The government has been taken to task by its own MPs for sending billions of pounds overseas to help build power plants that burn fossil fuels while claiming a climate victory on home soil.

The environmental audit committee said the UK is sabotaging its climate credentials by paying out “unacceptably high” fossil fuel subsidies to developing nations, while claiming to lead world in tackling the climate crisis. It called on ministers to stop by 2021 using taxpayer funds to lock poorer nations into a fossil fuel future.

The rebuke is the clearest cross-party criticism of the UK’s fossil fuel subsidies and comes after mounting international criticism in recent months.

Environmental activist Greta Thunberg said in April the UK’s “active, current support of new exploitation of fossil fuels” was “absurd”. The audit committee report found that UK Export Finance (UKEF), which provides lines of credit and insurance to help companies win business overseas, spent £2.6bn in recent years to support the UK’s global energy exports, of which £2.5bn was handed to fossil fuel projects. Only 4% of its funding, or £104m, was used to support renewable energy projects.

Earlier this year, former UN secretary general Ban Ki-moon called on the UK to stop funding fossil fuel projects in the developing world.

He told the committee that UKEF needs “recalibration” to meet international climate trends and obligations.

Mary Creagh, the committee’s chair, described the UK’s record as “unacceptable”.

“The government claims that the UK is a world leader on tackling climate change, but behind the scenes the UK’s export finance schemes are handing out billions of pounds of taxpayers money to develop fossil fuel projects in poorer countries,” she said.

One of the largest projects included a deal to pay half a billion pounds to the UK subsidiary of a Turkish construction company to build two “critical” gas-fired power plants in Iraq.

The report said Enka UK registered as a UK company a year before its funding deal but does not have an office, staff or operations in the UK. It told the committee it plans to open an office in Birmingham for a staff of 12.

A spokesman for UKEF said the government “fully recognises the importance of tackling climate change” and the need “for a mix of energy sources and technologies as the world transitions to a low-carbon economy”.

In the committee’s report Louis Taylor, the chief executive of UKEF, defended the agency’s support for gas-fired power plants as part of a climate “transition” because it has half the carbon footprint of coal.

The report emerged days before the government is expected to legislate an ambitious target to reduce the UK’s net greenhouse gas emissions to zero by 2050.

The government’s official climate adviser, the committee on climate change, warned last month that “export finance is not aligned with climate goals, and often supports high-carbon investments”.

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The UK is also vying to host the UN’s most important climate talks since the Paris agreement next year to draw attention to its climate ambitions.

Mike Childs of Friends of the Earth said it crucial that the UK’s finance agency “is divested completely from planet-wrecking fossil fuels”.

“We’ve heard our government’s shouting from the rooftops around ambition on emissions reduction in the UK, but for too long this has simply meant outsourcing a lot of high carbon projects overseas,” he said. “You don’t solve a crisis by simply moving it somewhere else to make your own numbers look good.”