UK Government Has Given £1.76 Billion To Fossil Fuel Industries Abroad Since 2010
The UK government has, over the years 2010–2014, provided support totaling £1.76 billion (via Export Credit Guarantees) to fossil fuel industries abroad, according to a recent analysis from the EnergyDesk.
Worth noting is the fact that these credit guarantees are, of course, backed by taxpayer money. Were you asked if you wanted your taxes to be used this way? I certainly wasn’t — though, to be fair, I’m not British. Still… the point stands.
Also, most certainly worth considering is the fact that Prime Minister David Cameron has repeatedly (in recent times anyways) spoken against fossil fuel subsidies; and their use appears to go against “promises” made in the current coalition government’s manifesto.
But then I guess saying one thing and doing something else entirely wouldn’t be something new for him (or his peers), would it?
And his choice of words on the subject haven’t been mild either for that matter, so the disjunction between words and actions is even more stark than it would be otherwise. At the climate summit last September, he even went as far as to refer to them thusly: “economically and environmentally perverse fossil fuel subsidies which distort free markets and rip off taxpayers.”
And yet, here we are — with one set of words and statements, and one very different set of actions.
Here are some details and an explanation of the process of support (via the EnergyDesk):
UK Export Finance agency (UKEF) is authorised by the government to decide what to financially back and their main instrument is the Export Credit Guarantee. These are designed to minimise the risk of making deals abroad for UK exporters.
In practice this means UKEF can work with banks to partially underwrite bonds that are a sort of insurance policy on the contract – and expected by the overseas buyer to be provided by the exporter. This supports the deal by releasing the working capital paid by the overseas buyer to the exporter, which can be used instead of placing it with the bank.
UKEF also provides insurance for UK exporters to protect against non-payment or other issues that commercial insurance won’t provide, as well as sometimes lending money to the buyer of the UK export so that they can pay them directly. In the four years since the coalition government came into power in 2010, UKEF has announced significant support for a range of overseas fossil fuel projects – from backing for coal mining in Russia to oil and gas exploration in Brazil.
Last financial year was a particularly big one in terms of financial backing for fossil fuel projects, with over £380 million going to Brazilian state-controlled energy giant Petrobras (which is embroiled in an ongoing corruption scandal). This was as part of a US$1 billion – around £660 million at current rates – line of credit signed with the firm in 2012. The deal involves UK drilling services for oil and gas exploration in Brazil, and presumably offshore exploration, too, since one of the UK firms specialises in subsea engineering.
Another one well worth taking note of was one that saw ~£475 million go to support the work on a petrochemical complex in Saudi Arabia by a UK construction firm — referred to by UKEF as being its “largest limited recourse project financing” ever.
There’s also been, very interestingly, a lot of support “pledged to Russia by UKEF” — altogether totalling ~£430 million since 2010. This has included support for numerous Russian coal projects, “financial backing for state-owned gas giant Gazprom to receive engineering equipment from Rolls-Royce Power Engineering, and expertise and software to other fossil fuels projects.”
For those wondering why such support has been so common, it’s worth noting that previous reporting has revealed that the UK spends around a billion pounds annually importing coal from Russia.
A final note on that regard, the chairman of one of the Russian companies involved (SUEK), Andrew Melnichenko, reportedly has strong connections to the UK government — his “long-standing advisor George Cardona is (even) a former special advisor to Geoffrey Howe.”
On a related note — a recent report from the Overseas Development Institute found that the UK is currently providing ~£1.2 billion annually in support of exploration work for oil, coal, and gas. Some of this support is via national subsidies (tax breaks, etc), and around “£425 million per year in public finance for overseas exploration including in Siberia in Russia, Brazil, India, and Indonesia.”
Needless to say, the current support for renewables in the UK doesn’t approach that of support for the fossil fuel industries. You could perhaps argue that for the time being fossil fuels are more important, and there’s some truth to that — but the “future” does arrive at some point. The longer that the transition away from fossil fuels is put off, the harder and harsher that it’ll be.
Image Credit: SUEK
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