Save for later Print Download Share LinkedIn Twitter The US Treasury Department has pledged to phase out financing of upstream oil and gas projects around the world, although the Biden administration has left the door open to funding some midstream and downstream gas projects. In a long-anticipated strategy document released on Monday, the Treasury Department outlined how Washington will leverage its voting power in the World Bank and other international finance institutions to steer energy financing away from carbon-intensive projects. Earlier this year President Joe Biden directed federal agencies to craft a climate finance plan for assisting developing countries in reducing their carbon emissions. He stipulated that this effort should promote "the flow of capital toward climate-aligned investments and away from high-carbon investments" (OD May13'21). The strategy is aimed at aligning the US more with Europe, where there has been growing pressure for governments and international lending agencies to stop backing international fossil projects. The Biden administration's approach contrasts sharply with that of the Trump administration, which supported fossil fuel development and pulled the US out of the Paris climate agreement -- a step which Biden later reversed. The two-page plan says the US opposes upstream oil, gas, and coal projects, while offering only qualified support for mid and downstream natural gas projects that would benefit fragile developing countries or small island states. Criteria for Exceptions According to the guidance document, the Treasury Department will only back gas projects where there is no economically viable renewable energy alternative; where there are compelling energy access or security implications; and where such projects support the goals of the Paris climate agreement. Additionally, the Treasury Department says it will only support carbon capture and methane abatement measures as stand-alone investments that would reduce the carbon footprint of existing facilities. At a July meeting with the heads of the World Bank, International Monetary Fund and other institutions, Treasury Secretary Janet Yellen urged them to double the current $40 billion pledge for private-sector financing focused on climate adaptation, among other policy goals. Environmental groups have complained loudly about the extent to which the new guidance could leave the door open to new natural gas projects. This echoes their criticism that the administration's pledge for the loan portfolio of the US International Development Finance Corp. to become carbon-neutral by 2040 provides too much wiggle room to keep financing gas projects. Luisa Galvao at Friends of the Earth said the broad restrictions outlined in the guidance leave "loopholes for continued fossil fuel financing that are so big, you can drive an LNG ship through them." These include the possibility of continuing support for LNG exports and language referencing the role that gas could play as a "bridge fuel" in the energy transition. Analysis by Friends of the Earth indicates that under the new guidelines the US could continue to support up to 40% of fossil fuel projects that were funded in 2018-20. Jolie Schwarz of Oxfam America called the new guidance a "big step forward” but warned that greater transparency was still needed around "indirect support" for fossil fuels along with "stricter limitations around the exceptions allowed for the use of natural gas or carbon capture." Bridget DiCosmo, Washington
