The Times Australia
The Times World News

.

Tiwi Islands offshore gas fight shows public banks are under real pressure over fossil fuel funding

  • Written by Christian Downie, Associate Professor, Australian National University
Tiwi Islands offshore gas fight shows public banks are under real pressure over fossil fuel funding

Not so long ago, it was easy for public banks to fund new fossil fuel projects. But now, as the world faces a worsening climate crisis, the tide may be turning.

Case in point: after Traditional owners filed an injunction over a Santos gas development near the Tiwi islands, South Korea’s export credit agency announced it would reconsider[1] its financial support.

“Environmental and legal risks” is one reason given by the Export-Import Bank of Korea (Kexim) for the delay in deciding on a loan of up to US$330 million for the project. The move could threaten its financial viability.

Public financial institutions are under renewed pressure to change lending practices after the world’s leading climate scientists[2] strongly warned against any new fossil fuel infrastructure. In our region, public banks in China, Japan, and South Korea now face unprecedented scrutiny[3] for their role in financing the climate crisis.

Not only that, but the Tiwi injunction has again shone a spotlight on the role played by export credit agencies like Kexim in pumping funds into new coal, gas and oil projects.

Drilling rig at sea
New fossil fuel projects rely on finance. Shutterstock

What are export credit agencies and why do they matter?

The Kexim loan was intended to go to the Korean energy group SK E&S, which had planned[4] to export gas from the project to Asia. Without funding, there may be no project.

That’s why Kexim’s move is so important. While export credit agencies are not the only funders of oil, gas and coal infrastructure, and not the largest either, they have been instrumental in developing many of the world’s most carbon intensive sectors.

Read more: Green lending: world's biggest banks' latest initiative at COP26 is a step backwards[5]

How? By locking in fossil fuel energy systems, leveraging private finance by reducing risk premiums, and shaping international standards which influence private bank policies. In short, they have played a key role in enabling fossil fuel expansion.

For decades, these state supported agencies have gone under the radar. No longer. Scrutiny is increasing of their work borrowing from national treasuries or public capital markets to finance export-oriented fossil fuel projects.

That’s not to criticise all the work these agencies do. They’ve proven invaluable for nations like South Korea as they industrialised. By providing direct loans, insurance and guarantees to foreign buyers, they have helped improve the competitiveness of their exports.

Coal power station with smoke Many public and development banks have been funding fossil fuel projects locally and overseas. Shutterstock

Ending lending: why export credit agencies must fund clean alternatives

If the world is to achieve the rapid energy transition necessary to avoid the worst effects of climate change, we will need a revolution in global finance. We have to drain funding from fossil fuels and pump it into clean energy.

Until recently, efforts to cut international public funding for fossil fuel projects have focused on multilateral development banks like the World Bank and the Asian Development Bank. In response, both have slowly started to shift their financing[6] away from fossil fuels.

While that’s a positive step, bilateral funding bodies like export credit agencies are still stuck at square one. Research estimates these public banks are now financing fossil fuel projects more than the multilateral development banks. Between 2013 and 2015, for instance, these agencies financed oil and gas[7] to the tune of US$32 billion a year. The worst offenders were Japan, Korea and the United States.

Australia’s equivalent – Export Finance Australia – is hardly blameless. Between 2009 and 2020, our agency loaned[8] an estimated A$1.5 billion to new coal, oil and gas projects, dwarfing the funding it gave to renewable projects.

The pressure is mounting

As governments belatedly swing into action, it is likely we will see an end to the historical support given by these banks to highly polluting sectors. In turn, this will hinder corporate efforts to mobilise public and private finance alike.

That’s not to say there won’t be holdouts. At the Glasgow UN climate conference in late 2021, developed countries including the United States, Canada and the United Kingdom committed[9] to ending public funding for “unabated fossil fuel energy”. Australia, Japan and South Korea were not among the signatories.

Read more: Why banning financing for fossil fuel projects in Africa isn't a climate solution[10]

The Glasgow announcement came only a month after the OECD announced[11] it would end export credit support for coal-fired power plants built without the ability to capture and store carbon dioxide.

Wind turbines in field Renewable financing through Australia’s export credit agency has been limited. Shutterstock

While important, these steps are nowhere near enough. To date, only the Canadian export credit agency has committed to aligning funding with the goal of net zero by 2050. That means the lending policies of almost all of these agencies remain glaringly inconsistent with Paris Agreement goals and renewed warnings from climate scientists.

