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

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.