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The German government is seeking to revise the climate-related criteria governing its export credit guarantees and investment guarantees. To that end, it proposes replacing the existing sector guidelines with a new "Transformation Framework". The Framework would determine which export transactions and overseas investments remain eligible for government-backed support, and under what conditions. Stakeholders were invited to submit comments on the draft until 9 October, and ClientEarth participated in the consultation.
International public finance, particularly export and trade finance, reduces the risks associated with cross-border projects and investments through guarantees and insurance. As a result, it has significant potential to steer investment towards climate objectives. However, international public finance continues to support environmentally harmful projects, including projects involving fossil fuels. This remains true of Germany's international public finance activities.
The draft Transformation Framework suffers from a number of serious shortcomings. Rather than strengthening climate safeguards in line with the latest climate science, it weakens key protections contained in the German government's current climate-related sector guidelines for export credit guarantees. In particular, the draft would allow relatively broad support for gas-fired power plants, hydrogen-ready power plants, and power plants equipped with carbon capture, utilisation and storage (CCUS).
This approach also carries long-term economic risks. Continued reliance on fossil fuels increases exposure to transition risks, price volatility and the risk of stranded assets for both businesses and public finances. In addition, the draft Framework's inadequate decarbonisation requirements increase the likelihood that support granted under it could be found incompatible with Germany's international legal obligations. This is particularly relevant in light of the Paris Agreement, the United Nations Convention on the Law of the Sea (UNCLOS), and other applicable international treaties and rules of customary international law.
ClientEarth therefore made five recommendations to strengthen the draft Framework:
While ClientEarth welcomes Germany's commitment to aligning its export and investment support with climate objectives, the draft Transformation Framework falls short of that goal. Meaningful revisions are therefore essential to reduce climate-related financial risks, safeguard Germany's long-term economic and trade interests, ensure compliance with international climate commitments, and minimise exposure to legal risk under international law.