OECD makes climate change agreement ahead of COP26

By Melissa Coade

Wednesday October 27, 2021

US Secretary of State Antony Blinken speaks during a press briefing with Mathias Cormann.
US Secretary of State Antony Blinken speaks during a press briefing with Mathias Cormann.(Patrick Semansky/ Reuters)

Participants of the international Organisation for Economic Co-Operation and Development (OECD) will end export credit support for unabated coal-fired power plants in support of the goals of the upcoming UN Climate Change Conference in Glasgow next month

A statement from the OECD said it expected the ban would come into effect by the end of October 2021. 

“The ban will come into effect once participants complete their formal internal decision-making processes, which are expected by the end of October 2021.” 

Participants include Australia, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland, Turkey, the UK and the US. 

The OECD announced that an agreement had been reached on Tuesday with the effect of banning supported export credits, and tied aid to new coal-fired power plants that do not have operational carbon capture, utilisation and storage (CCUS) facilities. 

The new ban will also apply to existing coal-­fired power plants, the announcement said, unless the purpose of the infrastructure is pollution or CO2 abatement and does not extend the lifetime of the plant. An exception will apply to equipment in existing plants where it is being retrofitted to install CCUS.

On Monday a new OECD analysis was released showing that by 2023, climate finance provided by developed countries for climate action in developing nations was expected to reach USD $100 billion. An assessment of progress released in September showed that the same finance in 2019 had totalled USD $79.6 billion, up 2% from 2018.

OECD Secretary-General and former Australian senator Mathias Cormann issued a statement saying that projections of additional climate finance were welcome, given it was a commitment developed nations from the 15th Conference of Parties (COP15) of the UNFCCC in Copenhagen in 2009.

“Our OECD analysis of donor information indicates that 2023 is the year when the USD $100 billion climate finance goal is likely to be met,” Cormann said.

“This level of finance must then be sustained throughout 2024 and 2025.” 

The OECD has been preparing a delivery plan for the USD $100 billion climate finance goal in the lead up to the November COP26 event in Glasgow, with developing countries also requesting the group analyse future levels of climate finance from individual countries and multilateral development banks. 

The figures capture four components of climate finance provided and mobilised by developed countries: bilateral public climate finance, multilateral public climate finance attributed to developed countries, climate-related officially supported export credits, and private finance mobilised by bilateral and multilateral public climate finance, attributed to developed countries.

“While a number of factors, such as the capacity to get relevant projects underway within the intended time frames, will influence exactly when the USD $100 billion goal is achieved, it is vital for developing countries to have a good understanding of developed countries’ intentions in advance of COP26 in Glasgow starting next week,” Cormann said.

The arrangement for officially supported export credits came into existence in 1978, when a small number of OECD countries wanted to establish a framework that would create a level playing field, and encourage competition among exporters based on quality and prices of exported goods and services. As a result, limitations have been created on the financing terms and conditions when participants provide officially supported export credits or tied aid.

Some of the rules of the arrangement are sector-specific but, generally speaking, the arrangement applies to all officially supported export credits with a repayment term of two years or more. It does not apply to military equipment or to agricultural commodities.

Five years ago annex VI was introduced to the OECD arrangement, creating stricter terms and conditions for the officially supported export credits relating to coal-fired electricity generation projects. It intended to encourage both exporters and buyers to move towards high-efficiency technologies by placing a limit on credit support for coal-fired power plants.


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