JUST when you thought Parliament could not get any more out of touch with the real world, we get this report from the Environmental Audit Committee.
A summary headed ‘MPs call for end of taxpayer support for fossil fuel projects from 2021’ says the committee’s investigation into the scale and impact of UK Export Finance’s financing of fossil fuels in developing countries ‘reveals that most of UKEF’s investment undermines the UK’s climate commitments’.
It says that over a five-year period UKEF spent £2.6billion to support the UK’s global energy exports. Of this, 96 per cent (£2.5billion) went to fossil fuel projects, with £2.4billion going to fossil fuel projects in low and middle-income countries.
It concludes that UKEF plays a significant role in enabling fossil fuel projects by removing risk and sending investor signals to the market, and demands that UKEF ends support to new fossil fuel projects by 2021, and align its work with achieving net zero emissions by 2050.
The summary quotes comments from committee chair, Labour MP Mary Creagh:
‘Achieving net-zero emissions by 2050 will mean ending our addiction to dirty fossil fuels.
‘The Government claims that the UK is a world leader on tackling climate change, but behind the scenes the UK’s export finance schemes are handing out billions of pounds of taxpayers’ money to develop fossil fuel projects in poorer countries. This locks them into dependency on high carbon energy for decades to come.
‘This is unacceptable. It is time for the government to put its money where its mouth is and end UK Export Finance’s support for fossil fuels.’
First of all, we need to understand what UKEF actually does.
It does not subsidise any companies or projects. Nor does it take any funding from the taxpayer.
UKEF offers export credit insurance to suppliers, who otherwise might find it too risky to sell abroad. UKEF also provides and underwrites loans, both to suppliers and purchasers, in order to finance the purchase of goods and services from UK exporters.
All of this is carried out on a purely commercial basis, with premiums and interest rates set at levels that match the perceived risks and costs in each case. Indeed, UKEF is required by HM Government to operate on a slightly better than break-even basis.
Because of the nature of the operation, the largest part of its business involves supporting the sale of capital goods, as these tend to involve long-term contract arrangements.
The whole reason for UKEF’s existence is that it helps promote exports, something vital to the UK’s economy and jobs. It does not, and should not, exist in order to allow politicians to virtue signal, or dictate to other countries what they can and cannot do.
If Russia wants coal mines, or Oman oil refineries, those decisions are theirs and theirs alone. We have no right to interfere.
In any event, whatever Britain does will have no effect. If we refuse to export these goods, somebody else will. China alone is busily building more than 300 coal power plants in other countries across Asia and Africa, all part of its Belt and Road initiative. Japan is planning to follow suit, using finance from the Japan-led Asian Development Bank.
There will be plenty of other countries a lot nearer home who would be delighted to take business away from UK exporters.
They moan that 96 per cent of energy finance went on fossil fuel projects. What this tells us is that none of these countries want unreliable renewable energy.
But this is not simply an argument about the rights and wrongs of fossil fuels. Real jobs and real people’s livelihoods are at stake here.
The UKEF’s website gives an example of a company which has benefited from their support. https://www.gov.uk/government/case-studies/welsh-firm-secures-contracts-in-india-with-uk-government-support
Based in Welshpool, Powys, Carpenter & Paterson has been manufacturing specialist pipe suspension equipment for over 60 years. With most of its customers in the oil, gas and power generation industry, overseas sales account for 75 per cent of its business, including in South East Asia. In the last three years, the company’s sales have been boosted by new contracts with Reliance India.
In 2016, UKEF provided Reliance India with a £300million line of credit to help fund construction work on its refinery in Jamnagar. Financing was provided on the condition that Reliance sourced goods and work on the project from the UK, resulting in over 100 contracts being awarded to companies such as Carpenter & Paterson.
As a result of UKEF backing for the project, Carpenter & Paterson secured more than £7million in revenue over two years, helping to support dozens of Welsh jobs. Thanks to this success and the continued growth in demand for its products across Asia, the company has established manufacturing bases in India and Thailand.
In other words, good news all round. But the company’s product portfolio is inevitably heavily weighted to the oil, gas and power sectors. Take that away, and what business would they have left?
The simple answer is none. They simply could not throw away all of the expertise and product knowledge built up over many years and convert their factories to making wind turbines or solar panels.
The Environmental Audit Committee may naively think they are saving the planet. But all they are doing is putting British jobs at risk.