CSOs have written to urge OECD Export Credit Agencies to discontinue financing of coal projects, to suggest the provision of beneficial financing for carbon capture and storage and other fossil fuel technologies in the Sector Understanding and to express concern re the need for increased transparency from the OECD Export Credit Group and the Participants with respect to climate change-related policy setting and implementation processes.
Index for October 2013
Volume 12, Issue 10
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CSOs request ECAs discontinue financing of coal projects
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Civil Society groups request ECAs discontinue financing of coal projects
September 13, 2013
Participants to the Export Credit Arrangement
Members of the Export Credit Group
To the Participants and the Members:
We are writing to urge your member Export Credit Agencies to discontinue financing of coal projects following recently announced decisions by other leading public finance institutions to halt public financing of coal. In this context, we would also like to suggest important implications for the provision of beneficial financing for carbon capture and storage and other fossil fuel technologies in the Sector Understanding on Export Credits for Renewable Energy, Climate Change Mitigation and Water Projects (hereafter Climate Change Sector Understanding). And, we write concerning the need for increased transparency in the OECD Export Credit Group and the Participants to the Arrangements’ climate change-related policy setting and implementation processes.
Carbon Capture and Storage: As Greenpeace and others have shown, carbon capture and storage (CCS) presents a false hope for mitigating climate change. CCS has not proven to be either environmentally or economically viable at scale. The capture, transport, compression and injection of CO2 is an inefficient process which has been estimated to actually increase the fuel requirements of a plant with CCS by about 25% for a coal-fired plant, and about 15% for a gas-fired plant, requiring the extraction, transport and combustion of even more fossil fuels, increasing harmful pollution. Scientists also fear that in many locations CCS injection can trigger earthquakes, rendering CCS to be a risky and likely unsuccessful strategy to significantly reduce greenhouse gas emissions.
Systems to capture, transport, compress and inject CO2 can dramatically increase the price per kWh of power generated over a project’s lifecycle, rendering such systems uncompetitive. Thus, financial support for CCS permissible under the Climate Change Sector Understanding diverts limited climate change mitigation financing away from sustainable renewable energy solutions and hinders, rather than assists, the necessary transition away from fossil fuels.
CCS creates unacceptable risks and liabilities for project sponsors, financiers, governments and the environment. The number of project cancelations is high, putting financiers and project sponsors at risk. Host government capacity to effectively implement and manage local liability regimes that protect communities and the environment over the life of a project is unknown; and it is next to impossible to create a financial provision to fund post-site closure monitoring and remediation because the long term costs of CCS are unquantifiable. Moreover, there is a risk of chronic and catastrophic CO2 leakage, posing climate risks as well as threats to the local environment and human health.
CCS technology is still in the demonstration phase. It is highly unrealistic as an option for delivering carbon emission reductions at the scale and timeframe necessary to avert catastrophic climate change, with only 8 demonstration projects operating globally, falling far short of the International Energy Agency's CCS roadmap target of 100 plants by 2020 and 3,000 plants by 2050. Technological maturity will take another decade or two, thus missing the most critical window for emission reductions. Thus, CCS cannot deliver significant reductions in time to keep the global temperature increase below 2 degrees Celsius.
Even if, theoretically, CCS were to become feasible, its widespread use would facilitate the perpetuation of fossil fuel combustion on a massive scale, with all the attendant adverse health and environmental impacts, including respiratory & cardiovascular system damage, disease, cancer, and death, along with air & water pollution. Carbon capture and injection is increasingly used to boost oil production, which will likely result in a net increase in greenhouse gas emissions and other pollution. The provision of special financial benefits for a technology that facilitates a new era of coal plants clearly conflicts with emerging bans on public financing of coal plants (see Ending Coal Financing below). Thus, the use of CCS to expand both coal and oil projects defeats the credibility of the Climate Change Sector Understanding.
CCS thus contradicts the overall purpose of the Climate Change Sector Understanding to provide adequate financing to projects “significantly contributing to climate change mitigation,” as well as other specific provisions including that supported projects “should result in low to zero carbon emissions, or CO2 equivalent, and/or in high energy efficiency.” Hence, we call on you to abandon the inclusion of CCS in the currently agreed Climate Change Sector Understanding. We urge the Participants to rescind provisions supporting CCS at the Participants’ next negotiating session on the Climate Change Sector Understanding.
