The world is approaching a more catastrophic phase of global warming and needs to move quickly to reduce carbon emissions, but President Joe Biden broke another major climate promise to end public finance for fossil fuels, with the United States Export-Import Bank voting last week to provide almost $100 million to expand the PT Kilang Pertamina Balikpapan Petroleum Refinery in Indonesia.
The financing plan, approved in a closed-door meeting of the United States federal government’s official export credit agency’s board of directors, is expected to boost gasoline production by 101,000 barrels per day.
The move is considered part of Biden’s attempt to reduce gas prices as he is kicking off his re-election campaign,
In March, Biden announced an unprecedented release of well over a million barrels a day from oil US reserves.
The United States consumes around 20 million barrels of oil per day, with daily global consumption hovering around 100 million barrels.
At the United Nations COP26 climate summit in November 2021, 39 countries and financial institutions, including the United States, signed the Glasgow Statement on International Public Support for the Clean Energy Transition, committing signatories to end direct international public financing for fossil fuels by the end of 2022, barring in exceptional circumstances aligned with 1.5ºC, and fully prioritize their public finance for the clean energy transition.
If all signatories follow through on their pledges with integrity, this commitment will directly shift $28 billion per year from fossil fuels to clean energy and help shift even larger sums of public and private money away from investments in climate-harming fossil fuels.
While many nations including Canada, the United Kingdom, France, Denmark, Sweden, and Finland have published policies codifying their Glasgow Statement promises, the United States has refused to publish a policy and is now clearly breaking its pledge.
The refinery finance approval comes as Biden prepares to attend the G7 summit in Hiroshima, Japan, on May 19.
Last year the G7 adopted a pledge near-identical to the Glasgow Statement, reiterating a collective commitment to end international public finance for fossil fuels by the end of 2022.
Last month, the G7 Climate, Environment and Energy Ministers claimed they have fulfilled this commitment.
The approval of U.S. financing for the Indonesian refinery, alongside recent approvals for public finance for fossil fuel projects by Japan and Italy, shows that this is untrue.
The approval comes despite widespread opposition in the United States and Indonesia, with civil society outlining many problems with the project, including local fire risk, a concerning history of large oil spills, failure to engage with communities, inadequate environmental impact assessments, and climate risk.
The project runs against established climate science, with the International Energy Agency’s Net Zero by 2050 scenario warning that for even a 50% chance of keeping global temperatures rise under 1.5ºC, oil demand must drop, inevitably leading to oil refinery closures.
The IEA reports that the refining sector faces “major challenges”. This means that the Indonesia refinery expansion is not only incompatible with climate goals, but also financially risky, with high risk that the project will become a stranded asset.
This move will also damage U.S. energy security and prolong an energy crisis caused by fossil fuels. In October 2022, the International Energy Agency published its authoritative World Energy Outlook, showing oil, gas, and coal demand plateauing this decade, and confirming that no new oil and gas investment can be permitted if the world is to keep to the Paris Agreement’s 1.5ºC goal.
The IEA states, “No one should imagine Russia’s invasion can justify a wave of new oil and gas infrastructure in a world that wants to reach net zero emissions by 2050.” This means any further public finance for fossil fuels will only exacerbate the energy crisis, not solve it.