G7 to Allow Fossil Fuel Financing If Climate Pledges Kept

Group of Seven nations are set to allow some exceptional public financing of overseas fossil-fuel projects to continue provided that the investments are consistent with prior climate-change agreements, according to people familiar with the matter.

The final text of the leaders’ statement, due to be published Tuesday at the conclusion of a three-day summit in Germany, will temporarily allow public investments in gas projects in limited circumstances given the current energy crisis. At the same time, it will reaffirm that commitments such as those agreed on at the COP26 climate summit in November need to be stuck to, the people said.

The agreement is a compromise after days of intense negotiations among diplomats as some G-7 countries race to replace Russian energy, with Europe in particular struggling to secure alternative sources of gas.

Summit host Germany was pushing to allow investments in gas, and has warned that Russia’s moves to limit supply risk a Lehman-like collapse in the energy markets, with Europe’s largest economy facing the unprecedented prospect of businesses and consumers running out of power.

‘No backtracking’

“On paper there is no backtracking from the COP26 commitment, but the ultimate proof lies in the real investment choices that G-7 countries will make over the next weeks and months,” said Luca Bergamaschi, executive director of the climate change think tank ECCO.

Germany has responded to the cuts by reviving coal plants and providing financing to secure gas supplies from countries such as Qatar, while continuing with its long-standing plans to phase out nuclear energy. The World Nuclear Association, an industry lobby group, is urging the G-7 to boost access to nuclear technologies.

The summit conclusion is a step back from a commitment G-7 ministers made in May, when they acknowledged for the first time that fossil-fuel subsidies were incompatible with the Paris Agreement and would end international public finance for gas projects by the end of 2022. However, back then they also acknowledged that investment in the LNG sector was a necessary response to the current crisis “in a manner consistent with our climate objectives and without creating lock-in effects.”

The International Energy Agency has said that no new oil and gas projects should be developed if the world is to limit global warming to 1.5 degrees Celsius.