In an executive order issued last month, Biden tasked the United States' agencies involved in foreign assistance and development financing--the International Development Finance Corporation (formed in 2019 by combining the Overseas Private Investment Corporation and the Development Credit Authority), Treasury, USAID, and the Millennium Challenge Corporation among others--with devising emissions-reducing financing.
This executive order also extends to the multilateral organizations the US is a member of, including the World Bank. It states:
[The Treasury Secretary shall] develop a strategy for how the voice and vote of the United States can be used in international financial institutions, including the World Bank Group and the International Monetary Fund, to promote financing programs, economic stimulus packages, and debt relief initiatives that are aligned with and support the goals of the Paris Agreement.
In doing so, the Biden administration wants to contrast clean, green American with dirty energy China. However, there is a danger that developing countries not as green-minded as Biden may instead be pushed to deal more with China:
President Joe Biden’s plan to halt U.S. funding for overseas fossil fuel projects will turn the global spotlight on China for bankrolling coal projects around the globe. But it could also push poor countries closer to Beijing — and risk ceding the United States’ position as a leading financier for developing economies...
Biden's directive last month to move toward withholding money from international institutions like the World Bank that help poor nations build fossil fuel power plants stands in stark contrast to Beijing's flow of cash under its Belt and Road Initiative, which supplies 70 percent of the financing for the world's new coal-fired plants. The White House is betting its move will paint China as hypocritical as that country — the world's top greenhouse gas emitter — aims to take a leading role in international climate change efforts.
To be sure, there will need to be a (sorry for the public administration jargon) whole-of-government approach for the US to get its message across in a way that resonates with developing countries deciding between clean energy and fossil fuels:
But the plan will require the Biden team to closely coordinate its foreign policy, trade and clean energy initiatives, because the absence of U.S. money for coal projects won't on its own sway other nations’ energy plans. And the U.S. cannot unilaterally offer sweet enough financial terms for clean energy to lure countries away from China's coal finance.
It's fair to say the US has its work cut out for it in a world which has not forsworn fossil fuels. It is worth pointing out that the Obama administration which Biden was a part of already started encouraging similar measures at the World Bank that have impacted the amount of fossil fuel-based energy projects it funded:
But the U.S. could immediately start shifting billions of dollars away from fossil energy if [Treasury Secretary] Yellen directs U.S. representatives at the World Bank and other multilateral funders to vote against coal, said Joe Thwaites, an associate with the World Resources Institute’s Sustainable Finance Center.
The number of coal projects funded by those institutions has already dwindled, due in part to efforts under the Obama administration, though multilateral development banks in which the U.S. is a shareholder accounted for $69.5 billion of fossil fuel finance between 2008 and 2019, according to environmental group Oil Change International.