Washington DC December 12 2021: Following through on President Biden’s January executive order calling for the US to develop a plan to help flow capital toward climate aligned investments, the Biden administration has told US embassies to stem support for carbon-intensive energy projects internationally.
The new interim guidance “rules out any US government engagement” related to unabated or partially abated coal generation, according to a cable sent to US embassies overseas earlier in December. It also limits the the government’s engagement internationally on other new fossil fuel projects that are deemed carbon intensive, albeit with some exceptions.
The administration’s posture on overseas financial support for fossil fuel infrastructure has been closely watched by proponents and opponents of natural gas, in part because of its implications for gas infrastructure in emerging markets that could become future demand centers for US LNG.
Under the guidance, other fossil fuels, including oil and gas projects, are considered carbon intensive projects for which departments and agencies are directed not to pursue new engagements, although exceptions are possible for national security and geostrategic interests, or when projects are needed to support “energy access or energy for development in particularly vulnerable areas,” according to a copy of the cable.
The new guidance sets a threshold; it defines carbon-intensive projects as those that would lead to GHG emissions with emissions intensity above a life-cycle value of 250g CO2/kWh, according to the cable. The document calculates combined cycle gas projects as having an emissions value of 450g CO2eq/KWh, while gas combined cycle with carbon capture and sequestration is listed at 170g CO2eq/KWh, or below the threshold that would trigger the limitations.
The guidance, on the other hand, would allow continuation of activities that would reduce GHG emissions, such as through methane emissions monitoring and mitigation in the natural gas supply chain. It also allows for support for transmission and distribution as well as technology-neutral assistance to improve institutional capacity for power sector entities such as those regulating power systems.
Following climate finance plan
The effort is aligned with the Biden administration’s climate finance plan released in April, which called for ending international support for carbon-intensive fossil fuel-based energy, boosting annual public climate finance for developing countries, and mobilizing private finance internationally for climate related investments.
Most recently, at the UN Climate Conference talks in Glasgow, the US joined at least 18 other nations in a commitment to “end public support for the international unabated fossil fuel energy sector by the end of 2022,” except in limited circumstances aligned with Paris Agreement goal of a 1.5-degree-Celsius warming limit.” Those commitments pertained to institutions that provide international public finance.
Jake Schmidt, senior strategic director of international climate at the Natural Resources Defense Council, said the new guidance is an “important, overdue step that must be followed with concrete action.”
“That means all US agencies must decisively stop financing gas, oil, and coal projects overseas and shift investments into clean, renewable energy projects around the world,” he said.
Fred Hutchison, president and CEO of LNG Allies said the guidance appears to be what the trade group had been expecting from the administration — “a tightening of the rules on fossil fuel engagement abroad with some limited exceptions.”
“It is tough to judge how this will affect foreign LNG and natural gas infrastructure development until specific projects are brought forward for US government support,” he said in an emailed statement Dec. 10.
Hutchison said he would pose several questions to the administration, including how this would help nations such as India that have said their net-zero transition would take until 2070 and require gas to displace coal and accelerate the deployment of renewables.
Bronwen Tucker, Oil Change International global public finance campaign co-manager, said details matter “and we are still missing the fine print.”
“If the exemptions are implemented in good faith, this guidance should end almost all US international finance for fossil fuels,” he said in an emailed statement. “But if they are poorly interpreted, it could allow up to 61% ($6.9 billion) of US international fossil fuel support since the Paris Agreement to continue.”
The environmental group estimates the US has spent over $11 billion in public funds on overseas oil, gas and coal projects since the Paris agreement was signed.
