Twenty countries pledged to end “unabated” financing for foreign fossil fuel projects following talks at COP26, choosing to fund clean energy projects instead. The growing calls for oil and gas divestment could have wider ramifications in the global sector, though Mexico appears to remain steadfast in its pro-fossil fuel stance.
The US, Canada, the UK and 17 other countries were joined by several development banks in a commitment to stop public financing for fossil fuel projects abroad. “We will end new direct public support for the international unabated fossil fuel energy sector by the end of 2022,” the officials said in a statement. The term unabated refers to coal, oil and gas projects that burn fuels without carbon capture technology integrated, meaning that a combined cycle power plant with such technology, for example, is still on the table. G20 countries signed a similar deal earlier in 2021 to halt foreign investment in coal, a fossil fuel source that especially Mexico has been using less of. The deal incorporates exemptions, although these still need to comply with the goals set at the 2015 Paris Agreement to stop global warming beyond 1.5C.
Calls to divest in oil and gas are gaining strength. In May of this year, the International Energy Agency (IEA) said that investors should not fund new oil, gas and coal projects if the world truly wants to reach net-zero emissions by 2050. Many international oil and gas companies, including supermajors, are looking to shift to low carbon energy. Although the plans outlined at COP26 are by no means exhaustive, industry experts have called it a significant step forward.
Nevertheless, some criticize the perceived roadmap to net-zero energy and see it is as unrealistic. Mexican President Andrés Manuel López Obrador has caused controversy by vowing to rescue PEMEX and CFE and curbing private renewable energy endeavors to benefit the public sector. “Enough with the hypocrisy and fashion trends. What one must do is fight the monstrous inequality that exists in the world,” he said during a press conference, referring to the government’s push to enable better climate financing for developing economies. López Obrador argued that richer countries have more capabilities to make the energy transition happen and furthermore continue to benefit from oil and gas extraction, at the same time discussing plans for the transition. The president furthermore joked he would not bring out the country’s notorious presidential plane to attend the meetings, which is what other state executives chose to do.