Is your money funding fossil fuel projects?

Over the past decade, a little known government agency has been using UK taxpayers’ money to finance oil and gas projects abroad. We look at what this means for local communities and climate breakdown.
By Fran Hunter    |      Published:  28 Feb 2020    |      Last updated:  22 Jun 2023    |      4 minute read

In January 2020 former prime minister Boris Johnson announced an end to funding coal projects overseas. A month later he launched COP 26 – the UK-hosted climate talks – and said the country must "lead the way" globally on reaching net zero emissions because of its historic role in industrialisation.

But the announcement on coal was labelled a "sham" (the UK hasn’t funded overseas coal projects since 2002), and recent investigations suggest government is actively planning to fund climate breakdown, not solve it.

Which projects has UK government funded?

We – along with organisations like CAFOD and Global Witness – have been looking into the UK’s support for fossil fuel projects abroad, and quite frankly the government is making a mockery of its climate commitments.

Despite parliament declaring a climate emergency in 2019, and its pledge to achieve net zero carbon emissions by 2050 (which is still too slow), UK taxpayers are unknowingly funding dirty oil and gas in developing countries through a little-known government agency – UK Export Finance (UKEF).

UKEF provides loans and guarantees to ensure that projects which would benefit the UK "do not fail for lack of finance or insurance". The projects include offshore oil and gas fields in Ghana, expansions of oil refineries in Kuwait, and offshore oil platforms in Brazil.

Fossil fuels, communities and climate breakdown

In January 2020 the BBC reported on the government’s funding of fossil fuel projects and, using government’s own figures, estimated that the combined carbon emissions from the projects once complete is 69 million tonnes of carbon per year – equivalent to Portugal’s total annual carbon emissions.

But aside from the obvious harm to climate, these projects often have dire consequences for local communities.

Before backing a project, the UK government assesses the potential for negative environmental, social and human rights (ESHR) impacts. All of the projects shown on the map were classed, by its own admission, as "Category A – having potentially significant environmental, social and human rights (ESHR) impacts."

An impact assessment on the gas and oil fields in Ghana reports that the local population was heavily reliant on fishing (and to a lesser extent, farming). Yet in the same document it admits:

"The Project will lead to the economic displacement of land-based livelihoods in the land acquisition area (crop cultivation, animal rearing, and aqua-culture) and the economic displacement of marine fishing-based livelihoods due offshore pipeline construction and reduced access to fishing grounds."

Furthermore, "the lack of skills and education, and formal business opportunities [within the project area] will limit the extent to which local community members will be able to benefit from employment and procurement opportunities."

In other words, the project will negatively impact both farming and fishing – which is the main source of income for the nearby communities – and the project owners don’t imagine they’ll be able to provide other sources of income.

Mozambique: paradise lost?

As if the UK hadn’t invested enough in fossil fuels, in July 2020 UKEF pledged $1 billion to support a Liquefied Natural Gas (LNG) project off the unspoiled coast of Cabo Delgado, Mozambique. The project involves drilling for gas on the seabed, transporting it to an onshore station where it is turned into liquid form and then shipped to foreign buyers. The liquefaction process is incredibly energy intensive, making it even worse for the environment than natural gas drilling. 

The potential climate impacts of the project are huge. For example, the emissions from the use of the gas that's extracted are estimated to be equivalent to the total emissions from the aviation sector for all EU member states combined. 

Fisherman in Cabo Delgado, Mozambique
Credit: Justiça Ambiental (JA!)
A fisherman in Cabo Delgado, Mozambique

Mozambique is the 7th poorest country in the world, according to the International Monetary Fund. The country is still suffering from the hangover of a bloody civil war, and in recent years Cabo Delgado has been the target of extremists, with frequent attacks on local people.

Coastal communities in the region rely heavily on fishing as a key source of both food and income. They say attacks are linked to the discovery of offshore oil fields, and the area is now highly militarised by both foreign and Mozambican personnel.

The oil fields, discovered a decade ago, have excited interest among foreign governments and multinationals alike. Since then, two LNG projects have been constructed and launched, and a third (the Rovuma basin) is seeking finance – hence UKEF’s interest.

According to Daniel and Ilham, our colleagues at Friends of the Earth Mozambique (known as JA!), the onshore support facilities for one project have forced the "removal" of 556 families, who are now in villages which are far from their farming land and fishing grounds. "Some have been given jobs, but these are unskilled and short term in nature."

The projects also threaten the nearby Quirimbas Archipelago (a UNESCO biosphere which is home to endangered flora and fauna, pristine coral reefs, mangroves, and seagrass beds), as well as contributing to climate breakdown an environmental assessment shows that just 1 of the 3 projects will increase Mozambique’s greenhouse gas emissions by 9.4% within 3 years.

Friends of the Earth Mozambique has been hard at work lobbying Danish and Swedish pensions funds to stop investing in (or divest from) big oil companies in Mozambique. But they need help from across the globe to stop foreign governments and businesses from driving further climate breakdown.

In September 2020, our legal team launched a challenge in the High Court against the UK government's decision to back the Mozambique LNG project, on the grounds that it didn't properly assess climate, environmental or human rights impacts, and is incompatible with the Paris Climate Agreement. We also believe the lack of transparency around the decision making was illegal. Our case was heard in December 2021.

The Paris Agreement, or Paris Climate Deal, is a legally binding agreement between 196 countries to reduce carbon emissions and limit global warming to 1.5°C.

It also compels nations to address the loss and damage caused by climate impacts, and commits finance to help developing countries tackle and adapt to climate change.

The Agreement was reached at the UN climate talks in Paris (COP21) in 2015, and came into force the following year.

On 15 March 2022 Mrs Justice Thornton, one of two judges who heard the case, ruled that the decision to support Mozambique LNG was unlawful. However, in an extraordinary legal event, the judgment was split, with the other judge dismissing our grounds. Our case was disallowed by the court as full consensus wasn't reached by both judges.

We then took our case to the Court of Appeal in December 2022, but in January 2023 we heard that it had ruled against our challenge. We requested permission to appeal from the Supreme Court, but this was denied in June 2023, bringing an end to our case.

While we're very disappointed by this ruling, the case has had many successes. We’ve increased the legal scrutiny of the financiers of the Mozambique LNG project, not just in the UK but around the world. Plus launching this case helped secure the UK government policy to stop new investment in international fossil fuels using public funds.

And we'll continue our fight against fossil fuels as we stand in solidarity with Friends of the Earth Mozambique and the communities facing violence, disruption and instability due to this mega gas project.

We need your help to keep uncovering these travesties and hold government to account on its climate commitments. 

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