The Biden administration has ordered an immediate halt to new federal support for coal plants and other carbon-intensive projects overseas, a major policy shift designed to fight climate change and accelerate renewable energy worldwide.
The wide-ranging directive for the first time bars US government backing for future ventures, potentially affecting billions of dollars in annual funding as well as diplomatic and technical assistance.
The move was detailed in a cable sent late last week to US embassies and obtained by Bloomberg News.
The policy contains significant exemptions, including for compelling national security concerns, foreign policy considerations or the need to expand energy access in vulnerable areas.
It also does not apply to existing projects, including some the US has supported under multiple administrations.
Nevertheless, the policy shift could affect a significant number of potential foreign projects, including terminals in eastern Europe and the Caribbean to receive shipments of US natural gas.
It also goes beyond constraining financial aid and rules out other, softer forms of government support, including diplomatic and technical assistance that benefits developers of pipelines, liquefied natural gas terminals and other projects overseas.
“Our international energy engagement will center on promoting clean energy, advancing innovative technologies, boosting U.S. clean-tech competitiveness and providing financing and technical assistance to support net-zero transitions around the world,” according to the document.
The move underscores how the Biden administration has made fighting climate change one its most urgent policy priorities.
Yet the approach creates a major opening for China, which is eager to fund and finance energy projects around the world, often with sums of money the US has been unable to match.
The administration stressed that while the US government will withhold support, it won’t actively seek to prevent US companies from building coal, oil and gas projects overseas.
“As long as there is demand for fossil energy products, technologies, and services in global markets, the US government will not stand in the way of US. companies that are ready and able to meet those needs,” said the guidance to embassies.
“The US government will continue to help US energy companies, especially small- and medium-sized businesses, achieve their commercial objectives without compromising global climate ambitions.”
The effort is designed to steer the government’s work toward clean energy sources — not instantly cut off carbon-intensive projects, said a person familiar with the administration’s thinking.
The initiative seeks to advance clean energy engagement but not prioritize it above concerns about national security, energy access or prices, the person said.
Environmental advocates have lobbied President Joe Biden’s administration to make such a shift, arguing that the construction of new oil pipelines, LNG terminals and similar projects is not consistent with efforts to limit global temperature rise to 1.5 degrees Celsius (2.7 degrees Fahrenheit), a critical threshold for avoiding the most catastrophic consequences of climate change.
The policy’s wide reach is critical, said Jake Schmidt, senior strategic director of the international climate program at the Natural Resources Defense Council.
“The US has provided a lot of political cover or other indirect support for overseas fossil fuel projects through their ambassadors or other means,” Schmidt said.
“A country will then prioritize the project — even if there are a bunch of reasons not to do it — because they don’t want to hurt the relationship with a country as important as the U.S.”
For instance, under the Obama administration, the State Department supported efforts to expand fracking in other countries using technology honed in the US Under former President Donald Trump, the U.S. championed deals to build LNG terminals that would be supplied with American natural gas.
The US doled an average of $16 billion in international public finance to just natural gas projects annually from 2017 to 2019 — four times as much as wind and solar — according to a recent report from the International Institute for Sustainable Development, a think tank.