Some 39 countries and public finance institutions made a world-first pledge at the 2021 United Nations Climate Change Conference (COP26) in Glasgow, Scotland, to end international public finance to fossil fuels.  

Since then, most signatories to the Clean Energy Transition Partnership (CETP) – including Canada, the UK, France and the European Investment Bank – have met their promise, collectively reducing investments by up to two-thirds from a 2019-2021 baseline, for a total of $5.2bn in 2023, reports the IISD.

However, it says signatories are ‘making less progress on their commitment to prioritise support for clean energy’. According to the IISD’s latest analysis, in 2023 CETP members delivered $21.3bn to clean energy, an increase of just 16% from the 2019–2021 baseline and less than the $26bn delivered in 2022.

Also, most of this went to developed countries – Spain, Germany and Poland were the three biggest recipients. Of finance to lower- and lower-middle-income countries, 83% was delivered as loans, contributing to what has been described as the worst debt crisis in history.

Natalie Jones, lead author of the report and Policy Advisor at the IISD, comments: ‘It’s great to see leaders axing international public finance to coal, oil and gas, which is incompatible with a safe climate. Now they must match that with scaled-up investment in clean energy for all, including targeted support for the countries that need it most.’

Some CETP members either failed to update their policies or partially restricted fossil fuel finance but left big loopholes, says the IISD report. The US, Italy and Germany reduced but did not eliminate support for coal, oil and gas, while Switzerland increased it.

Adam McGibbon, Campaign Strategist at advocacy organisation Oil Change International and report co-author, continues: ‘The CETP is a global success story that’s having a real-world impact in shifting finance away from fossil fuels – but this is despite the broken promises of the US, Italy, Germany and Switzerland. These countries need to live up to the promise they made in Glasgow or face growing international pressure to change.’

If fully implemented, the CETP could shift $28bn/y from fossil fuels to clean energy. With the next round of climate talks in Baku, Azerbaijan, this November set to focus on finance, this would send an important signal, the report highlights.

The report, Out With the Old, Slow With the New, sets out five ways for CETP members to build on their progress:

• Adopt robust fossil fuel exclusion policies across all agencies providing international public finance, if they have not yet done so.
• Set ambitious targets for scaling up clean energy finance, with exclusions for unproven solutions like blue hydrogen and carbon capture and storage.
• Target support to countries that need it most, with grants and highly concessional instruments for lower-income countries.
• Update national and institutional policies and strategies to prioritise international support for clean energy.
• Match international policies with domestic climate leadership by ending domestic fossil fuel finance and subsidies, banning new licences for oil and gas production, and phasing out fossil fuel extraction on a globally just and 1.5°C aligned timeline.