The secretary general of the Organisation of Petroleum Exporting Countries (OPEC), Haithman Al-Ghais has raised serious concerns of impending energy chaos that would likely hit both advanced and growing economies with an escalating campaign to abandon fossil fuels.
The OPEC top official warned against abandoning fossil fuels, hitting back once again at remarks from the world’s energy watchdog.
He said cutting out fossil fuels ‘would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world.’
On Wednesday, the International Energy Agency(IEA) said, oil demand may plateau this decade as consumers shift more to renewables to avert catastrophic climate change. We may be witnessing the beginning of the end of the fossil-fuel era,” IEA executive director, Fatih Birol said.
The clash marks yet another war of words between OPEC and the IEA, which has criticized Saudi Arabia and its partners for risking an inflationary surge by driving up fuel prices.
The Paris-based IEA described the OPEC alliance, led by the Saudis and Russia, as a “formidable challenge” to the stability of oil markets, which have faced considerable disruption from Moscow’s invasion of Ukraine.
However, there are indications that the World Bank may have spent several billions of dollars backing fossil fuels in 2022.
Campaigners estimate about $3.7 billion in trade finance was supplied to oil and gas projects despite bank’s green pledges, with Nigeria’s oil extraction likely to benefit from trade finance supplied by the World Bank
The World Bank poured billions of dollars into fossil fuels around the world last year despite repeated promises to refocus on shifting to a low-carbon economy, research has suggested.
The money went through a special form of funding known as trade finance, which is used to facilitate global transactions.
Urgewald, a campaign group that tracks global fossil fuel finance, found that the World Bank supplied about $3.7bn (£2.95bn) in trade finance in 2022 that was likely to have ended up funding oil and gas developments.
Heike Mainhardt, the author of the research, called for reform of the World Bank and its private finance arm, the International Finance Corporation (IFC), to make such transactions more transparent and to exclude funding for fossil fuels from its lending. “They can’t say that they are aligned with the Paris agreement, because there isn’t enough transparency to be able to tell,” she said.
Fossil fuel companies would take advantage of this, she added. “They can see that they can access public money this way, without drawing attention to themselves, and they’re very clever, so they will do this,” she said.
Trade finance is a form of funding more opaque than standard project finance. Whereas project finance usually flows to governments, organisations or consortiums for a particular well-defined purpose and is relatively easy to track, trade finance is more diffuse.
It comprises numerous complex financial instruments used by banks and other financial institutions to provide working capital to governments or businesses. Trade finance can take the form of credit or guarantees, and is an important tool for the World Bank as it helps to “de-risk” financing to developing countries, which are often penalised by higher than normal interest rates when they try to raise finance privately.