The Biden administration's international climate finance plan held out the possibility that the U.S. might back some natural gas projects abroad, even though significant uncertainty remains about the White House stance on public financing for gas infrastructure.

The White House plan, released April 22 during a two-day climate summit, said U.S. government agencies would "seek to end international investments in and support for carbon-intensive fossil fuel-based energy projects." It stopped short of the hopes of some environmental groups that the White House would rule out backing overseas gas projects.

The plan's language, similar to the wording of a January executive order, did not specify the energy resources to be targeted. But there was an additional qualifier in the latest announcement that said "in limited circumstances, there may be a compelling development or national security reason for U.S. support for a project to continue."

Energy analysts nonetheless anticipated that U.S. investments in gas infrastructure would be scaled back as part of the administration's push to reorient development financing away from "carbon-intensive activities."

"It still doesn't answer the question of how narrowly or broadly those exceptions might apply," Nikos Tsafos, a senior fellow with the energy security and climate change program at the Center for Strategic and International Studies, said in an email. "My general sense is they will say no unless there is a very compelling reason to say yes."

The White House position could be important for the development of gas infrastructure in emerging markets sought by U.S. LNG exporters. Since the January order, energy market observers, industry leaders and environmental groups have suggested that the administration's new approach with two key finance financing entities — the U.S. International Development Finance Corp. and the Export-Import Bank of the United States — could put international natural gas project investments at risk. If the administration does target gas projects, it would reverse efforts under the Trump administration that were encouraged by LNG developers to help spur financing of gas infrastructure and promote gas market development overseas.

Under the administration's international climate finance plan, the Ex-Im Bank will increase its support for "environmentally beneficial, renewable energy, energy efficiency, and energy storage exports from the United States."

Meanwhile, the plan said the U.S. International Development Finance Corp. will boost its climate-related investments to at least one-third of its new investments. The development bank, which invests in energy, infrastructure and technology projects in emerging markets, also pledged to begin prioritizing investments in renewable energy and other "climate-focused projects" in order to reach net-zero emissions in its lending portfolio by 2040.

"Neither provision specifically excluded natural gas, but other aspects of the proposal could create headwinds for financing of future natural gas projects," analysts at ClearView Energy Partners said in an April 23 note to clients.

ClearView said other initiatives outlined in the plan seemed intended to constrain or raise the cost of capital for fossil fuel projects more broadly. ClearView pointed to the plan positioning the Treasury Department to play a principal role in enabling "financial market actors to internalize climate-related considerations into their decisions" as an example of an effort by the Biden administration "to indirectly financialize climate risk."

Administration's actions offer hope to LNG industry

Some global entities have stepped up their support for LNG import infrastructure in recent years. Japan, just days before the White House climate summit, publicly pledged its support for international LNG project finance as a way to supplement renewables and help displace coal, according to S&P Global Platts.

The Biden administration's position on natural gas is still unfolding, but industry representatives have been generally optimistic that permitting and access to capital would not become impediments to new liquefaction capacity. Commercial challenges are currently the primary obstacle to building more U.S. LNG export infrastructure.

"We hope that the Biden administration will value LNG for its ability to reduce emissions globally," a spokesperson for leading U.S. LNG trade group the Center for Liquefied Natural Gas said in an email about the international climate finance plan.

The trade group has pointed to U.S. Energy Secretary Jennifer Granholm's written comments to lawmakers ahead of her confirmation in February that "U.S. LNG exports can have an important role to play in reducing international consumption of fuels that have greater contribution to greenhouse gas emissions."

U.S. Special Presidential Envoy for Climate Change John Kerry said in an April 7 conversation with the head of the International Monetary Fund that "we have to move away from coal faster. Gas, to some degree, will be a bridge fuel."

The Ex-Im Bank approved $13.6 billion to support export transactions in fiscal years 2019 and 2020, with a third going to the Mozambique LNG project developed by Total SE. The Development Finance Corp. has backed gas projects in places such as Egypt and South Africa. Both organizations have also discussed supporting Vietnam in its goals for developing LNG infrastructure.

Plan does not go far enough for environmental groups

In March, nearly 450 nonprofit groups sent a letter to Biden administration officials urging them to include natural gas on a list of fossil fuels that would be excluded from U.S. development financing for international projects. One of the signatories, Friends of the Earth, said the administration's new restrictions on overseas financing were insufficient in that they failed to eliminate support for all fossil-fuel projects.

"'Carbon-intensive' is quite vague and we have seen that used in the past to only refer to coal," said Kate DeAngelis, international finance program manager at Friends of the Earth U.S.

Another signatory, Oil Change International, also described a lack of firm commitments. "We don't know exactly how to interpret the plan," Collin Rees, a senior campaigner for the group, said in an email. "We need to see more specificity soon from the Biden team to clarify their intent and to start implementation as soon as possible."

S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.