Australian taxpayers funding fossil fuels via federal government – new report

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IMage: Jubilee Australia and ActionAid Australia

Last week, Jubilee Australia and ActionAid Australia released a new report, Hidden Cash For Fossils. Read the report here. The Guardian also covered it here.

This report details how Australian taxpayer dollars are sneakily funding fossil fuels, through our shareholdings in the multilateral development banks (MDBs).

 

The key findings are: 

  • In 2020, 19% of Australia’s aid money went to the MDBs, including the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank
  • Australia is a shareholder in the MDBs – we are the fifth largest shareholder in the Asian Development Bank (ADB) and the sixth largest shareholder in the Asian Infrastructure Investment Bank (AIIB). This means we have leverage to influence policy and financing decisions at these banks
  • Between 2016 and 2021, after the Paris Agreement was signed, the World Bank, the ADB and the AIIB provided over almost AU$33 billion to fossil fuel development projects
  • Based on Australia’s shareholding in these MDBs, Australia’s share of the fossil fuel financing is AU $828 million over the same period
  • Australia could help MDBs to shift millions out of fossil fuels and into clean energy globally by signing the Glasgow Statement

Executive Summary

The fight against climate change is urgent. As the latest report from the Intergovernmental Panel on Climate Change (IPCC) has highlighted, “[T]here is a rapidly closing window of opportunity to secure a liveable and sustainable future for all.”1 Climate impacts are not felt evenly, with the hardest affected being particularly marginalised groups like women, young people and people with disabilities in low- and middle-income countries. As global temperatures have risen 1.1°C above pre-industrial levels, climate change is further deepening inequality and poverty, causing loss of lives, croplands and livelihoods.

The Paris Agreement’s goal is to limit global warming to well below 2°C, preferably to 1.5°C, compared to pre-industrial levels. Achieving this goal will require rapid and significant changes in energy use and a significant amount of financing. The International Energy Authority (IEA) has warned that that staying below 1.5°C of warming means an immediate halt to any new fossil fuel supply projects.2

Despite rhetoric on alignment with the Paris Agreement’s goals, multilateral development banks (MDBs) continue to provide financing for fossil fuels – including through Australia’s aid program. The banks’ slow progress in moving away from fossil fuels is inconsistent with the global achievement of the Paris Agreement’s goal to limit global temperature rise to 1.5°C.

The Australian Government has announced its desire to act on climate change and transform Australia into a “renewable energy superpower”. As a significant and influential shareholder in several MDBs, Australia has a responsibility to help shift the banks away from fossil fuel development and toward genuine Paris alignment.

Introduction

The Paris Agreement’s goal is to limit global warming to well below
2°C, preferably to 1.5°C, compared to pre-industrial levels. Achieving this goal requires cutting off fossil fuel investment and production – with global production needing to drop by 3% annually until 2050.4 Despite this, governments’ national plans for fossil fuel production, if realised, would see 240% more coal, 57% more oil and 71% more gas produced
by 2030.5

Australia is one of the largest global producers and exporters of fossil fuels.6 The Australian Government also provided $11.6 billion of public money in 2021-22 in subsidies or other contributions to assist the fossil fuel industry.7

While most public financing for fossil fuels is provided as domestic subsidies, Australia has also indirectly financed coal, oil and gas through its aid program – particularly the funding it provides to multilateral development banks (MDBs).

MDBs are international banks established by groups of countries to support economic growth and social development in member states, with a focus on low- and middle-income members. According to the Department of Foreign Affairs and Trade (DFAT), Australia engages with MDBs because “multilateral banks have significant convening power and presence in many partner countries where Australia delivers aid… Australia’s partnerships with multilateral banks allow us to access their significant expertise, leveraging their analytical, financial and human resources.”8

This paper aims to provide clear information on Australia’s funding to the MDBs and the MDBs’ financing of fossil fuels. It calls on Australia to use its role in the banks to redirect that financing towards a just energy transition and scaling up climate finance to low-income countries that have contributed the least to climate change.

Australia has indirectly financed coal, oil and gas through its
aid program – particularly the funding it provides to multilateral development banks.

References

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16 Cornford, J (2011) Banking on Aid: An examination of the delivery of Australian aid through the World Bank and Asian Development Bank. Manna Gum and Oxfam Australia. available at: https:// mannagum.org.au/publications (accessed 12 February 2023), p. 10.

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22 Cornford, J (2011) Banking on Aid, p. 21.
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  1. 24  Bazbauers, A.R. & Engel, S (2021) The Global Architecture of Multilateral Development Banks: A System of Debt or Development? (Routledge), p. 86.
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  3. 26  Howes, S & Liu H (2022) Australia decides 18th is good enough for IDA. The Development Policy Centre, College of Asia and the Pacific, Australian National University. available at: https://devpolicy. org/australia-decides-18th-is-good-enough-for- ida-20220311/ (accessed 15 February 2023)
  4. 27  Department of Foreign Affairs and Trade (2021)

    Partnership Framework on Development Between the Asian Development Bank and the Department of Foreign Affairs and Trade 2021-2025; https:// www.dfat.gov.au/sites/default/files/adb-dfat- partnership-framework-2021-25.pdf (accessed 27 March 2023).

