President Joe Biden is on the verge of endorsing restrictions on international funding for oil and gas projects. This significant step holds the potential to release billions of dollars for clean energy and solidify his climate legacy. It represents a notable shift from the United States' stance over the past three years. In 2021, Biden joined a group of wealthy nations to limit financing for coal-fired power plants in other countries. However, efforts to expand these restrictions to other fossil fuels have not been supported. Now, at a virtual meeting of the Organisation for Economic Co-operation and Development on Tuesday, his administration, along with a few other rich countries, is expected to call for curbing public financing for oil and gas projects internationally. According to three people familiar with the administration's plans, this could have a profound impact and leave a strong climate legacy for the Biden administration.

Impact and Legacy

Deputy director of international finance at Friends of the Earth, Kate DeAngelis, emphasizes the significance of this move. The U.S. is anticipated to back a so-called emission threshold that would prevent the U.S. Export-Import Bank and other publicly funded export credit agencies from financing carbon-intensive energy projects. This aligns with the interim guidance provided by the Biden administration to end international fossil fuel financing, which was not made public but was analyzed by the Natural Resources Defense Council. It is likely to be the last opportunity for the administration to push for an agreement at the OECD. President-elect Donald Trump, who has questioned climate science and pledged to increase domestic oil drilling, is unlikely to support ending fossil fuel investments abroad when he takes office in January.This move comes in the face of pressure from climate activists who expect Biden to fulfill his 2021 promise to end overseas financing of all carbon-intensive fossil fuel projects. The U.S. joined dozens of other countries at climate talks in Glasgow, Scotland, that year, agreeing to stop funding international fossil fuel projects by 2023. Reaching an agreement now would establish firm rules that would be difficult to reverse, compelling the incoming Trump administration to either comply with the deal or withdraw from it.A spokesperson from the Trump transition did not respond to a question about how the administration would handle such an agreement. However, they stated that voters elected Trump based in part on his promises to lower energy costs for consumers. Karoline Leavitt, the spokesperson, said in an email, "When he takes office, President Trump will make America energy dominant again, protect our energy jobs, and bring down the cost of living for working families."Jake Schmidt, senior director for international climate at NRDC, believes that if Vice President Kamala Harris had won the election, the Biden administration would have supported the agreement. But Trump's victory may be prompting the administration to act more swiftly. He said, "They clearly realized the end of the year is approaching rapidly, and their ability to secure a climate win is diminishing."

Meeting Focus and Proposals

The upcoming meeting will focus on an export credit agency agreement among the European Union and 10 other wealthy nations: Australia, Canada, Japan, South Korea, New Zealand, Norway, Switzerland, Turkey, the United Kingdom, and the United States. It follows a 2021 deal by these countries in the Organisation for Economic Co-operation and Development to end public investments in coal power projects that do not capture and store their emissions.Earlier this year, the European Union proposed to extend the coal prohibition to cover oil and gas, except in specific circumstances that align with the Paris climate agreement, which aims to limit global temperature rise to 1.5 degrees Celsius. This idea has gained the support of Canada, Norway, and the United Kingdom, among others. However, the U.S. has not publicly backed it or offered an alternative until Tuesday, when it is expected to support a separate plan for establishing emission thresholds.Export credit agencies currently provide billions of dollars in financing for fossil fuel projects, leading to pressure from climate activists who are calling on Biden to fulfill his earlier commitments. Despite a Biden executive order instructing federal agencies to end such support, the U.S. Export-Import Bank has continued to approve financing for international fossil fuel projects. This is significant because although the Treasury Department represents the U.S. in OECD negotiations, the Ex-Im Bank would need to implement any decision reached. The Ex-Im Bank has previously stated that its charter prevents it from discriminating against specific industries such as oil and gas.Schmidt of NRDC argues that an emissions threshold could be a more "cleaner and clearer" way to set restrictions compared to the EU proposal. The EU proposal could have more loopholes if countries do not clearly define which types of projects are compatible with the 1.5°C limit.One remaining challenge will be getting South Korea to join the agreement, especially given the political turmoil in the country following President Yoon Suk Yeol's failed attempt to establish martial law. Agreements at the OECD must be reached by consensus.Last month, three Democratic senators sent a letter to Treasury Secretary Janet Yellen and National Security Adviser Jake Sullivan, urging them to use the Tuesday meeting "to fulfill a key and durable promise on international energy finance." Schmidt said, "Having the senators weigh in was an important reminder that the White House needs to finish the job."