Finance for Fossils – the Role of Public Financing in Expanding Petrochemicals

25 Pages Posted: 21 Jun 2022

See all articles by Jakob Skovgaard

Jakob Skovgaard

Lund University

Guy Finkill

The University of Manchester

Fredric Bauer

Lund University

Max Åhman

Lund University - Environmental and Energy Systems Studies

Tobias Dan Nielsen

IVL Swedish Environmental Research Institute

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 domestic public finance has in enabling two case studies of 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 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 these 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.

Keywords: Petrochemicals, finance, plastics, fertilizer, climate change, lock-in

Suggested Citation

Skovgaard, Jakob and Finkill, Guy and Bauer, Fredric and Åhman, Max and Nielsen, Tobias Dan, Finance for Fossils – the Role of Public Financing in Expanding Petrochemicals. Available at SSRN: https://ssrn.com/abstract=4141958 or http://dx.doi.org/10.2139/ssrn.4141958

Guy Finkill

The University of Manchester ( email )

United Kingdom

Fredric Bauer

Lund University ( email )

P.O. Box 118
Lund, SE-221 00
Sweden

Max Åhman

Lund University - Environmental and Energy Systems Studies ( email )

Sweden

Tobias Dan Nielsen

IVL Swedish Environmental Research Institute ( email )

Valhallavägen 81
Stockholm, 114 27
Sweden

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