Campaign briefing Decarbonising aid Why we must stop UK financing for fossil fuels overseas May 2020 Photo: decoalonize.org CC: BY-NC-SA 2.0 Environmental activists in Kenya are determined to show that coal has no place in the country’s energy future. Why aid for fossil fuels must end • These investments are only one part of UK public financing for fossil fuels overseas which undermine • The world has ten years to decarbonise the global the government’s national commitments on economy and limit global temperature rises to emissions reductions. Since the Paris Agreement O 1.5 C – the target set by the Paris Agreement in was signed, approximately £568 million of UK aid 2015. This is an absolutely crucial demand for has been invested in fossil fuel projects overseas. frontline communities whose lands and livelihoods If we include export credits provided by UK Export will be destroyed by climate breakdown. Finance (UKEF) for fossil fuels, that number rises to • The UK government argues that investing in oil and £3.9 billion. gas is a good medium-term alternative to coal • Despite claims to be supporting a transition to power for countries in the global south. However, cleaner energy, CDC has £213 million of active this argument has been thoroughly debunked as investments in projects using the most polluting it will create fossil fuel dependency and lock in fuels, including diesel and heavy fuel oil.2 In 1 high carbon emissions for generations to come. countries including Ghana, CDC’s projects are also • UK aid is legally required to be spent on poverty contributing to the privatisation of energy systems, reduction. Yet fossil fuel investments have often with considerable costs to the public sector. been made on the basis of what makes a good • After the Covid-19 pandemic, the only way return for investors. For example, our analysis shows to ensure a green recovery and a just energy that the UK’s development bank CDC Group has transition is to listen to our allies in the global directly invested over £520 million of aid money south who see an end to UK financing of fossil in fossil fuel projects in the past decade. fuels as a key step on the road to climate justice. Photo: DFID/Michael Hughes CC: BY 2.0 Prime Minister Boris Johnson speaking at the opening of the UK-Africa Investment Summit, London, 20 January 2020. Context This trend looks set to accelerate as the government continues to align its development policy with trade In 2021, the UK government is set to host the strategy, with a merger of DfID with the Foreign postponed COP26 climate talks in Glasgow. Office likely to happen in the coming months. This This process is designed to encourage greater continues a trend in which DfID has slowly lost commitments from participant countries to tackle control of aid policy for several years – almost 30% climate change by setting ambitious national of the aid budget is now spent by other departments. emissions reduction targets and providing increased finance for the transition from fossil fuels This has resulted in more aid money being given to renewable energy, at home and internationally. to countries where the UK government wants to establish new trading relationships and in sectors In the run up to the COP, the government is likely to (e.g. energy, infrastructure, financial services) make announcements on how it is using taxpayers’ where British businesses have particular expertise. money to reduce emissions and combat climate Development policy is increasingly being driven crisis. For example, in January 2020, Boris Johnson by the UK’s economic interests and the pursuit of announced at the UK-Africa Investment Summit that private profit. the government would stop using the aid budget As the total amount of ODA (Official Development or UKEF credits to support thermal coal mining and Assistance] being spent directly by DfID decreases, coal power plants overseas (it later emerged that the aid budget is being redirected towards the UK’s the Department for International Development development finance institution, CDC.3 In 2017, the [DfID] had stopped supporting coal power in 2012). government passed a bill which raised the limit But while the government is stepping up climate on the amount of money CDC could receive from finance in some areas, it continues to use taxpayers’ government from £1.5 billion to £6 billion, with an money to fund a vast range of polluting projects option to rise further to £12 billion without further in the global south. At the summit, which was put primary legislation.4 on using £15.5 million from the government’s aid budget, 90% of the commercial energy deals announced were for fossil fuel projects. 