  5. 28  Oil Change International (2022) Public Finance for Energy Database: Data Dashboard. available at https://energyfinance.org/#/data. (accessed 15 January 2023)
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  7. 30  The MDBs’ alignment approach to the objectives of the Paris Agreement: working together to catalyse low-emissions and climate-resilient development. available at: https://thedocs.worldbank.org/en/ doc/784141543806348331-0020022018/original/ JointDeclarationMDBsAlignmentApproach toParisAgreementCOP24Final.pdf
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Mechanism. Asian Development Bank. available at: https://www.adb.org/what-we-do/energy- transition-mechanism-etm (accessed 19 February 2023)

37 Source text is “ADB, “Energy Transition Mechanism”. Website. Available at: https://www.adb.org/ what-we-do/energy-transition-mechanism-etm (accessed 25 April 2023).”

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39 Asian Development Bank (2022) ‘ADB and Indonesia Partners Sign Landmark MOU on Early Retirement Plan for First Coal Power Plant Under Energy Transition Mechanism’. Asian Development Bank News Release available at: https://www. adb.org/news/adb-indonesia-partners-sign- landmark-mou-early-retirement-plan-first-coal- power-plant-etm. (accessed 19 February 2023)

40 Albay, R (2023) ‘Indonesia’s Cirebon 1 coal power project highlights gaps in ADB’s ‘coal-to-clean’ ETM scheme’, Eco-Business. available at: https:// www.eco-business.com/news/indonesias-cirebon- 1-coal-power-project-highlights-gaps-in-adbs- coal-to-clean-etm-scheme/. (accessed 24 February 2023)

41 Hartatik (2022) ‘Part 1: JETP, Funding Solution of Debt Trap?’, Tanahair.net. available at https:// tanahair.net/part-1-jetp-funding-solution-or-debt- trap/?utm_source=rss&utm_medium=rss&utm_ campaign=part-1-jetp-funding-solution-or-debt- trap (accessed 22 March 2023)

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45 Eco-Business (2023) ‘ADB responds to criticism of Cirebon 1 refinancing deal: Primary channel for grievance redress sits with coal plant operator’ Eco-Business. 2023. Available at https://www. eco-business.com/news/adb-responds-to- criticism-of-cirebon-1-refinancing-deal-primary- channel-for-grievance-redress-sits-with-coal- plant-operator/. (accessed 25 February 2023)

  1. 46  BankTrack (2023) “Cirebon 2 coal power plant Indonesia”, available at: https://www.banktrack. org/project/cirebon3 (accessed 24 April 2023).
  2. 47  NGO Forum on ADB (2021) Towards a swift and
    just end to coal: A statement of civil society and communities in Asia-Pacific urging the Asian Development Bank not to gamble with our climate plight with a premature coal buy-out scheme. available at: https://www.forum-adb.org/post/ towards-a-swift-and-just-end-to-coal (accessed 1 March 2023).
  3. 48  Oil Change International (2022) Public Finance for Energy Database.
  4. 49  Recourse (2022) Submission: Energy Sector Strategy Update. available at: https://re-course. org/wp-content/uploads/2022/12/Recourse-AIIB- ESS-update-submission.pdf (accessed 6 April 2023)
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  6. 51  Asian Infrastructure Investment Bank, Energy Sector Strategy: Sustainable Energy for Tomorrow., p. 24.
  7. 52  Asian Infrastructure Investment Bank (2021)

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55 Mehedi, H, Bristy, S.A, Mahbub Alam, A.M., Khan,
S, Akram, N, Wright, P.K, Roberts-Davis, T.L (2022) Unique Meghnaghat LNG Power Plant Building on Fabricated Causes and Draining Bangladesh’s Economy. Bangladesh Working Group on Ecology and Development, Coastal Livelihood and Environmental Action Network, Recourse and NGO Forum on ADB. available at: https://www. re-course.org/old/wp-content/uploads/2022/12/ UMPLBuildingonFabricatedCausesDec2022_ compressed-2.pdf (accessed 24 February 2023), p. 5.

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58 Mehedi et al, Unique Meghnaghat LNG Power Plant Building on Fabricated Causes and Draining Bangladesh’s Economy, p. 2.