Low Emissions/High Energy Efficiency Fossil Fuel Power Plants: We are also deeply concerned about the Participants’ consideration of potential inclusion of “[C]onditions for low emission/high energy efficiency fossil fuel power plants including definition of CCS-readiness.” Support for low emission/high energy efficiency fossil fuel projects perpetuates the use of fossil fuels is a false solution which ensures more greenhouse gas emissions, worsening climate change while diverting precious, limited public resources away from sustainable renewable energy solutions. Increases in efficiency normally occur with the evolution of technologies, whereas in this case the Participants are being asked to subsidize the status quo.
As described in the section above, CCS fails to meet the requirements of the Climate Change Sector Understanding, and CCS-readiness contravenes these requirements even further. Since the future viability of CCS technology in general and on any given project remains wholly uncertain, proponents of CCS-readiness cannot provide verifiable quantitative and measurable data to demonstrate that the following requirement of the Climate Change Sector Understanding Appendix II can be met:- “Participants shall provide a detailed description of the proposed Project Class or Type and information on how such projects fulfill the criteria [including] evaluation of the direct contribution of the Project Class or Type to climate change mitigation, including a comparison of the sector performance, based on measurable data regarding carbon emissions or CO2 equivalent and/or in high energy efficiency, with conventional and in-use newer technological approaches; this comparison shall, in all cases, be based on quantitative measures, such as a decrease in emissions per unit produced.” [Emphasis added]
And:
- “A description of the technical and performance standards of the Project Class or Type.”
What’s more, adding a project class or type to the Sector Understanding on the basis that it might be viable in the future eviscerates any reasonable standard of compliance. The potential inclusion of CCS-readiness also begs the question of whether any and all types of projects covered under other Sector Understandings should be granted advantageous financing conditions just because project sponsors might comply with a given requirement in the future.
As such, the proposal to include CCS-readiness based on conjecture about the future is grossly irresponsible, and should be soundly rejected.
Ending Coal Financing: We would like to draw your attention to the fact that the European Investment Bank (EIB), World Bank, and the U.S. Government have recently issued directives to end the financing of coal projects abroad except in extremely limited circumstances. We feel this is an important move in addressing both climate change and local environmental and community health concerns, and an important step in the larger process of addressing public financing for harmful fossil fuel projects. We believe other public finance institutions, such as the members of the OECD Export Credit Group, should also discontinue coal financing without exception, and begin a rapid phase-out of other forms of fossil fuel financing. If not, coal developers will exploit this policy gap in order to push through projects with ECA support that other institutions would not contemplate supporting, thus renewing a race to the bottom. The risks of this scenario to ECAs and the OECD would be severe.
Lack of Transparency: We remain concerned that the Participants and the OECD Export Credit Group continue to provide scant information on the implementation of the Climate Change Sector Understanding and climate change provisions of the Common Approaches. For example, despite requests, these bodies have not provided public information on the number, type, financial volume or location of projects that benefit from the Climate Change Sector Understanding. Also, the Export Credit Group has not provided requested public information on carbon emissions that are to be accounted for and reported on under the revised Common Approaches. As the world’s largest class of public finance institutions, which is establishing public policy on one of the most important global issues of our time, this lack of public transparency is inexplicable and unacceptable. You can and must do better.
We look forward to your response to all of the above concerns and suggestions.
Sincerely,
ECA-Watch Europe
Antonio Tricarico
Re:Common
Italy
Ben Schreiber
Acting Climate and Energy Program Director
Friends of the Earth
United States
Iris Cheng
Energy Campaigner
Greenpeace International
The Netherlands
Vanya Walker-Leigh
Climate Change Adviser
Nature Trust Malta
Malta
Amanda Starbuck
Energy & Finance Program Director
Rainforest Action Network
USA
Arthur Mitzman,
Coordinator
Concerned Citizens against Climate Change
The Netherlands
Tomislav Tkalec,
Head of Energy Programme
Focus, Association for sustainable Development Slovenia
Slovenia
Hozue HATAE
Campaigner
Friends of the Earth Japan
Japan
Gloria Kuang-Jung Hsu
Coordinator, Academic Committee
Taiwan Environmental Protection Union
Bikash Rath
Sr. Programme Manager
Regional Centre for Development Cooperation
India
Kuba Gogolewski
Energy campaigner
CEE Bankwatch Network
Central and Eastern Europe
Lucie Pinson - Les Amis de la Terre
Chargée de campagne Finance privée/Coface
Private finance/ Coface campaigner
