In theory, ECA financing can have both a positive and negative impact on the global climate, but in reality ECAs have overwhelmingly financed projects which do more harm than good.
The problem with climate change
The dangers of climate change are well documented internationally. Efforts to curb greenhouse gas emissions and tackle the most polluting industries include G20 commitments to curb fossil fuel subsidies and measures on the United Nations Framework Convention on Climate Change.
ECAs and climate change
ECAs are one of the largest sources of public financing for fossil fuel projects worldwide, providing billions more for dirty energy than for renewable energy. In so doing, ECAs undercut international efforts to curb greenhouse gas emissions including those mentioned above.
To promote more “clean energy” financing, many of the world’s leading ECAs approved an agreementto provide preferential financing terms (including 18 year repayment, greater allowance for local costs) for traditional renewable energy (e.g., solar, wind, geothermal, energy efficiency), for additional technologies (e.g., tidal, wave, bio-energy, waste energy, osmotic power, district heating and cooling, hybrid power), and even far more controversial technologies (e.g., carbon capture and storage, hydro-electric).
Additional technologies and activities are under consideration in future negotiations (e.g., climate change adaptation, energy efficiency in fossil fuel projects, net zero energy buildings, smart grids, fuel cells).
In 2012 a larger number of major ECAs also agreed to assess, monitor and report on the greenhouse gas emissions of projects they have finances, and to promote coherence between ECA policies and their respective government’s international climate change commitments. These agreements are called the ‘Common Approaches’.
For most of the ECAs involved, the common approaches represent the first time that concerns over climate change have been incorporated into assessments over financing fossil fuel projects. However, the approaches do not appear to include any commitment to an overall decrease in financing for fossil fuels.
Dodgy deals relating to climate change and ECAs
Unfortunately, most ECAs are notoriously opaque and do not publicly disclose aggregate data on the projects receiving preferential terms for “clean energy” and projects that are subjected to new greenhouse gas assessment requirements.
The ECA with the most transparent data is the U.S. Ex-Im Bank, which is one of the largest sources of public financing of fossil fuel projects worldwide. In 2011 Ex-Im Bank provided $4.9 billion for fossil fuel projects, which compares with $7.2 billion in FY 2011 by the entire World Bank Group [link to Oil Change report]. In contrast, Ex-Im Bank renewable energy financing in the same year was $721 million, which is up from a base of near zero five years prior. [link to chart]
The China Export-Import Bank (EXIM) is also believed to be a major financier of both fossil fuel and renewable energy projects, but this is difficult to verify as EXIM does not publicly disclose its financing. China is also a major financier of renewable energy projects and in 2011 became embroiled in a trade dispute with the U.S. over alleged unfair subsidies to renewable energy. [link to media story and to Jigar’s group]
What is ECA Watch doing?
ECA-Watch believes that ECA financing for fossil fuel harms the global climate, negatively impacts the local environment and communities and fosters corruption and, as such, is a pernicious subsidy that should be ended. At the same time, ECA-Watch supports ECA financing for appropriate renewable energy projects that enjoy community support and do not result in odious debt for developing countries.