finance in IDA, fragile and conflict-affected, and small island developing states the U.S. Guidance states they may continue to vote in favor of. This includes only the MDBs where the United States is a member: World Bank, Inter-American Development Bank, Asian Development Bank, African Development Bank, and European Bank for Reconstruction and Development.
- Earlier this year, after passing a policy to end its international public finance for fossil fuels, the United Kingdom announced that it would “convene a vision for how other countries, public and private financial institutions and multilateral development banks can accelerate the energy transition by collectively shifting international support from all forms of fossil fuels to clean energy.”
Yuki Tanabe, Japan Center for a Sustainable Environment and Society (JACSES), firstname.lastname@example.org
Susanne Wong, email@example.com, +1 510 847 3759
Bronwen Tucker, firstname.lastname@example.org, +1 587 926 7601