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Environmental Guidelines for Export Credit Agencies Fact sheet released by the Bureau of Oceans and International Environmental and Scientific Affairs, U.S. Department of State, July 11, 2000

What are Export Credit Agencies?

Export credit agencies (ECAs) are official government agencies that provide assistance in supporting or facilitating domestic exports. ECAs provide a range of services, including working capital loan guarantees, loan repayment guarantees and direct loans. Among the largest ECAs are the U.S. Export-Import Bank (EX-IM Bank), Germany's Hermes, Japan's Export Import and Investment Insurance Department (EID-MITI) and Japanese Bank for International Cooperation (JBIC), and the United Kingdom's Export Credits Guarantee Department (ECGD).

What Impact do ECA Activities Have on the Environment?

Every year, ECAs support investments worth tens of billions of dollars around the globe. These investments, such as dams and other large infrastructure projects in sensitive ecosystems, often have significant environmental impacts. Without common environmental guidelines, we risk a "race to the bottom," in which project sponsors "shop" for the least environmentally restrictive ECA financing. This issue is also linked with climate change and renewable energy, since ECAs finance billions of dollars worth of energy sector projects.

What are ECAs Doing to Address Environmental Issues?

Since 1995, EX-IM Bank has applied environmental procedures and guidelines aimed at maintaining U.S. exporters' competitiveness while ensuring that its actions are environmentally responsible. EX-IM Bank conducts environmental reviews by evaluating the environmental effects of projects against transparent quantitative and qualitative standards based on elements of International Finance Corporation (IFC) environmental guidelines. EX-IM Bank requires greenhouse gas emission accounting on a project, as well as an annual, basis. Most of the remaining large ECAs have adopted unspecified internal review procedures, but no other ECAs have transparent quantitative and qualitative standards applied in advance to projects they consider for support.

What are U.S. Policy Objectives?

A key U.S. objective is adoption by OECD countries of common environmental guidelines for ECAs. Such guidelines should be applied up front and allow an ECA to determine prior to financing whether a particular project presents adverse environmental impacts, and how (or whether) the impact can be adequately mitigated. The goal is to ensure that the activities of ECAs are environmentally responsible. The U.S. favors drawing on elements of internationally recognized environmental guidelines, such as those of the IFC, adapted to ECA business. EX-IM Bank adopted such guidelines in 1995 and is the only ECA currently applying transparent environmental guidelines to requests for export financing.

Recent Developments

• On April 12, the OECD Export Credit Group (ECG) accepted a work plan listing issues the group will explore in determining how export credit agencies will address environmental issues. The work plan explicitly includes environmental guidelines for ECAs based on qualitative and quantitative criteria as a topic for discussion. The ECG also agreed to three additional special sessions on the environment in June and September 2000 and possibly February 2001 to discuss the work plan.

Summary

• Ultimately, we need to ensure that ECAs move to a specific common reference point that would ensure that the activities of our ECAs are consistent with our sustainable development agenda.

• OECD countries have encouraged multilateral development banks (MDBs) such as the World Bank to ensure that their programs are environmentally friendly. We need to do the same with our own programs, which account for billions of dollars a year in global development. ECAs should adopt quantitative and qualitative guidelines that are MDB-consistent.

Background on Official Export Credit and the Environment

Multilateral Mandates

G8 Summit, Cologne, Germany, June 1999:
"We will work within the OECD towards common environmental guidelines for export credit agencies. We aim to complete this work by the 2001 G8 Summit."

OECD Ministerial Communiqué, May 1999:
"We urge that the work continue with a view to strengthening common approaches [to the environment] and to report on progress made at the next Ministerial Council Meeting."

Other Communiqué Language

OECD Ministerial Communiqué, June 2000:
"Good progress has been made in the OECD's Export Credit Group on strengthening common approaches on environment and export credits. Ministers urged completion of the work plan by the end of 2001, and requested a report on progress at their next meeting."

G8 Environment Ministerial Communiqué, Otsu, Japan, April 2000:
"Every year our export credit agencies support investments worth billions of dollars around the globe. These investments may have significant environmental impacts. Export credit agencies should help promote environmental considerations in all their activities. This is a priority issue in our efforts to protect the global environment.
       Last year, G8 Heads called on export credit agencies to work 'towards common environmental guidelines ... by the 2001 G8 Summit.' We must reinvigorate and intensify our work to meet this mandate. We welcome as a first step the Action Statement agreed in February this year by the OECD Working Party on Export Credits and Credit Guarantees and the proposed work plan including Special Sessions dedicated to the environment issue."

G8 Environment Ministerial Communiqué, Schwerin, Germany, March 1999:
"We welcome the work being done by the OECD with a view to strengthening environmental considerations in the risk assessment procedures conducted by export credit agencies. The progress achieved in international coordination during the past year is encouraging. We agree that the OECD export credit agencies should accelerate its work. Accordingly, the Group should report on a time line that identifies concrete action taken by the export credit group as a whole, including any progress attained on common agency action for specific projects."

Foreign and Finance Ministers Statement at the Birmingham Summit, May 1998:
"Building on efforts in the OECD on taking environmental factors into account when providing official export credits, we encourage further work by the OECD to this end and ask for a report back next year."

Communiqué of the G8 Heads, Denver Summit, June 1997:
"Private sector financial flows from industrial nations have a significant impact on sustainable development worldwide. Governments should help promote sustainable practices by taking environmental factors into account when providing financing support for investment in infrastructure and equipment. We attach importance to the work on this in the OECD, and will review progress at our meeting next year."

Application of U.S. Export-Import Bank Environmental Guidelines

The U.S. Export-Import Bank's (EX-IM) guidelines have led to improvements in the projects it supports, and to lending for environmentally sound projects. In fact, since 1995, EX-IM has financed transactions including an estimated $2.7 billion in environmentally beneficial export value.

Examples of projects and initiatives supported by EX-IM:

• EX-IM supported combined cycle power plants in Argentina, Croatia and Turkey, costing from $25 to over $100 million, that use high technology to produce very low levels of NOx while emitting relatively low levels of greenhouse gases.

• EX-IM recently announced a $50 million memorandum of understanding (MOU) with China that will support multiple renewable energy and energy efficiency projects.

• EX-IM signed an agreement in May 2000 with the Hungarian Export-Import Bank establishing the South-East Europe Reconstruction Credit Initiative under which the two banks will work together to identify environmentally beneficial projects in countries such as Croatia, Romania and Bulgaria for joint support.

• EX-IM's involvement with a coal-fired power plant project in Israel led to agreement by the Israeli electric utility to properly manage disposal of the ash from its boiler units rather than dump the ash into the Mediterranean. Due to EX-IM's intervention, the utility opted to begin an ash-recycling program that made use of the waste product for building and road construction materials and to dispose of the remaining ash in an environmentally acceptable waste disposal facility.

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