The Biden administration has ordered an immediate halt to federal support for coal plants and other carbon-intensive projects overseas, a major policy shift designed to fight climate change and accelerate renewable energy worldwide.
The wide-ranging directive bars for the first time any US government backing for such ventures, potentially affecting billions of dollars in annual funding as well as diplomatic and technical assistance. The move was detailed in a cable sent late last week to US embassies and obtained by Bloomberg News.
The new policy contains significant exemptions, including for compelling national security concerns, foreign policy considerations or the need to expand energy access in vulnerable areas.
Nevertheless, the policy shift could affect a significant number of foreign fossil fuel projects, including funding for terminals in eastern Europe and the Caribbean to receive shipments of US natural gas. It also goes beyond constraining financial aid and rules out other, softer forms of government support, including diplomatic and technical assistance that benefits developers of pipelines, LNG terminals and other projects overseas.
“Our international energy engagement will center on promoting clean energy, advancing innovative technologies, boosting US clean-tech competitiveness and providing financing and technical assistance to support net-zero transitions around the world,” according to the document.
The move underscores how the Biden administration has made fighting climate change one its most urgent policy priorities. Yet the approach creates a major opening for China, which is eager to fund and finance energy projects around the world, often with sums of money the US has been unable to match.
The US doled an average of $16-billion in international public finance to just natural gas projects annually from 2017 to 2019 — four times as much as wind and solar — according to a recent report from the International Institute for Sustainable Development, a think tank.
Environmental advocates have lobbied President Joe Biden’s administration to make the shift, arguing that the construction of new oil pipelines, liquefied natural gas terminals and similar projects is not consistent with efforts to limit global temperature rise to 1.5 degrees Celsius (2.7 degrees Fahrenheit), a critical threshold for avoiding the most catastrophic consequences of climate change.
The policy’s wide reach is critical, said Jake Schmidt, senior strategic director of the international climate program at the Natural Resources Defense Council.
“Everything is covered by this guidance,” including investments, trade missions and diplomatic engagement to support carbon-intensive ventures, Schmidt said. “Money’s important, but money’s not the only way” the U.S. has supported fossil fuel projects overseas, he said.
For instance, under the Obama administration, the State Department supported efforts to expand fracking in other countries using technology honed in the US. Under former President Donald Trump, the US championed deals to build LNG terminals that would be supplied with American natural gas.
Spokespeople for the State Department and the office of John Kerry, the special presidential envoy for climate, did not immediately comment on the policy.
The new plan aligns with a commitment the US made in June with other Group of Seven nations to end public financing of “unabated” coal power generation — or plants that lack emission controls to capture carbon dioxide.
The directive makes clear that the US is ruling out government support for coal power projects unless they fully capture greenhouse gas emissions. “Engagements related to coal generation must be related to full abatement of emissions and/or accelerated phase out,” according to the guidance.
The effort builds on the Treasury Department’s August guidance that it will oppose support for fossil fuel projects through the World Bank Group and other multilateral development banks.
The policy applies to all new work on carbon-intensive energy projects that would involve US government spending of $250 000 or would directly enable the construction of infrastructure that would otherwise not be built.
Exemptions will be allowed for oil and gas projects, including pipelines, power plants and terminals, if they are deemed to significantly advance national security, imperative from a geostrategic perspective or essential to support energy development in particularly vulnerable areas.
Government officials will be allowed to seek those exemptions through a formal review process that questions whether ventures would lengthen the lifespan of a fossil fuel technology and if there are no other, more appropriate options.
Environmental advocates have encouraged a deep and searching review of alternatives, arguing that would foster US support for renewable power projects overseas.
The administration stressed that while the US government will withhold support, it won’t actively seek to prevent US companies from building coal, oil and gas projects overseas.
“As long as there is demand for fossil energy products, technologies, and services in global markets, the US government will not stand in the way of US companies that are ready and able to meet those needs,” said the guidance to embassies. “The US government will continue to help U.S. energy companies, especially small- and medium-sized businesses, achieve their commercial objectives without compromising global climate ambitions.”
The administration also made clear that fossil fuel projects still could become a prudent part of future energy development and the policy is subject to change.
If agencies “repeatedly demonstrate that limited life extensions of existing fossil fuel assets are the most viable option for reaching net-zero emissions, integrating higher levels of clean energy into reliable systems than otherwise possible, and avoiding the build-out of new and long-lived carbon-intensive infrastructure, then this evidence will be a valuable input into a future review” of the policy, the guidance document said.
It was not immediately clear how the policy would apply to ongoing carbon-intensive projects — including some the US has supported under multiple administrations — though the plan is aimed at new international energy engagements.