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David B. Sandalow Assistant Secretary for Oceans and International Environmental and Scientific Affairs U.S. Department of State Speech to Global Legislators Organization for a Balanced Environment (GLOBE) Otsu, Japan, April 8, 2000

(As Delivered)

"Export Credit Agencies"

It is great to escape the meetings next door, and a great pleasure to be back here in Japan. I was last here for COP-3, but I have a complaint, which is that we always work too hard at these meetings. Not only did I not see any of Kyoto's temples but I think I only slept 8 hours in 8 days ... my goal here is to see beautiful Lake Biwa!

One observation -- I believe the first GLOBE president was Al Gore. That's a clear career path -- from GLOBE president to Vice President, and hopefully on to President. I am especially honored to be here with former Prime Minister Hashimoto who I know is very close to both the Vice President and President Clinton.

I am here today to address the important topic of Export Credit Agencies. The reason I focus on it is simple: every year, export credit agencies support investments worth tens of billions of dollars around the globe. These investments often have significant environmental impacts -- which are sometimes good, for example, investments that promote clean energy or clean water. But that's not always the case. In the past decade our ECAs have supported projects in rain forests and dams that have been the source of great environmental damage. And demonstrating a classic problem of globalization, companies can seek financing around the world, and unless we can establish common guidelines, we risk a "race to the bottom," in which project sponsors "shop" for the least environmentally restrictive ECA financing.

Large, complex, and global negotiations like climate change and biosafety get most of the attention. I hope both of these will change the world and change it quickly. But the reality is that it takes years for those negotiations to be finalized and to take effect.

In contrast, ECA guidelines will make a difference around the world.

Important work is underway in the G8. Last year in Cologne, G8 Heads mandated the development of common environmental guidelines for export credit agencies by the 2001 G8 Summit. Work is proceeding within the OECD's Export Credit Group, but the question is whether it is proceeding fast enough to meet our leaders' mandate.

Some take the view that the phrase "common environmental guidelines" means sharing information on projects. While information sharing is a good start, it is not enough. The U.S. favors the use of internationally recognized environmental guidelines, based on guidelines such as those of the [World Bank's International Finance Cooperation] IFC. We need a standard that prohibits lending for projects in the rain forest, for example.

In the U.S. we've been applying guidelines to lending for quite some time, in a process that started ten years ago. While our GLOBE legislative members were supportive, some members of the business community were not very supportive. But the United States Export-Import Bank was very supportive in shaping the guidelines we apply today.

The guidelines have several important features. One, the projects meeting screening criteria must submit an environmental impact assessment. Two, the information is made public. It is posted on the Ex-Im Bank homepage and anyone can find it on the worldwide web. Extreme care is taken to protect confidential or proprietary business information, but there is information on all other aspects of the project.

One of the pieces of information we require developers to submit is greenhouse gas emissions levels for any power plant projects.

In addition there are categorical prohibitions also applied which prohibit lending to development in certain areas. Projects are not allowed in primary tropical rain forests, for example.

So there is both good and bad news. The good news is, we have made a definite and positive contribution to improving the environment.

Some examples of that are EX-IM's support for 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. In addition, EX-IM recently announced a $50 million MOU with China that will support multiple renewable energy and energy efficiency projects.

That's good. Now for the bad news, which is that we cannot do this work alone.

Increasingly our exporters are coming to us and saying that other countries' export credit agencies are prepared to lend for projects which fall outside of EX-IM guidelines.

Here's where GLOBE comes in. Those of us who care about the environment and work to protect the environment must take ownership quickly. The time is now. We can make a difference tomorrow if we work together to make that difference.

I'm extremely grateful for the opportunity to speak to you today on this topic and I hope I haven't gone on too long. I have long been impressed by the work of GLOBE International, and look forward to hearing your questions.

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