In October 2021 at COP26, New Zealand became a signatory to the joint Statement “International Public Support for the Clean Energy Transition”. This committed New Zealand to end direct public support for the international unabated fossil fuel energy sector by the end of 2022, and instead to prioritise support fully towards the clean energy transition.
In line with the statement signed at COP26, from 1 January 2023, New Zealand’s export credit agency, New Zealand Export Credit (NZEC), will no longer provide support for the fossil fuel energy sector, aside from in limited circumstances.
The fossil fuel energy sector activities affected by this policy are:
- Exploration, extraction, production, transportation, storage, and refining of oil, gas, and coal;
- Fossil fuel-fired plants; and/or
- Supporting infrastructure, logistics, and services primarily related to fossil fuels.
This applies to domestic and overseas-based contracting parties to the transaction for which NZEC has been engaged as well as the end-beneficiaries of the goods or services supported, where this is possible to determine. The policy covers across all NZEC’s products and services, including support for domestic supply chain transactions and export transactions.
There will be a limited number of exemptions:
- Environmental and safety improvement measures: Where a transaction relates to satisfactory safety or environmental improvement measures, applications can be considered only where:
- the transaction will not expand operations of the fossil fuel asset; and
- the party has a documented and realistic transition plan consistent with a 1.5°C warming limit and the goals of the Paris Agreement.
- Transactions unrelated to fossil fuel energy sector activities: Where a party is in the fossil fuel energy sector, but the transaction relates to goods and services that do not directly contribute to the activities captured within the policy, applications may be considered only where that party has a documented and realistic transition plan consistent with a 1.5°C warming limit and the goals of the Paris Agreement.
- Transactions related to energy resilience in developing countries: Where the transaction relates to energy resilience projects in developing countries for stand-alone power generation or other downstream supply chain activities, NZEC can consider applications where alternatives to non-fossil fuel energy sources are limited or in humanitarian contexts. This exemption is intended to apply to small-scale projects, such as diesel generators or fuel storage where renewables may not be viable. It does not apply to fossil fuel-fired plants.
This will support companies to pursue abatement solutions, transition away from fossil fuels, and align future activities with the Paris Agreement.
This policy will not affect NZEC support for transactions relating to fossil fuels outside the energy sector, such as generation in energy-intensive sectors like cement or steel, or economic activities where fossil fuels are a source of energy, or an input for goods and services, with non-fuel applications, such as fertiliser production.
Ending support for the fossil fuel energy sector, aside from in very limited circumstances, is an important step in the further decarbonisation of export financing and builds on NZEC’s previous work. In November 2021, NZEC ceased support of export credits and tied aid for coal‑fired power plants without operational carbon capture, utilisation, and storage (CCUS) facilities.
NZEC is committed to implementing the climate policy and goals as set out in the Paris Agreement; we must do our part to shift international financial flows away from fossil fuels.
NZEC also adheres to the OECD’s Recommendation on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “Common Approaches”) which describes measures to address the potential environmental and social impacts of projects for which export credit support is requested.