2 I Decarbonising aid: Why we must stop UK financing for fossil fuels overseas Table 1: CDC’s direct investments in fossil fuel infrastructure Company Sector Fuel Location Date Value of investment Actis Energy Power generation Gas Cameroon June 14 $10,100,000 Cameroon (Eneo) Africa Power Platform Heavy fuel oil Power generation Kenya Feb 17 $68,500,000 (Tsavo) / diesel Amandi Energy Power generation Gas / crude oil Ghana Dec 16 $82,900,000 ARM Cement Manufacturing Coal Kenya Sep 16 $144,000,000 Azura Power Power generation Gas / diesel Nigeria Dec 15 $30,000,000 Liquefied Bangla Offshore LNG Distribution Bangladesh Feb 18 $25,000,000 natural gas Grindrod Distribution Coal South Africa May 14 $16,600,000 Indorama Eleme Manufacturing Gas Nigeria April 13 $140,000,000 Fertilizer Chemicals Ltd Sirajganj 4 Power generation Gas / diesel Bangladesh Aug 17 $103,000,000 Summit Meghnaghat Power generation Gas / diesel Bangladesh July 14 $17,500,000 Heavy fuel oil Tè Power Power generation Guinea Mar 18 $39,000,000 / diesel TOTAL $676,600,000 TOTAL £520,500,000 Since 2010 alone, we have found that CDC has • Because CDC and other investment funds make made over half a billion pounds’ worth of direct their investments in dollars, we have converted investments in fossil fuel projects in Africa and Asia. some figures into sterling for easier comparison, But that is not all. This is only the minimum amount, at the rate of 1.3 USD = 1 GBP. because CDC does not report publicly on how much • The above analysis of CDC’s direct investments it invests via private equity funds. The majority of the since 2010 shows that it has invested £520.5 million fossil fuel projects supported by CDC are funded by into fossil fuel-based power generation, intermediated investments, so the actual amount manufacturing and distribution. will be much higher. • £355.7 million of these investments occurred after In February 2020, CDC appointed Dr. Amal-Lee Amin the Paris Agreement was signed. as Climate Change Director in order to “lead and promote CDC’s contribution to the success of the • As noted above, this does not account for all of upcoming COP26 conference on climate change”.5 CDC’s investments in fossil fuels in this period, as With CDC planning to launch a new climate CDC does not report on the individual amounts change strategy to align its approach more closely of investments it makes via private equity funds. with the Paris Agreement, there is now a unique Recent analysis by Greenpeace demonstrates opportunity for CDC to change path by committing that CDC has invested $785 million (£604 million) to end all of its overseas fossil fuel financing. into funds which have invested in fossil fuel projects.6 From that, $45 million (£34.6 million) was invested post-Paris. Decarbonising aid: Why we must stop UK financing for fossil fuels overseas I 3 How else is UK public funding and £6,000 in 2018”.8 However, this is something supporting fossil fuels overseas? of a red herring as direct bilateral ODA has never accounted for a large proportion of ODA spend on a) A total figure? energy, which is mainly accounted for via multilateral or “indirect” spend via CDC and other funds. CAFOD has estimated that, between 2010 and 2017, the UK government “provided support for c) Prosperity Fund energy in the global south with a total value of Between 2016 and 2018, the Cross-Government £7.8 billion. Of that 60 per cent – or £4.6 billion – Prosperity Fund (which is funded with ODA but is went to outdated fossil fuels”. Furthermore, of this managed by the Foreign Office) financed 16 fossil £4.6 billion, £600 million (a little over 13 per cent) fuel projects, including expanding oil and gas was aid money which has a legal requirement sector capacity in Brazil, Mexico, China, Myanmar, to be spent on poverty reduction.7 and India. These projects represent approximately To work out the amount of UK aid invested 29.2 per cent (£1.93 million) of the Prosperity Fund’s since the Paris Agreement was signed, we must overall energy spend.9 add together CDC’s direct investments, CDC’s estimated intermediated investments, and the fossil d) Private Infrastructure Development fuel commitments made via other funds which are Group supported through UK ODA (broken down further The Private Infrastructure Development Group below). This tells us that up to £568 million of UK aid (PIDG) has received over $1 billion from the UK has been invested in fossil fuel-related activity since aid budget since 2002. PIDG has committed $750 April 2016. If we include UKEF funding in that figure, it million (£576.9 million) to support fossil fuel projects, rises to £3.875 billion of UK public financing invested using some of the world’s most polluting fuels.10 That in fossil fuels since the Paris Agreement was signed.