Development Finance Institutions must align their financing with the Paris Agreement. To do this they must recognise that fossil gas cannot be considered a ‘transition’ fuel to cleaner energy systems. Rather it is another carbon intensive high emitting fossil fuel that is potentially diverting funds from sustainable renewable alternatives.
The recent Step Off The Gas report highlighted that gas projects in low and middle-income countries are receiving more international public finance than any other energy source: four times as much as wind or solar. This risks locking countries into a fossil fuel dependent future, further increasing devastating climate impacts and inequality and delaying the transition to renewables.
Financing new gas projects is not the solution, investment in sustainable renewable energy is. renewable-based alternatives for most of its uses are either already cheaper or are expected to be within a few years. We urgently need to shift to a fair and clean energy system.
Fossil gas is harmful because:
- Methane Leakage: Significant methane leaks occur throughout the processing, transport, regasification, and consumption of gas. Methane is 83 to 86 times more potent than CO₂ over 20 years in driving global warming.
- Severe Health Impacts: Fossil gas combustion releases hazardous air pollutants that harm human health and the environment. Exposure is linked to respiratory diseases, cardiovascular issues, and other serious illnesses.
- Water and Environmental Contamination: Fossil gas infrastructure, including pipelines, leaks toxic chemicals into the environment and water supplies, threatening ecosystems and communities.
- Unreliable and Costly Energy: Dependence on imported LNG exposes countries to price volatility, energy insecurity, and unaffordable energy costs.
- Gendered Health Risks: Women and children, especially in frontline communities, are disproportionately affected by fossil gas pollution. Household exposure to gas-related air pollutants increases risks of respiratory illnesses, pregnancy complications, and other long-term health issues.
The Role of Public Finance in Fossil Gas Expansion
Public finance deliberately inspires confidence and thus, falsely legitimises fossil gas as a viable energy source, encouraging private sector investments into harmful projects. Development Finance Institutions (DFIs) must:
- End Fossil Gas Financing: Urgently redirect finance away from fossil gas to align both private investment and public policy with the Paris Agreement goal of keeping global warming below 1.5°C.
- Prioritise a Just Energy Transition: Divert public finance to invest in a rapid, inclusive transition from fossil fuels to sustainable, renewable energy solutions.
- Support Renewable Infrastructure: Finance energy storage expansion and grid modernisation to accelerate the renewable energy transition.
- Reject False Solutions: Avoid funding unproven, expensive technologies like coal gasification and Carbon Capture, Utilisation, and Storage (CCUS), which extend fossil fuel dependence rather than eliminating it and continues to justify fossil fuel exploitation and new fossil fuel power generation.
International public finance for fossil fuels must be rapidly phased out and redirected toward developing reliable, safe, and accessible energy systems powered by sustainable, locally sourced, and indigenous renewable energy.