Fossil fuels, the consumption of which is the main cause of climate change, continue to benefit from significant private investment and public subsidies.
Declarations of good intentions by companies or States on the ecological transition hide the reality. Eight years after the Paris agreement, they continue to finance global warming more than the solutions to limit it. “Public and private funding for fossil fuels is always more important than that for climate change mitigation and adaptation”, noted in April 2022 the Intergovernmental Panel on Climate Change, which is due to publish a summary of its latest reports on Monday March 20. The consumption of coal, oil and gas is however, by far, the primary cause of climate change (PDF) caused by human activities. As they burn, these fossil fuels release greenhouse gases, which trap the sun’s heat.
Getting out of this dependence is therefore essential to preserve living conditions on Earth. “Today’s investments determine the level of greenhouse gas emissions tomorrow”warns Maxime Ledez, research fellow at the Institute of Economics for Climate (I4CE). “No one said we had to get out of fossil fuels overnight”adds Lucie Pinson, director of the NGO Reclaim Finance. The problem is that this capital is going to new projects [comme le projet EACOP de TotalEnergies ou le nouveau terminal méthanier du Havre] incompatible with our climate goals and companies that don’t have a transition plan.” The International Energy Agency (IEA), an agency historically created after the oil shock of 1974 to secure the energy supply, does not say anything else. In 2021*, it estimated, in a remarked statement, that it was not necessary to launch new gas, coal or oil exploitation projects to achieve the energy transition.
However, the sums injected by the banks into this industry “remain at the same level and public subsidies are increasing”notes Natalie Jones, expert at theInternational Institute for Sustainable Development (IISD). Franceinfo takes stock of these financial flows that fuel global warming.
Banks and private actors finance producing companies
The banks. Since the signing of the Paris agreement in 2015, the world’s 60 largest banks have provided an average of $764 billion (718 billion euros) each year to fossil fuel companies, according to calculations by the coalition NGO Banking on climate chaos* (“Betting on climate chaos”). If the amount allocated each year to giants in the sector such as ExxonMobil or Saudi Aramco has been decreasing since 2019, financing is capping more than it is decreasing: the latest figure available – 742 billion dollars for the year 2021 – remains higher than the years 2016 and 2017. Among these banks, 44, i.e. almost three-quarters, have nevertheless committed to achieving carbon neutrality by 2050. “They made big promises and they continue to write unconditional checks without asking their customers to take action.“, regrets Lucie Pinson, whose NGO is part of the Banking on climate chaos coalition.
BNP Paribas, the leading French bank in the ranking (10th) ahead of Société Générale (21st) and Crédit Agricole (23rd), defends its strategy criticized by NGOs. “These rankings which add up funding amounts over five years have the defect of erasing our reduction trajectory”assures Laurence Pessez, director in charge of social and environmental responsibility at BNP, even if the bank’s investment curve is currently drawing a plateau, with 14.75 billion dollars in 2021 against 17.87 in 2016. . “At the end of 2022, we already have more financing going to low-carbon, essentially renewable energies, than to fossil fuels, namely 55% compared to 45%”, she develops. BNP has pledged to reduce its funding related to gas extraction and production by 30%, and that related to oil extraction and production by 80% by 2030.
Insufficient commitments for observers. In February, three NGOs sued the bank and 600 scientists published an open letter in The Obs calling on the company to “stop supporting new oil and gas projects”. “We regret that these NGOs have chosen the voice of litigation rather than dialogue”reacts Laurence Pessez, before responding to the researchers: “There is a scientific consensus on the need to reduce our emissions. Scientists, who focus on this dimension, find that things are not going fast enough [les émissions continuent même d’augmenter]. We hear it and we have also made new commitments. They are fully in line with the operational translation of the International Energy Agency, which integrates both the climate emergency and other economic and social parameters. Finally, the bank estimates that “the transformation of the energy sector will not happen without the oil and gas majors which are investing heavily in low-carbon energies”.
