A new report from the International Institute for Sustainable Development (IISD) has found that rich countries are overwhelmingly funding gas projects in low-to-middle income countries, despite the decreasing need for gas and the climate impacts of extracting and burning it.
Gas receives significantly more finance than all other energy technologies in low-middle income countries – four times as much as wind and solar, around $16 billion USD per year between 2017 and 2019. Most of this is flowing into power generation and infrastructure for liquefied natural gas (LNG) projects.
“Efforts to expand gas are being underpinned by international public finance from multilateral development banks (MDBs) and from G20 bilateral financial institutions such as bilateral development banks and export credit agencies”, which tends to unlock private finance by reducing project risk and provides a signal to broader investment trends.
Much of the pressure to construct new fossil gas infrastructure comes from countries that are increasing exports of gas, including Australia. “New liquefied natural gas (LNG) exporters, such as the United States and Australia, are seeking new markets while gas companies look for new resources to extract and export”, says the report.
China, Japan, the United States and Korea lead the rankings of supplying finance to poorer countries to build new gas using and producing infrastructure. The leader in the supply of international finance for clean energy is Germany, followed by Brazil.
“As countries like Australia and the United States massively expand their liquefied natural gas exports, the public money supporting new gas infrastructure looks more geared to serving powerful interests than helping southern countries meet their needs,” said Greg Muttitt, the lead author of the study, to the Guardian UK.
The report reiterates the fact that gas usage needs to decrease very significantly to align the world to climate goals, with a substantial decrease in usage beginning in 2020 required for a 1.5C warming scenario as per the Paris Climate agreement:
The report also details technological changes likely to occur that risks these assets becoming stranded. Wind and solar will reduce the need for gas in the power sector, heat pumps provide electric alternatives in buildings, and industrial uses may decrease with some less developed changes in the near future.
The report comes as Australia expands its ‘gas fired recovery’, investing heavily in increasing fossil fuel extraction while many of its overseas customers begin implementing more ambitious climate targets.
The authors recommend that international financial institutions “End all direct and indirect support to gas exploration and production, as well as to new gas power plants and other long-lived gas infrastructure, such as pipelines and LNG terminals”, and “prioritise support to the poorest countries that face the greatest challenges in developing renewable energy systems, notably least-developed countries and small island states”.