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Social Science

Finance for fossils – The role of public financing in expanding petrochemicals

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Jakob Skovgaard,

Jakob Skovgaard

Corresponding author at: Department of Political Science, Lund University, P.O. Box 52, SE-221 00 Lund, Sweden.

Jakob.skovgaard@svet.lu.se


Guy Finkill,

Guy Finkill

Manchester University, United Kingdom

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Fredric Bauer,

Fredric Bauer

Lund University, Sweden

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Max Åhman,

Max Åhman

Lund University, Sweden

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Tobias Dan Nielsen

Tobias Dan Nielsen

IVL Swedish Environmental Research Institute, Sweden

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  Peer Reviewed

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© attribution CC-BY

  • 0

rating
793 Views

Added on

2023-04-24

Doi: https://doi.org/10.1016/j.gloenvcha.2023.102657

Related Subjects
Law
Politics
Economics
Geography
Education
Sociology

Abstract

The petrochemicals industry (mainly plastics and fertilizer production) is expanding, despite increasing attention to the environmental impact of petrochemicals. In our paper, we explore the role public finance plays in the petrochemicals industry. We do so by mapping the public and private financial flows into large-scale petrochemical projects for the decade 2010–20 and discuss the role of public financial institutions for the development of the industry globally. Secondly, we provide a detailed analysis of the roles international and national public finance has played in enabling two prominent petrochemical projects: namely the Sadara plant in Saudi Arabia and the Surgil plant in Uzbekistan. The cases are illustrative of the dynamics of state interest and involvement in fossil fuel producing countries as well as of lending and guarantees from foreign export credit agencies (ECAs) and development finance institutions, and how such public finance plays an important role in leveraging private finance. Our findings show how public finance for petrochemicals is highly globalized and to a large degree originates in developed countries. As petrochemical industrial infrastructures are designed to last decades, the public finance thus strongly contributes to the carbon lock-in of the sector and limits the possibilities for low-carbon investments needed to comply with the UN Paris Agreement.

Key Questions

What role does public finance play in the expansion of the petrochemicals industry?

Public financial institutions significantly contribute to the growth of the petrochemicals sector by providing loans, guarantees, and other financial instruments. This support often originates from developed countries and is crucial in leveraging private investments, thereby facilitating large-scale petrochemical projects globally.

How have international and national public finances enabled specific petrochemical projects?

Two prominent examples are the Sadara plant in Saudi Arabia and the Surgil plant in Uzbekistan. The Sadara project received substantial backing from various public financial institutions, including a Buyer Credit guarantee from the UK's Export Credits Guarantee Department (ECGD) for up to US$700 million. Similarly, the Surgil project secured approximately US$2.54 billion in financing, with significant contributions from South Korean state-owned entities and other international financial institutions.

What are the environmental implications of public financing in the petrochemicals industry?

Public financing plays a pivotal role in the carbon lock-in of the petrochemicals sector. By supporting infrastructure designed for long-term use, such as petrochemical plants, public finance contributes to the continued reliance on fossil fuels, thereby hindering the transition to low-carbon alternatives necessary to meet global climate goals.

What are the broader implications of public finance in the petrochemicals industry?

The substantial public financial support for petrochemical projects underscores the need for a critical evaluation of such investments. While these projects may offer short-term economic benefits, they pose long-term environmental risks and may divert resources from sustainable development initiatives. A strategic reassessment of public finance allocations is essential to align with global sustainability objectives and the commitments of the UN Paris Agreement.

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ARTICLE USAGE


Article usage: Apr-2023 to May-2025
Show by month Manuscript Video Summary
2025 May 87 87
2025 April 73 73
2025 March 84 84
2025 February 55 55
2025 January 103 103
2024 December 46 46
2024 November 49 49
2024 October 45 45
2024 September 68 68
2024 August 45 45
2024 July 45 45
2024 June 29 29
2024 May 34 34
2024 April 22 22
2024 March 8 8
Total 793 793
Show by month Manuscript Video Summary
2025 May 87 87
2025 April 73 73
2025 March 84 84
2025 February 55 55
2025 January 103 103
2024 December 46 46
2024 November 49 49
2024 October 45 45
2024 September 68 68
2024 August 45 45
2024 July 45 45
2024 June 29 29
2024 May 34 34
2024 April 22 22
2024 March 8 8
Total 793 793
Related Subjects
Law
Politics
Economics
Geography
Education
Sociology
copyright icon

© attribution CC-BY

  • 0

rating
793 Views

Added on

2023-04-24

Doi: https://doi.org/10.1016/j.gloenvcha.2023.102657

Related Subjects
Law
Politics
Economics
Geography
Education
Sociology

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