Since the signing of the Paris Climate Agreement in 2015, billions of dollars in fossil fuel investments are still the order of the day. The big news that the ABP pension fund will stop investing in fossil fuels came on the day it was announced that 88 percent of investments in the energy sector of Dutch banks, insurance companies and pension funds were still fossil at the end of 2020.
However, fossil fuel projects rarely take off without effective support from governments, whether through grants, loans, or insurance. For example, between 2016 and 2018, G20 countries still put on average more than three times more international funding for fossil projects than for sustainable energy. Despite the climate, banks and governments fan the flames every year.
It must be about money
Therefore, it is completely insufficient to continue to talk about long-term climate goals, as long as they are not linked to short-term financial consequences. So the Glasgow Climate Summit should become a turning point for fossil investments. It must be about money.
New fossil investments are in direct conflict with the global agreement not to allow climate change to spiral out of control, and thus to keep it limited to less than 1.5 degrees Celsius. According to the International Energy Agency, investments in new production of fossil fuels should be halted early today.
Finance is one of the little-known, but most important pillars of the Paris Climate Agreement. 175 countries have signed on to the ambition “to align money flows with a path toward low-carbon and climate-resilient development”. If we want to achieve the Paris goals, this means on the one hand the phasing out of fossil finance, while on the other hand, sustainable investments must experience exponential growth.
In 2020, the Netherlands subsidized fossil energy with around 4.5 billion euros
Glasgow’s mission is clear, but will it happen? In any case, the United Kingdom, the host country of the climate summit, wants to curb international funding for fossils. In cooperation with the European Investment Bank, it calls on states and organizations to commit to stopping this. This mainly focuses on rich countries, including, of course, the Netherlands and other EU countries. In April, the Netherlands, along with six other European countries, promised to stop subsidizing coal exports, but no decisive action was taken in the field of oil and gas.
It is essential for Dutch and European credibility during the climate negotiations that this change. First of all, the Netherlands should immediately join the United Kingdom and stop international funding for excavation projects. But even in our country, fossil projects are still supported by billions of euros. According to the Ministry of Economic Affairs and Climate, the Dutch government has supported the fossil sector in 2020 with around 4.5 billion euros. Environmental organizations estimate the amount to be higher: around 8.3 billion euros per year between 2016 and 2020. The Netherlands still does not have a concrete plan to put an end to this.
Gas is not “green”
The Netherlands should also speak more forcefully in this regard in the European context. The European Commission is currently considering explicitly labeling gas investments as “green” fuels in a so-called label: EU law that defines which investments can be called sustainable. This is an actual gas subsidy and sends a completely wrong signal to private investors. It would seriously damage the EU’s credibility at the climate summit. That is why the Netherlands should take a tougher stance against the continued pressure to increase subsidies for gas investments in Europe.
As one of the richest countries in the world and home to major international financiers, the Netherlands has an important responsibility to lead the way. If we don’t, the Netherlands will become an impediment to a sustainable future. If we as one of the most prosperous countries are not enough, it is hard to ask for more from emerging economies and developing countries. In this way, climate targets are out of sight. The coming weeks will be one for the EU and the Netherlands: Do we recognize the Paris Agreement with our mouths, or also through our wallets?
