By Riham Alkousaa and Kate Abnett
BRUSSELS (Reuters) - Ten European states agreed on Friday to spell out this year how they will limit export finance support for overseas fossil fuel projects, but they shelved a draft pledge to explicitly end it after pushback from Italy.
At last year's United Nations COP26 climate change summit, 20 countries including Italy, the United States and Germany promised to stop public funding for overseas fossil fuel projects by the end of 2022.
Nearly 200 countries will gather in Egypt next week for COP27, as global pressure for tougher action to tackle global warming grows.
Ministers from 10 European countries including Germany, Italy and France met on Thursday to set out what that pledge means for their export credit agencies.
They said on Friday they would publicly report this year on how they were applying the pledge to export finance - which helps domestic companies sell goods and undertake projects abroad - including "limited" exceptions.
"This will provide ministers with a sound factual basis to decide on a potential policy alignment," they said in a joint statement.
The other seven countries in the Export Finance for Future (E3F) initiative are Belgium, Denmark, Finland, the Netherlands, Spain, Sweden and Britain.
The statement was weaker than a previous draft seen by Reuters, which had explicitly committed to end new direct official trade and export finance support for "exploration, production, transportation, storage, refining, distribution of coal, crude oil, natural gas, and unabated power generation".
The final statement said the reporting would cover these activities, but left it up to individual countries to specify which they would stop supporting.
Three sources familiar with the discussions told Reuters Italy had asked to remove the draft wording that specified which fossil fuel activities would lose support.
"Italy is satisfied. But it is not the only one who has represented the need to use the flexibility that the agreements allow," an official briefed on Rome's position told Reuters.
The dispute reflects European countries' struggle to balance commitments to fight climate change with their response to an energy crisis caused by Russia slashing gas supply to Europe.
Nina Pusic, an export finance strategist at non-profit Oil Change International, said it was clear that members of the initiative, including Italy and summit host Germany, used the energy crisis as an excuse to water down their commitments.
"We continue to see a number of E3F members failing to lead. At best, they are dragging their feet, and at worst, breaking their commitments," she told Reuters.
France and Britain have already translated the pledge to stop overseas fossil fuel support into government policies. Others are drafting such policies - including Germany, which has suggested the energy crisis could make new overseas gas fields necessary.
The statement said countries agreed that the energy crisis "does not change their commitment" to the fossil fuel finance pledge.
(Reporting by Riham Alkousaa, Kate Abnett, Giuseppe Fonte; editing by John Stonestreet)