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Germany and Italy push G7 to water down commitment to end foreign gas funding

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G7 leaders pledged to end foreign public funding for fossil fuels, but made exceptions for temporary gas investments deemed ‘necessary’ to tackle the energy crisis

The group of wealthy G7 countries has weakened its promise to end funding for foreign gas projects, at the instigation of German leader Olaf Scholz.

At COP26 last year, six G7 countries agreed to end public funding of fossil fuel projects abroad by the end of 2022 – a commitment that was reaffirmed by ministers of the EU. G7 environment at a meeting in May, when recalcitrant Japan joined them.

But the meeting of G7 leaders in the Bavarian Alps in Germany this week introduced new loopholes to engagement. In a joint press release published on Tuesday, they “emphasize[ed] the important role of the increase in LNG deliveries [gas] can play” to accelerate the exit from their dependence on Russian energy and “to recognize[d] that investment in this sector is necessary in response to the current crisis”.

“In these exceptional circumstances, state-backed investments in the gas sector may be appropriate as a temporary response,” the statement added.

German Chancellor Scholz said at a press conference: “When it comes to funding fossil fuel sources, this is something that has to stop. The future is not in the gas. But, he added: “In the short term, gas will be necessary and there may be investments in the transitional phase that will have to be supported”.

To stop funding Russia’s war against Ukraine, European countries have sought to increase gas supplies from non-Russian sources, including the United States, Qatar, Algeria, Norway, Egypt and Israel.

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Climate activists reacted angrily. Laurie van der Burg, campaigner at Oil Change International, said: “Today the G7 under Chancellor Scholz prioritized filling the pockets of the fossil gas industry over protecting the people’s lives”.

On the other hand, she said the wording makes it clear that gas support must be temporary, consistent with climate goals, including the 1.5C target, and not create a lock-in effect.

These conditions should not allow new gas investments to occur, argued Van der Burg. Indeed, the construction of new gas infrastructure takes years, does not offer a viable solution to quickly wean the G7 from Russian gas and is not compatible with climate objectives.

The International Energy Agency has warned that further investment in coal, oil and gas beyond 2021 is incompatible with a trajectory to limit global warming to 1.5°C.

Luca Bergamaschi, director of Italian climate think tank ECCO, agreed that weather conditions and competition from clean alternatives “mean there is little or no investment for new gas” without they are “artificially subsidized”.

For Gareth Redmond-King of the UK-based Energy and Climate Intelligence Unit, the statement reflects the “responsibility of G7 countries to feed people and keep the lights on”. “Short-term increases in fossil fuels can, as the EU shows, be eclipsed by more ambitious medium-term emissions pledges,” he said.

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An earlier version of the text, seen by Climate Home News, shows a proposal to describe new gas investments as “may/could be necessary”. Sources familiar with the talks, told Climate Home that Scholz directly proposed the language, supported by Italy and opposed by the UK and France.

During a recent visit to Senegal, Scholz said supporting the West African country’s gas production plans was “a question that deserves further investigation“. Senegalese leader Macky Sall was invited to the G7 summit along with the president of gas-producing Argentina Alberto Fernández and the leaders of India, Vietnam and Indonesia.

Italian President Mario Draghi said at a G7 press conference: “It is quite clear that in the current situation, we will have short-term needs that will require significant investments in gas infrastructure in developing countries and elsewhere. But we need to make sure they can be retrofitted to carry hydrogen so that’s a way to reconcile short-term needs with long-term climate needs.”

On the sidelines of the summit, Draghi met his Argentinian counterpart Fernández. The two men spoke of the possibility for Italy “to participate in existing projects in Argentina to install gas liquefaction plants and export it”, Fernández said in a tweet.

The G7 further confirmed that it was pursuing “just energy transition partnership” agreements with India, Vietnam, Indonesia and Senegal, as well as previously announced talks with South Africa.

Joe Thwaites, climate finance watcher Noted that countries that have pledged to end international fossil fuel financing currently spend around $33 billion a year to support coal, oil and gas projects overseas. OECD data suggests that in 2019 rich countries were about $34 billion short of the goal of mobilizing $100 billion a year to help developing countries tackle climate change.

Shifting funding from fossil fuels to clean climate finance would close the gap, Thwaites said, adding, “It’s hard to think of a better deal: ending the fossil fuel funding that is driving the climate crisis and using it to increase funding for clean energy access in developing countries.” development. A truly rare win-win.

In the statement, the G7 leaders promised to “intensify our efforts” to reach the $100 billion goal “as soon as possible”.

A recent Overseas Development Institute (ODI) report found that “the United States is largely responsible for the climate finance gap”. In 2020, it gave just $2 billion in climate finance while its “fair share” is $43 billion, according to a calculation that includes the size of its economy and its historical emissions.

ODI research found that Italy, the UK and Canada were each short $3 billion in their fair share. Germany, France and Japan are giving more than their fair share, but the report questions the quality of France and Japan’s finances, as much of it is loans.