Export finance and the green transition

Abstract

CO 2 emissions are set to hit record levels in 2023, and there is no sign of peaking. The energy sector, in particular, is a key source of greenhouse gas emissions (GHG) and central to efforts to combat climate change. The sector contributed to approximately three-quarters of GHG in 2021 as most energy generation globally comes from fossil fuels. Despite increased climate ambitions and net-zero commitments, many governments still intend to raise oil and gas production, also a result of the economic consequences of the war in Ukraine. Only a moderate decrease in coal production is predicted over the next decade, although 195 countries committed to the Paris Agreement in 2015 (IEA, 2021;Kong & Gallagher, 2021;Olivier & Peters, 2020). The agreement responds to the threat of climate change by holding the increase in global average temperature to 'well below' 2°C in this century, as well as to pursue efforts to limit the rise to 1.5°C.Consequently, the global pathway to net-zero emissions by 2050 requires governments to implement and strengthen climate policies. This requirement led to a broad range of policy approaches, strategic directions, and concrete government actions in recent years. In November 2021, the 26th UN Climate Change Conference of the Parties in Glasgow (COP26) accelerated action towards the goals of the Paris Agreement. This included pathways to scale up renewable energy use in emerging markets and developing economies (EMDEs) as one of the most relevant mitigation measures to achieve the committed goals. On a national

The new OECD arrangement on export credits: Breakthrough or bad compromise?

“…Based on climate finance‐related mandates, many ECAs and EXIMs introduced ambitious climate strategies in recent years. Previous research showed that institutions supported climate finance amounting to up to EUR 8.4 billion in 2020, that is, up to 1.5% of total climate finance flows (Klasen et al, 2022). ECAs and EXIMs also created new or amended existing products for climate finance such as green loans and guarantees.…”

How “safe” is the WTO “safe haven”? A need to modernise disciplines for officially supported export credits

“…Climate action–related matters are priority themes for governments and official export finance instrument at least in most OECD countries. This includes scaling down support not consistent with the Paris Agreement, a contribution to climate resilient development and low-carbon financing, and the support of low-carbon transformation related transactions (Klasen et al , 2022; Hale et al , 2021; Liao, 2021; Caldecott, 2020; Hopewell, 2019). ECAs are only at the beginning stages of this seismic transformation.…”

Climate risk mispricing: why better assessments matter in financing for development

“…This methodology has helped the ECA understand its contribution to fossil fuels but still fails to capture some data at the project level (Censkowsky et al 2021). Since 2019, Atradius DBS has accelerated efforts towards supporting a green transition, and in 2021, it launched a new product, the green cover investment for green investment with export potential (Klasen et al 2022).…”