In a year when unprecedented floodwaters have taken lives and livelihoods up and down Australia’s east coast, it is time for governments to revise the mandates of their export credit agencies. They can be a force for good by helping to leverage billions of dollars into clean energy projects, rather than fossil fuel ones.

Without government action, it will be left to local communities like the traditional owners in the Northern Territory and environmental organisations to fight uphill battles against these taxpayer funded banks.

References

  1. ^ reconsider (www.ft.com)
  2. ^ climate scientists (www.theguardian.com)
  3. ^ unprecedented scrutiny (theconversation.com)
  4. ^ planned (www.gtreview.com)
  5. ^ Green lending: world's biggest banks' latest initiative at COP26 is a step backwards (theconversation.com)
  6. ^ shift their financing (www.worldbank.org)
  7. ^ financed oil and gas (1bps6437gg8c169i0y1drtgz-wpengine.netdna-ssl.com)
  8. ^ agency loaned (www.jubileeaustralia.org)
  9. ^ committed (ukcop26.org)
  10. ^ Why banning financing for fossil fuel projects in Africa isn't a climate solution (theconversation.com)
  11. ^ announced (www.oecd.org)

Read more https://theconversation.com/tiwi-islands-offshore-gas-fight-shows-public-banks-are-under-real-pressure-over-fossil-fuel-funding-180956

Times Magazine

Headless CMS in Digital Twins and 3D Product Experiences

Image by freepik As the metaverse becomes more advanced and accessible, it's clear that multiple sectors will use digital twins and 3D product experiences to visualize, connect, and streamline efforts better. A digital twin is a virtual replica of ...

The Decline of Hyper-Casual: How Mid-Core Mobile Games Took Over in 2025

In recent years, the mobile gaming landscape has undergone a significant transformation, with mid-core mobile games emerging as the dominant force in app stores by 2025. This shift is underpinned by changing user habits and evolving monetization tr...

Understanding ITIL 4 and PRINCE2 Project Management Synergy

Key Highlights ITIL 4 focuses on IT service management, emphasising continual improvement and value creation through modern digital transformation approaches. PRINCE2 project management supports systematic planning and execution of projects wit...

What AI Adoption Means for the Future of Workplace Risk Management

Image by freepik As industrial operations become more complex and fast-paced, the risks faced by workers and employers alike continue to grow. Traditional safety models—reliant on manual oversight, reactive investigations, and standardised checklist...

From Beach Bops to Alpine Anthems: Your Sonos Survival Guide for a Long Weekend Escape

Alright, fellow adventurers and relaxation enthusiasts! So, you've packed your bags, charged your devices, and mentally prepared for that glorious King's Birthday long weekend. But hold on, are you really ready? Because a true long weekend warrior kn...

Effective Commercial Pest Control Solutions for a Safer Workplace

Keeping a workplace clean, safe, and free from pests is essential for maintaining productivity, protecting employee health, and upholding a company's reputation. Pests pose health risks, can cause structural damage, and can lead to serious legal an...

The Times Features

Duke of Dural to Get Rooftop Bar as New Owners Invest in Venue Upgrade

The Duke of Dural, in Sydney’s north-west, is set for a major uplift under new ownership, following its acquisition by hospitality group Good Beer Company this week. Led by resp...

Prefab’s Second Life: Why Australia’s Backyard Boom Needs a Circular Makeover

The humble granny flat is being reimagined not just as a fix for housing shortages, but as a cornerstone of circular, factory-built architecture. But are our systems ready to s...

Melbourne’s Burglary Boom: Break-Ins Surge Nearly 25%

Victorian homeowners are being warned to act now, as rising break-ins and falling arrest rates paint a worrying picture for suburban safety. Melbourne residents are facing an ...

Exploring the Curriculum at a Modern Junior School in Melbourne

Key Highlights The curriculum at junior schools emphasises whole-person development, catering to children’s physical, emotional, and intellectual needs. It ensures early year...

Distressed by all the bad news? Here’s how to stay informed but still look after yourself

If you’re feeling like the news is particularly bad at the moment, you’re not alone. But many of us can’t look away – and don’t want to. Engaging with news can help us make ...

The Role of Your GP in Creating a Chronic Disease Management Plan That Works

Living with a long-term condition, whether that is diabetes, asthma, arthritis or heart disease, means making hundreds of small decisions every day. You plan your diet against m...