Public export promotion policies and so-called export credit agencies (ECAs) have the potential to leverage change. They provide government-backed loans, guarantees, and insurance for international trade. However, these financial institutions have traditionally supported carbon-intensive projects, such as those in the fossil fuel sector, and thus contribute to greenhouse gas (GHG) emissions.

Given the urgency of the climate crisis, there is increasing global pressure on governments and ECAs to align their activities with the Paris Agreement. This alignment is essential for limiting dangerous global warming to 1.5°C, as outlined by the International Energy Agency (IEA), which asserts that new fossil fuel projects must be avoided to meet these targets. The EU and its member states are at a critical juncture where their export credit policies must pivot quickly and decisively towards climate sustainability.

Against this background our new study reveals a fragmented landscape of fossil phase-out and net zero-strategies across Europe. The study advocates a two-pillar approach consisting of (i) a rapid fossil phase out in conjunction with (ii) a comprehensive net-zero approach based on GHG accounting and carbon-lock-in assessment. A stocktaking of implementation vis-à-vis the commitments made by EU member states reveals that there has been mixed progress so far.

Nordic EU countries and Germany provide examples of ambitious policy implementation. These countries have also adopted advanced frameworks for monitoring and reporting the GHG footprint of ECA-supported projects. Austria, on the other hand, provides a case of relative lenience regarding the fossil phase out and operates in methodological ’blind flight’ towards the Paris goals.

The study argues that the next step towards sustainable export finance for EU Member states who have not already done so is to adopt a two-pillar approach: first, ensure that fossil exit plans are timely and complete and, second, devise an ambitious, comprehensive and science-based net-zero approach, which fully aligns the remaining officially supported project portfolio with the Paris Agreement drawing on greenhouse gas (GHG) accounting methods. Members should also adopt an anticipatory role in due diligence which considers dependencies on fossil fuels via systematic carbon lock-in assessments.