Legal opinion shows Export Development Canada’s fossil finance could violate international law
Press release from Oil Change International, Above Ground and Environmental Defence Canada
Export credit agencies and the governments that oversee them could be in violation of their international legal obligations if they do not swiftly reduce their financing of fossil fuel-related activities. That is the main conclusion of a legal opinion published today, two days before the Petersberg Climate Dialogue. The opinion is authored by legal experts commissioned by Oil Change International to clarify the international law obligations of export credit agencies (ECAs), which provide tens of billions of dollars in support for fossil fuels every year.
The opinion follows moves by the US, EU and UK towards phasing out international public finance for fossil fuels. Canada, by contrast, has no plan to end the support it provides to fossil fuel companies through its ECA, Export Development Canada. The agency has provided an average of more than $13 billion per year in support for oil and gas since the Paris Agreement was signed. As a result, Canada ranks second-highest among G20 countries in total public financing for fossil fuels, and highest on a per-capita basis.
This government-backed finance could put Canada in violation of its international legal obligations, following arguments made in the legal opinion published today. The authors, Professor Jorge E. Vinuales from the University of Cambridge and Barrister Kate Cook of law firm Matrix Chambers, state that:
“if the extremely dangerous consequences of climate change are to be averted or… their likelihood reduced, there is no room for additional fossil fuel capacity and existing capacity or its emissions must be reduced urgently and proactively.”
The legal opinion considers the international law framework that applies to ECAs, many of which act on behalf of states. The authors draw primarily on customary international law, human rights law, climate change agreements and OECD instruments. They conclude that:
“given the substantial contribution of ECAs to enable the emissions of greenhouse gases associated with existing and new fossil fuel-related projects/activities, in principle, States comply with their duty of due diligence only if they do their utmost to reduce their contribution to the problem, rather than extending it or increasing it.”
According to the expert authors, Canada and other state sponsors of ECAs must do the following to meet their international law obligations in relation to climate change:
- Refrain from financing new fossil fuel-related projects/activities or increasing finance for existing ones;
- Decrease existing support for fossil fuel-related projects and activities within a clear, scientifically-based time-frame;
- Proactively avoid locking in fossil fuel projects and activities that may use up a significant part of the remaining carbon budget;
- Adopt and implement adequate procedures to assess the carbon footprint of potential projects; and
- Implement performance guidelines to monitor ECAs’ activities in the context of the climate emergency.
In response, civil society organizations have written to government officials in Canada, Australia, the Netherlands, France, Sweden, Japan, the United States, South Africa and Denmark, urging them to “take this opportunity to develop a policy that puts an immediate halt to support for fossil fuel projects and associated infrastructure, consistent with international law obligations.”
“This legal opinion puts Canada and Export Development Canada on notice. EDC needs to stop financing oil and gas projects or face potential litigation and reputational risks,” says Bronwen Tucker, Research Analyst with Oil Change International. “The opinion builds on what was already a compelling moral and financial imperative: public money should no longer be used to prop up fossil fuel projects and aggravate the climate crisis that is already putting the lives and livelihoods of millions across the globe at risk.”
“Civil society groups looking to safeguard the climate are increasingly turning to legal tools to protect our common future, and this opinion makes it clear that export finance for fossil fuels might become the next target of climate litigation,” says Karen Hamilton, Program Officer with Above Ground.
“Canada should be doing everything in its power to avoid the worst impacts of the climate crisis. By immediately ending all fossil fuel financing, like the billions provided through Export Development Canada, the government can fix the glaring contradiction between its climate commitments and its policies,” says Julia Levin, Climate and Energy Program Manager with Environmental Defence Canada. “The leadership demonstrated by the UK and the US shows clearly that Canada can make this shift – and must do so to be consistent with international law obligations.”