US must lead on decarbonizing international financing for development projects

BY REP. JARED HUFFMAN (D-CALIF.), OPINION CONTRIBUTOR - 05/27/22
CONGRESS BLOG

The recent 2022 Intergovernmental Panel on Climate Change report offered a dire warning from the world’s top scientists about the consequences of climate inaction: Climate change is killing the planet and we are not prepared. And the truth is, we are running out of time to curb the destructive effects already seen in our communities at home and around the globe, let alone avoid the catastrophic events on the horizon.

One of the most troubling sectors where the funding for climate-destroying fossil fuels continues unchecked is international fossil fuel financing for development projects, particularly in the transportation sector. As the World Bank and International Monetary Fund leaders gathered for the Spring Meetings, clean energy advocates urged them to end their investments in transportation projects that fund internal combustion engines that burn fossil fuels.

The numbers speak for themselves: of the World Bank’s 216 public sector transportation projects approved from 2017 through 2021, $77 billion was for projects supporting internal combustion engine vehicles and infrastructure that make the climate crisis worse. Less than $1 billion was approved for zero-emissions vehicles.

While the transportation sector is just one sizable piece of a larger ecosystem dependent on fossil fuels — international financial institutions (IFIs) play a significant role in fueling the problem. As one of the largest shareholders at the IFIs, the U.S. has significant influence to push the institutions to end their support for fossil fuel investments, which would have a worthwhile impact on total greenhouse gas emissions.

These uneven investments can’t continue to be the norm for the World Bank and other major financial institutions; we must pursue bold steps, both at home and through our investments abroad, to avoid the most disastrous impacts of the climate crisis. That means that our financial institutions must stop investing in the destruction of our Earth, end financing for fossil fuels, and instead invest in clean, secure, sustainable alternatives.

And it’s more than just our environment that’s at stake. Global security depends on clean, reliable energy. We can never be energy independent if we depend on fossil fuels that tie us to a boom and bust cycle dictated by the global market, OPEC, and fossil fuel-funded autocrats like Vladimir Putin. We must not lock future generations around the world into more reliance on these dangerous fuels, and the best way to ensure that is to launch a Marshall Plan for clean energy and end the world’s planet-killing addiction to fossil fuels.

That’s why my bill with Sen. Jeff Merkley (D-Ore.), the Sustainable International Financial Institutions Act (SIFI Act) is vital for solving our energy crisis. This legislation would advance the shift to a clean energy economy by aligning the United States’ role in the IFIs to end support of new fossil fuel activity.

President Joe Biden’s Executive Order on Tackling the Climate Crisis at Home and Abroad took the bold step of requiring the U.S. Treasury Department to develop a strategy for how the voice and vote of the United States can be used in the IFIs, like the World Bank Group and the International Monetary Fund (IMF), which led to the U.S. Treasury Department’s updated energy financing guidance released last summer.

These are welcome first steps, but we need to go well beyond them if we’re going to have a chance at making meaningful progress. The U.S. is a key — if not the key — partner in these banks. Our influence can determine the direction of their investments for years to come.

The SIFI Act builds upon current U.S. policy and the updated Treasury guidance. It would require U.S. representatives at the IFIs, like the World Bank, to champion clean energy and climate change mitigation and oppose any financial or technical assistance to any country or entity to create new capacity for fossil fuel activity. It would also restrict United States’ foreign assistance to support fossil fuel activity through entities such as the Export-Import Bank and the Development Finance Corporation.EPA must provide certainty for low-carbon fuels In 2023 and beyondBiden’s debt forgiveness misses targets

These are necessary actions to ensure that our development finance institutions end support of new fossil fuel activity and instead invest in green alternatives. We cannot afford to only invest pennies in clean options while taxpayer dollars continue to disproportionately support fossil fuels.

We must heed the warnings of scientists worldwide and call on leaders to start working now to make drastic cuts in greenhouse gas emissions before it’s too late for our climate and our planet. I urge my colleagues to work with me to pass the Sustainable International Financial Institutions Act and continue to use our power as a leader to call on the IFIs to end financing for fossil fuels, and instead invest in clean, secure, sustainable alternatives.

Jared Huffman is the U.S. representative from California’s 2nd District.