59 Fossil Free ADB Coalition (2021) Sowing The Seed
of Climate Chaos: The Asian Development Bank’s Support for Gas. Fossil Free ADB and Oil Change International. available at: https://fossilfreeadb. org/wp-content/uploads/2021/05/ADB_briefing_07. pdf (accessed on 1 March 2023)

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63 Mehedi, Het al, Unique Meghnaghat LNG Power Plant Building on Fabricated Causes and Draining Bangladesh’s Economy, p. 13.

64 Mehedi, H, et al, Unique Meghnaghat LNG Power

  1. 65  Organisation for Economic Cooperation

    and Development (2023) Development Co- operation Profiles: Australia. Organisation for Economic Cooperation and Development. available at: https://www.oecd-ilibrary.org/ sites/7c99890b-en/index.html?itemId=/content/ component/7c99890b-en (accessed on 15 March 2023)

  2. 66  The exceptions are funding for Trust Funds and other special funds, where donor contributions are slightly clearer.
  3. 67  OECD (2023) Development Co-operation Profiles: Australia.
  4. 68  This figure is calculated to find out the proportions of Australia’s contributions in the total fossil fuel financing of each MDB from 2016 – 2020 by using the percentage of the shareholdings of Australia in each bank. For example, between 2061-2020, World Bank gave US$16.19 billion to fossil fuels, and Australia’s shareholding (with IDA 1.07% as of 2022 and IBRD at 1.45% as of 2023) as average at 1.26% , this puts Australia’s ‘share’ as US$203.87 million of World Bank’s fossil fuel financing.
  5. 69  Neunuebel, C, Thwaites J, & Choi, E (2022) The Good, the Bad and the Urgent: MDB Climate Finance in 2021. World Resources Institute. available at: https://www.wri.org/insights/good- bad-and-urgent-mdb-climate-finance-2021 (accessed 9 February 2023)
  6. 70  The Big Shift Global (2022) Letter to the MDBs: Paris Alignment @COP27 Can’t Wait. The Big Shift Global Coalition. available at: https://bigshiftglobal.org/ MDBs_COP27_ParisAlignment (accessed on 9 February 2023)
  7. 71  Asian Development Bank (2021) Energy Policy Supporting Low-Carbon Transition in Asia and the Pacific. Asian Development Bank. available at: https://www.adb.org/sites/default/files/ institutional-document/737086/energy-policy-r- paper.pdf (accessed 15 February 2023)
  8. 72  Department of the Treasury (2021) Guidance on Fossil Fuel Energy at the Multilateral Development Banks. Department of the Treasury, The U.S. Government. available at: https://home.treasury. gov/system/files/136/Fossil-Fuel-Energy-Guidance- for-the-Multilateral-Development-Banks.pdf (accessed on 9 February)
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    for Sustainable Development, Oil Change International, Tearfund. available at:

https://www.iisd.org/system/files/2022-06/turning- glasgow-statement-into-action.pdf (accessed on 13 February 2023), p. iv.

74 The Big Shift Global (2021) “Multilateral Development Banks Absent from Glasgow Pact to Shift Fossil Finance to Renewables Signed
by Major Shareholder Governments”. available at: https://bigshiftglobal.org/multilateral- development-banks-absent-glasgow-pact- shift-fossil-finance-renewables-signed-major (accessed on 6 April 2023)

75 Gebel, A.C., Miescher, C, Häbler, J, Voss, M (2022)

From Glasgow to Guiding Action Ruling out Fossil Fuels at the Multilateral Development Banks – Implications of the Glasgow Statement for the Clean Energy Transition. GERMANWATCH. available at: https://www.germanwatch.org/sites/default/ files/germanwatch_from_glasgow_to_guiding_ action_preliminary.pdf. (accessed on 9 February), p. 20.

76 Gebel, A.C et al, From Glasgow to Guiding
Action Ruling out Fossil Fuels at the Multilateral Development Banks – Implications of the Glasgow Statement for the Clean Energy Transition, p. 6.

77 Michael Mazengarb, “’Australia is under new management’: Bowen tells clean energy investors”, Renew Economy, 16 June 2022, https://reneweconomy.com.au/australia-is-under- new-management-bowen-tells-clean-energy- investors/ (accessed 21 April 2023).

78 Bowen, C. (2022) National Statement to COP
27. Department of Climate Change, Energy, the Environment and Water, Australian government. available at: https://minister.dcceew.gov.au/ bowen/speeches/national-statement-cop27 (accessed on 9 February 2023)

79 Dufour, L et al, Turning Pledges Into Action: How Glasgow Statement signatories can meet their commitment to shift international public finance out of fossil fuels and into clean energy by the end of 2022, p. 26.

80 Department for Business, Energy and Industrial Strategy (2021) Aligning UK international support for the clean energy transition: Government Response. Department for Business, Energy & Industrial Strategy, The United Kingdom Government. available at: https://assets. publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/975753/ Guidance_-_Aligning_UK_international_support_ for_the_clean_energy_transition_-_March_2021_. pdf (accessed on 13 February)

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