A deal to end public funding for foreign fossil fuel projects — which Canada participated in on the world stage — has died in the face of key abstaining nations and the incoming administration of US President-elect Donald Trump.

Canada, together with Great Britain and the European Union, suggested In 2023, end financing through export credit agencies — government agencies that support foreign trade — for oil and gas projects abroad and redirect the money to clean energy instead.

The US under President Joe Biden endorsed the deal only immediately after the presidential election last November, embarking on a mad dash to reach a deal before Trump’s inauguration. After all, there wasn’t enough time.

The Organization for Economic Co-operation and Development (OECD) confirmed in a statement to CBC News that an agreement had not been reached despite months of negotiations.

In the OECD, any deal requires unanimous agreement. In addition to delayed US support, other countries that backed out were Turkey and South Korea, due to energy security and economic concerns.

Trump, who has signaled he wants to expand oil drilling and is filling his cabinet with pro-oil leaders, is not expected to support such a deal to limit fossil fuel funding.

Nina Pusic, senior climate strategist for export finance at Oil Change International, an advocacy group that has been closely following the talks, said it was a “huge missed opportunity for climate.”

“I think the big picture is that if we want to achieve the goals of the Paris Agreement, we need our public finances to go towards financing a clean and fair energy transition, instead of digging even deeper into the hole of fossil fuels,” Pušić said. .

How public finances encourage risky investments in fossil fuels

The proposal by the OECD, a group of 38 industrialized countries, stems from a pledge made at the UN climate conference in Glasgow in 2021 to phase out these types of fossil fuel subsidies and redirect money to clean energy.

The proposal was aimed at a particular type of fossil fuel subsidies — those given by export credit agencies for international projects. It is public financing that helps to support projects that could be risky and that have difficulty in obtaining initial financing from private investors and banks. Once public funding is in place, projects can more easily obtain additional private funding.

In Canada, that agency is Export Development Canada (EDC), which provides financing, bonds and insurance products for overseas projects involving Canadian companies, with the goal of boosting trade between Canada and other countries.

“One of the reasons why export credit agencies are also so important is that they reduce the risk of investment. So, they essentially provide a loan guarantee or some kind of cover for the project, which then invites the private sector to invest,” said Pušić.

“That’s why they have such an important role in this ecosystem supporting the fossil fuel industry.”

The US Export-Import Bank, for example, provided a $500 million loan for a gas project in Bahrain in 2024 and a $100 million loan for an oil refinery in Indonesia in 2023. In the final days of the Biden administration, the bank granted another $500 million for a large gas-fired power plant in Guyana.

Why some countries withstood the deal

One of the main opponents, South Korea, blocked the talks due to concerns about its domestic industries that support liquefied natural gas (LNG). South Korea is the world’s second largest financier of fossil fuels, mainly because it is the largest builder of LNG ships that transport this fuel around the world.

“However, given the global energy transition already underway, Korean companies that maintain an outdated focus on fossil projects will quickly find themselves left behind,” said Dongjae Oh, who heads gas industry research at Korea’s Solutions for Our Climate think tank. .

“The best thing to maintain competitiveness is not to invest in renewable energy projects,” he said.

Korean officials have also expressed concern that the country is not yet ready to transition away from fossil fuels for its energy needs and needs more time, according to Oh. He said Korea spent an estimated US$10 billion in international fossil financing in 2020-22, and that amount could rise.

The way forward for countries

Kate DeAngelis, deputy director of economic policy at the advocacy group Friends of the Earth US, said countries like Canada that supported the proposal must continue to negotiate despite the political changes in Washington.

“It’s important to remember that under the first Trump administration, OECD countries were able to tighten the coal financing restrictions that were put in place,” DeAngelis said.

“These governments cannot use that as an excuse to just drop the ball.”

In 2023, Canada announced that it would phasing out “inefficient” fossil fuel subsidies — funding that encourages higher carbon emissions and prevents the transition to clean energy. Despite this, report advocacy group Environment Defense found that Canada is still spending billions on oil and gas subsidies.

Meanwhile, EDC pledged phasing out direct financing of international fossil fuel projects, but is also a a great financier domestic oil and gas.

DeAngelis said that despite the lack of an OECD deal, countries can double down on these existing pledges by closing loopholes and genuinely reducing all fossil subsidies.

“Countries are very good at making commitments. It’s much harder to make sure they actually follow through,” DeAngelis said.