Despite commitments to combat climate change, G20 fossil fuel financing has injected billions into developing countries’ fossil fuel projects. From 2020 to 2022, the G20 and associated development banks allocated $142 billion to these initiatives, with Oil Change International (OCI) and Friends of the Earth US reporting that gas received more funding than coal or oil, and Canada, Japan, and South Korea were the primary financiers.
This ongoing investment flows not only to other developed nations like Australia but predominantly to the developing world, where it disproportionately favors wealthier middle-income countries over the poorest nations. Although the G7, which includes G20 members Japan and Canada, pledged in 2022 to end overseas fossil fuel funding, G20 fossil fuel financing has persisted, especially for oil and gas. The World Bank contributed about $1.2 billion annually to fossil fuels during this period, focusing largely on gas projects. Similarly, the US, Germany, and Italy, alongside other G20 members, have sustained their financial support for fossil energy projects overseas, even as the deadline for the 2022 pledge approached.
Contrasting with their clean energy investments, which totaled $104 billion over the same period, the G20’s continued reliance on fossil fuels highlights a significant gap between their environmental commitments and actual financial practices. Japan, for example, has notably continued to fund new fossil fuel initiatives, exploiting loopholes in international agreements and undermining the collective effort to reduce carbon emissions. This includes financing significant projects like the Scarborough gasfield in Australia and gas power plants in Mexico through the Japan Bank for International Cooperation (JBIC).
Public finance analysts and campaigners have criticized this ongoing support for fossil fuels, arguing that wealthy nations like those in the G20 are failing to lead a just energy transition. They stress the need for these countries to phase out fossil fuel funding more decisively and to contribute equitably to global climate finance. This transition is crucial not only for reducing greenhouse gas emissions but also for fostering sustainable development in less affluent nations, where the impact of climate change is often most severe. As global dynamics evolve, the pressure increases on G20 countries to reallocate their financial flows from fossil fuels to renewable energy sources, thereby supporting a more sustainable and equitable global economy. The persistent G20 fossil fuel financing underlines the complex challenges and responsibilities facing the world’s largest economies in aligning economic activities with environmental sustainability goals.