by Ashira Morris, ODP Staff Writer

China is often criticized for funding fossil fuel power infrastructure beyond its borders, and rightly so: it’s the top financier of overseas power plants, especially coal-fired ones. But they’re not the only ones continuing to finance coal and gas projects overseas.

• The US and Japan are a close second and third, enabling gas and coal power in countries like Indonesia, India, Vietnam, and the United Arab Emirates.
• A new analysis looked at investments from bilateral financing from the US and Japan through organizations like the United States Agency for International Development (USAID), which have continued to fund fossil fuel projects even as institutions like multilateral institutions like the World Bank have backed away from them. 

Why This Matters: All three countries have climate neutrality targets within their own borders but minimal restrictions on overseas fossil fuel financing. China has no policy on the topic, and while the US and Japan ostensibly have agreed to stop, they are able to fund these projects through bilateral financing. These investments lock in carbon pollution, making it harder for developing nations to switch their energy source to renewables. 

“Such fossil fuel infrastructure financing impedes the low carbon energy transition and needs to stop,” Xu Chen, lead author of the study and postgraduate research associate at Princeton University’s Center for Policy Research on Energy and the Environment, said in a statement.

Drilling in on the Data: While there has been previous analysis of the international development banks who have been slowly shifting their portfolios toward renewable energy, this study is the first to look at how national development finance institutions are funding fossil fuel energy projects.

• How much fossil fuel capacity did each country fund? From 2010-2018, 
  • China facilitated 101 GW of energy total. 64% of that capacity comes from fossil fuel plants.
  • Japan facilitated 95 GW of energy total. 87% of that capacity comes from fossil fuel plants.
  • China facilitated 47 GW of energy total. 66% of that capacity comes from fossil fuel plants.
• Together, the study estimates that the three countries facilitated locking in 24 gigatons of CO2 emissions by 2060.

“If climate targets are to be met, replacing bilateral fossil fuel financing with financing of renewable technologies is crucial,” the study authors write.