U.S. backs Indonesian oil refinery despite climate pledge

12 May 2023
By Michael Copley

Biden pledged to stop funding fossil fuels overseas. It's not stopping one agency

In 2021, the Biden administration told federal agencies to stop funding many new fossil fuel projects abroad. The directive went out shortly after a United Nations climate change summit in Glasgow, Scotland, where the United States and other countries pledged to cut off public support for overseas fossil fuel projects that freely emit greenhouse gas pollution. But now, leaders of America's Export-Import Bank have decided to lend nearly $100 million for the expansion of an oil refinery in Indonesia.

At a closed-door meeting Thursday, the bank's board of directors voted to back a project that will help Indonesia's national oil company increase production at its Balikpapan refinery.

Friends of the Earth, an environmental group, says the funding "directly violates" commitments the Biden administration made to end federal support for fossil-fuel projects in other countries.

"If we have this free-wheeling agent, then they're not answerable to the people, and they're basically using U.S. taxpayer dollars without any consequence or oversight," says Kate DeAngelis, who works on international finance at Friends of the Earth. "And that seems like it shouldn't be allowed within the U.S. government."

Shruti Shukla, who works on energy issues at the Natural Resources Defense Council, says the funding also runs counter to international efforts to reduce Indonesia's greenhouse gas emissions. Investors and a group of wealthy countries, including the U.S., have agreed to provide Indonesia with billions of dollars in grants and loans to help it get off coal power.

"It's time, at this stage, to pick and choose winners from a climate standpoint," Shukla says. "And it would be timely, especially for export credit agencies like the [Export-Import Bank], to use their financing dollars for the most climate-positive projects that are available."

The Export-Import Bank declined to comment on the record. The bank is an independent government agency that provides loans and insurance for projects that can boost U.S. exports.

"This project would support hundreds of U.S. jobs at dozens of manufacturers across the country, and allow Indonesia to substantially reduce its reliance on imported, refined transportation fuels while upgrading to a cleaner standard, protecting human health and the environment in the process," Reta Jo Lewis, chair of the Export-Import Bank, said in a news release.

Those sorts of local health and environmental benefits are important, Shukla says. However, if the project increases Indonesia's fossil fuel supplies, then she says it undermines the country's climate plans.

"What is concerning is that it gives a signal to other oil and gas projects in the region that they can still find financing from institutions like the [Export-Import Bank] for any future expansions that they might have in mind," Shukla says. "So that, to me, is the wrong signal to send out at this moment in time."

For the fiscal year that ended on September 30, 2022, oil and gas projects accounted for about 27% of the bank's portfolio, second only to the aircraft industry. The agency is considering financing more fossil fuel projects around the world, including the development of oil and gas fields in Mexico and Bahrain.