In a bid to achieve a climate-neutral world and promote clean energy, the United States has decided to stop financing fossil fuels during the Global Climate Summit. This decision, however, spells change for countries leveraging on crude oil. In Nigeria, the oil sector accounts for 95% of its foreign exchange earnings and 80% of its budgetary revenues. Likewise, crude oil fuels Nigeria’s importation, which exceeds its exportation of goods.
The vice president of Nigeria, Yemi Osinbajo, during the World Liquefied Petroleum Gas Association (WLPGA) forum in Dubai, said the decisions taken by these countries is of concern to the developing countries that depend on it. He said, “It is worrying that a growing number of wealthy nations have banned or restricted public investment in fossil fuels, including natural gas”.
“Such policies often do not distinguish between different kinds of fossil fuels, nor do they consider the vital role some of these fuels play in powering the growth of developing economies, especially in sub-Saharan Africa”, he said.
According to him, the transition to net-zero emissions for developing countries, including Nigeria, and the decision to stop financing fossil fuels would pose two existential problems. According to him, “Aside from the climate crisis, we have the problem of lifting millions out of extreme poverty and access to energy is a huge part of that. It is either unreliable due to lack of generating capacity and infrastructure, for the few with access to electricity, or unaffordable due to high prices”.
“But a more important aspect of that problem is the 2.6 billion people globally without access to clean cooking solutions, including over 900 million in Africa. This energy-poverty nexus has distinct gender characteristics”.
This will be difficult for developing countries, unlike the developed countries that have strategies in place to aid the easy transition to clean energy. For instance, Belgium doubled its gas use since 1990 and planned to build even more gas-to-power capacity in the coming years. Also, the USA exportation of liquefied natural gases has increased in recent years.
Although this change is hard, the difference is worth it. This will help explore other untapped resources in the country. For instance, the natural gases that countries produce domestically. The stop on financing fossil fuel does not include this.
Natural gas is a fossil fuel, yet it can pull entire communities out of poverty. It is nearly twice as carbon-efficient as coal. It is plentiful in several African countries outside North Africa, such as Nigeria, Mozambique, Angola, and the Democratic Republic of the Congo.
According to the Energy for Growth Hub, a worldwide research network, if the 48 countries double their electricity usage overnight by using natural gas, carbon emissions would be less than 1% of the global total.
What to Know about USA’s Decision to Stop financing Fossil Fuels
The United States of America and some countries during the Global Climate Summit in Glasgow, Scotland, announced to stop financing fossil fuel projects abroad by the end of next year. Rather, the investment will be in low-carbon energy projects such as wind and solar. In a report, this agreement covers “unabated” projects, which generally refers to fossil fuel facilities that don’t capture carbon dioxide emissions.
During the summit, Jonathan Wilkinson, Canada’s minister of natural resources, said, “The signing of this statement represents a step forward very much in the right direction”. However, some of the most prominent financiers of fossil fuel, such as Japan, South Korea, and China, were not at the summit.
Apart from the United States and the United Kingdom, other signatories include Costa Rica, Denmark, Canada, Italy, Mali, Netherlands, Switzerland, Belgium, France, Germany, Spain, and Sweden. Also, development banks such as East African Development Bank, European Investment Bank (EIB), French Agence Française de Développement (AFD), and the Dutch Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO) signed the agreement.
Kate DeAngelis, International Finance Program Manager at Friends of the Earth U.S., said, “G20 countries pour billions into fossil fuels while the world burns and the devastating impacts of climate change get worse and worse”.
She further said, “Even as the world’s scientists have sounded the alarm on the urgency of taking climate action, governments continue to ignore this code red. G20 governments must heed this call and once and for all shift their financing away from fossil fuels toward renewables”.
Is Nigeria ready for the change?
Maria Pastukhova, a senior political adviser at E3G said for the pledge to be embraced by developing countries, it is a sign that renewable energy can help boost and strengthen the economy of poorer nations. She said, “It’s just a compelling signal that a prerequisite and a priority for sustainable growth and economic development are not investments in fossil fuels but investments in clean energy”.
Justin Guay, director for global climate strategy at the Sunrise Project, said, “it’s one of the more meaningful announcements he has seen amid a flurry of pledges and agreements rolled out at the annual climate conference, known as COP 26”.
The fossil fuel world
According to a 2021 report, between 2018 and 2020, G-20 countries financed at least USD 63 billion per year ($188 billion in total) for oil, gas, and coal projects through their development finance institutions, export credit agencies, and the multilateral development banks (MDBs).
The finance was estimated to be 2.5 times more than the G-20 support for renewable energy. The top four financiers are Canada, Japan, Korea, and China, providing nearly half of that amount. The United States was fifth and a significant contributor to oil and gas.
Justin Guay, director for global climate strategy at the Sunrise Project, said the United States investments have recently been reduced because the official U.S. export credit agency has been stopped from financing fossil fuel projects.
In effecting this, the USA has taken steps to stop financing fossil fuel development outside of its boundaries. In August, the treasury department released instructions for multilateral development banks to stop financing fossil fuels.
A country that has accepted the change
Saudi Arabia ranks 3rd in the 2020 oil production while Nigeria ranks 11th yet, it is accepting change and adapting. According to the minister of oil, “In Saudi Arabia, we recognise that eventually, one of these days, we are not going to need fossil fuels. I don’t know when, in 2040, 2050 or thereafter. The kingdom planned to become a global power in solar and wind energy and could start exporting electricity instead of fossil fuels in coming years”.
This is seen in their investments. The Saudi Sovereign Wealth Fund, the PIF, invested $1.3 billion in Lucid, an electric automaker. Presently, this is worth $47 billion. Also, they have stakes in Tesla and Uber.