At Reclaim Finance, Lucie Pinson recognizes that the 2030 objectives for the BNP Paribas portfolio are aligned with the IEA roadmap. But “It’s the trajectory that counts. Their portfolio is at the right level in 2030. In the meantime, won’t they help a lot of fossil companies?” she wonders. The activist also points out that the banks’ commitments only cover loans and not the issue of bonds, another financing tool which has the advantage of not appearing on their balance sheets and which consists of selling debts from a business in the markets. A recent example illustrates the problem: on February 23, a loan granted to subsidiaries of Saudi Aramco, the powerful Saudi oil company, was transformed into a bond, with the help of BNP Paribas, Crédit Agricole, Société General and Natixis.
“Are French banks planning to meet their decarbonization targets or are they just cleaning up to get these transactions off their balance sheets?”
Lucie Pinson, director of Reclaim Financeat franceinfo
Finally, the activist insists that BNP does not ask these customers “to stop the development of new projects” and disputes the preferential treatment granted to gas, labeled energy of transition by the European Union. “It’s a fossil fuel, which is said to decrease in the scenarios, just like the others”recalls Lucie Pinson.
All banks are not on the same line. The Change de Banque site, developed by Reclaim Finance, identifies four responsible alternatives in France, including La Banque Postale and Crédit Coopératif. Specialized in retail banking, they do not finance this sector or have committed to exiting it completely by 2030. “All banks should apply a precautionary logic and condition their support on stopping the development of fossil fuels. But this approach is not good from a business point of view”contextualizes Lucie Pinson.
Asset managers, insurance companies and other private actors. Private financing of fossil fuels is not limited to banks. Asset managers, who invest the capital entrusted to them, and pension funds also get their hands dirty. Insurance companies provide their services, often essential for the realization of a project. But no figures exist for lack of obligation, regret the NGOs.
In France, the I4CE provides an annual overview of investments, public and private, in fossil fuels on French territory. These investments, dominated by the purchase by individuals, companies or administrations of gasoline-powered vehicles, are down, with 62 billion euros in 2021, compared to 86 in 2019. A decrease which is explained above all by the supply difficulties in semiconductors car manufacturers. “Once these constraints are lifted, there is a risk of a rebound”warns Maxime Ledez.
However, the situation is not hopeless. According to data from Bloomberg Nef, investments in the energy transition, private and public combined, were in 2022 at the same level as the sums allocated to fossil fuels, at 1,100 billion dollars. A first for this indicator.
States subsidize the consumption of these energies
If the financing granted by the banks is leveling off, State subsidies for the consumption of coal, oil or gas are on the rise, under the effect of the energy crisis caused by the war in Ukraine. The amounts have even tripled for coal. In 2022, 1,000 billion dollars (939 billion euros) were thus distributed, according to figures from the IEA*. A record, to which must be added 626 billion dollars (587 billion euros) of consumer aid not taken into account by the IEA’s methodology on subsidies. Behind these sums, there are measures such as price caps – for example, the tariff shield on the price of gas in France –, tax advantages or energy vouchers.
If these measures can be defended from a social point of view, the IEA notes that they are “rarely well targeted to protect the most vulnerable and tend to benefit the wealthiest”, which consume more energy. The agency sees “a worrying sign for the energy transition”, hampered by this type of measure. In the Glasgow Climate Pact*, the final declaration of COP26, the international community called for “phasing out inefficient fossil fuel subsidies, while targeted support for the poorest and most vulnerable”. For Natalie Jones, researcher at the International Institute for Sustainable Development, “the best way, in the long term, to protect consumers from the volatility of energy prices is to build a system based on renewable energy and energy efficiency”.
“These subsidies weaken the global effort against climate change because they lock us into our dependence on fossil fuels.”
Natalie Jones, researcher at IISDat franceinfo
France is not left out. In 2023, it will spend 19.6 billion euros on expenses “unfavourable” to the climate, a figure largely reduced as franceinfo had explained in October. At the Institute of Economics for the Climate, Maxime Ledez also points out that certain financing of fossil fuels, such as the tax differential between diesel and gasoline or the reduced VAT on plane tickets, are not no longer taken into account by the State in its calculations. “Clearly, these tax measures are not in line with our climate objectives”, he summarizes. For Maxime Ledez, our companies will have “hard to do without these subsidies in the short term” : “The question is how do we manage to organize decarbonization as quickly as possible without disrupting our social and economic activities?”
* All links marked with an asterisk are in English.