The U.S. Department of the Treasury issued Fossil Fuel Energy Guidance for Multilateral Development Banks (MDBs), on August 16th. This Guidance comes in response to President Biden’s Executive Order 14008 on Tackling the Climate Crisis At Home and Abroad announced earlier this year.
To help achieve a clean and sustainable future consistent with the development goals of the Paris Agreement, Treasury advocates for MDB investments prioritizing clean energy, innovation, and energy efficiency in its Guidance.
“Today, the United States takes bold, proactive steps to address the climate crisis by working with our international partners to establish a clear path to end Multilateral Development Banks’ support for fossil fuels except in exceptional circumstances while helping developing countries build a strong and sustainable future,” said Secretary of Treasury Janet L. Yellen.
When confronting the climate crisis, significant investments in clean energy need to be made. The United States, the largest shareholder across the MDB system, takes the leading role with the new Treasury Guidance that advocates for MDB staff to assess options for clean energy, innovation, and energy efficiency. Fossil fuels will only be considered if less carbon-intensive options really are unfeasible. The Guidance advocates for non-fossil fuel energy projects financed by the MDBs, while maintaining some flexibility for developing countries to support limited fossil fuel projects critical to their development objectives if certain criteria are met.
In the meeting that took place in July with MDB Heads, Secretary Yellen requested MDBs to align their portfolios with the Paris Agreement quickly, prioritize innovation and impact to match the scale of the climate crisis, develop ambitious capital mobilization rates consistent with broader climate goals, develop targets for green bonds, to make the partnerships with financial intermediaries ¨greener¨, double the current $40 billion pledge for private sector financing focused upon climate adaptation, and align policy based operations with climate goals. The Treasury Guidance aims to help MDBs meet these targets.
Treasury’s Guidance claims to support poor and vulnerable countries, and conflict-affected states, in meeting their development goals while applying strict standards to reduce overall emissions and achieve the goals of the Paris Agreement.