Finnvera’s prohibition policy for fossil fuels
Introduction
Climate change and the actions taken to counter its effects play a key role in Finnvera’s strategy. We participate actively in collaborative international efforts that promote climate-friendly export financing. At the 2021 Glasgow Climate Change Conference (COP26), Finland and 39 other countries signed a pledge to direct public support to the green transition and end the support for fossil fuels. Finland is also a member of the international Export Finance for Future (E3F) coalition that aims to make this pledge a reality.
The signatories of the COP 26 Declaration are committed to ending any new direct public support for fossil fuel projects in the international energy sector, except in limited and clearly defined conditions that are consistent with the 1.5°C threshold and the objectives of the Paris Agreement.
As the export credit agency of Finland, Finnvera is ready to put these commitments into practice. Finnvera has published its own oil and gas policy under the E3F coalition in 2022. The policy, which forbids the financing of any coal-fired power plants and related infrastructure projects, was enacted in 2021 after the OECD countries decided to no longer provide export credits for new coal-fired power plants.
Scope of the policy
The policy applies to export credit guarantee applications that are related to coal projects submitted after 1 January 2021, as well as oil and gas projects submitted after 1 January 2023.
The scope of the policy does not apply to the following:
- Trade finance (export guarantee projects with a repayment period of less than 2 years)
- Projects in Finland
- Non-fossil-fuel-based energy production (e.g. the production of energy with biofuels, hydrogen) and sectors not related to energy production (e.g. vessels)
- Power generation in energy-intensive sectors (e.g. paper and steel mills)
- Power generation for critical infrastructure (e.g. hospitals, water utilities)
- Electricity and heating networks (e.g. the construction of main grids)
- Projects that improve the state or security of the environment (e.g. oil spill prevention and response)
Prohibition policy
Export credit guarantees are not granted for the following types of projects:
- Coal mining and any related infrastructure
- Exploration and drilling of new oil and gas fields or major expansions of old fields, as well as fixed infrastructure for such fields (e.g. oil pipelines)
- Coal-, oil- and gas-fired power plants, except in strictly limited situations, see section Exceptions.
- Finnvera does not grant export credit guarantees for new peat-fired power plant projects abroad.
Exceptions
According to the COP26 Declaration, the financing of fossil fuels must be prohibited, apart from some strictly defined exceptions in specific situations. Finnvera has included the following exceptions to its policy:
- Coal:
- Measures to reduce pollution from existing power plants that will not increase the power plant’s lifespan or capacity.
- The prohibition does not apply to metallurgical carbon used in the manufacture of steel
- Oil:
- Reserve power plants or isolated electricity networks located in remote areas where other, lower-emission solutions are not feasible for ensuring the security of supply or enabling the use of renewable energy.
- Gas:
- The power plant is as a reserve or balancing power plant for renewable energy.
- The power plant generates baseload and is used to replace higher-emission energy production in the energy network, or the use of renewable energy cannot be justified
The fuel that a power plant primarily uses during its life cycle is considered its primary fuel source. The decision to finance any exceptional cases is made on a case-by-case basis after an overall assessment. Our evaluation process is based on a separate set of instructions that focuses on various factors, such as the following:
- Alternative analysis: Would a renewable solution be possible, with respect to its cost and schedule?
- Carbon lock-in risk: The project must not delay the green transition.
- Stranded asset risk: The project must not rely on any technological solutions that will be decommissioned before the end of their life cycle due to, for example, more stringent legislation or increased emission allowance prices.
- Nationally Determined Contributions (NDCs): Each country should set national emission reduction targets and visible goals for their emission reduction paths.
- The buyer’s objectives and actions: The buyer’s objectives and actions must be in line with national emission reduction targets.
Finnvera publishes the guaranteed projects that fall within the scope of the policy and their justifications according to each sectoral policy.