France
Sam Chelladurai
India READ Centre
India
Visar Azemi
Kosovo Civil Society Consortium for Sustainable Development
KOSID
Kosovo
Rose Braz
Climate Campaign Director
Center for Biological Diversity
United States
Garret Tankosić-Kelly
SEE Change Net Principal
SEE SEP Programme Manager
Bosnia & Herzegovina
Mahesh Pandya
ParyavaranMitra
India
Feli Esau
RCP-Network/OLEDD-CSO
D.R.Congo
Helene Connor
Helio International
France
Nick Hildyard
The Corner House
England
Wiert Wiertsema
Both ENDS
The Netherlands
Christopher Brandt
The Climate Concept Foundation
Germany
Regine Richter
Urgewald
Germany
Doug Norlen
Pacific Environment
United States
Heike Drillisch
CounterCurrent—GegenStroemung
Germany
Johan Frijns
Executive Director
BankTrack
The Netherlands
Julien Vincent
Market Forces
Australia
Debi Goenka
Executive Trustee
Conservation Action Trust
India
Falguni Joshi,
Gujarat Forum On CDM,
India
Eva Filzmoser
Nature Code – Centre of Development and Environment
Austria
Gabriel Sundoro Wijoyo Wynn
Green Empowerment
Southeast Asia
Adrian Lasimbang
Tonibung
Malaysia
Alba Valle
Euronatura
Portugal
Thomas Braunschweig
Berne Declaration
Switzerland
Cynthia Ong
Land Empowerment Animals People (LEAP)
Malaysia
Yuki Tanabe
Japan Center for a Sustainable Environment and Society (JACSES)
Japan
Thomas Wenidoppler
ECA-Watch Austria
Austria
Heike Mainhardt
Oil Change International
United States
Aviva Imhof
Pacific Coal Network Coordinator
Sunrise Foundation
Australia
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(European Parliament, Strasbourg, 8 October 2013) The European Parliament has approved a resolution on corruption and human rights in the public and private sectors which includes a clause calling on bilateral and multilateral financial institutions, including the World Bank Group, IMF, regional development banks, export credit agencies and private sector banks, to require extractive companies and governments to comply with the ‘Publish What You Pay’ requirements and/or EITI standards on transparency of payments as a pre-condition for all project support.
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(Ex-Im Bank, Washington, 1 October 2013) The Export-Import Bank of the United States has announced support for a 7-figure purchase of 2 new American agricultural aircraft by a soybean and corn agribusiness in Brazil from Air Tractor Inc. Ex-Im provided a medium-term insurance policy that was designed to mitigate risk in export of capital goods. Friends of the Earth Europe notes that "Soy expansion has devastating impacts on people. It is linked to significant increases in the prices of staple foods. Smallholder farmers and indigenous communities are displaced from their land because of it. This destroys small farms which have traditionally grown a large proportion of the food staples people need. Soy is causing family farms to die out, thus reducing food security."
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(Vnesheconombank, Moscow, 22 October 2013) In the course of the 18th regular meeting of the Heads of State in the presence of Russian Prime Minister Dmitry Medvedev and Premier of China’s State Council Li Keqiang, Vnesheconombank signed a framework agreement with the Export-Import Bank of China on opening a credit line worth 700 million US dollars. The agreement provides for extending credit facilities to Vnesheconombank to fund projects to be implemented on Russia’s territory in partnership with Chinese companies.
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(Jubilee Australia, Sydney, 15 October 2013) In the past two weeks corporate Australia has been rocked by reports of bribes being paid by one of the country’s largest companies, Leighton Holdings. These bribes were supported by Australian taxpayers’ money, handed out by a little-known and secretive government body called the Export Finance and Insurance Corporation (EFIC).
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OECD Working Party on Export Credits Consultation with Civil Society
(OECD ECG, Paris, 8 October 2013) ECA Watch has been invited to a Consultation between Civil Society Organisations (CSOs) and Members of the OECD’s Working Party on Export Credits and Credit Guarantees (ECG) and the Participants to the Arrangement on Officially Supported Export Credits to take place on Tuesday, 19 November 2013, from 9.30 a.m. to 1.00 p.m., at the OECD Conference Centre, Paris. The aim of this Consultation is to provide an opportunity for representatives from NGOs, banking, business, industry and trade unions to exchange views with OECD Members on issues relating to officially supported export credits. The Secretariat will also provide an update of recent and current developments. The last public minutes of the ECG's regular meetings posted on their web site are for their April 2011 meeting.
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(Reuters, London, 11 October 2013) The bond markets are turning into a regular funding platform for airline companies which have in the past relied heavily on export credit agencies and commercial bank lending to finance deliveries of their vast aircraft fleets. The opening of the bond funding option has come as a blessing for airlines, which are finding it harder to fund or refinance their aircraft via the traditional route of export credit agencies and commercial bank lending. Beginning in January, higher fees and equity requirements mandated by the OECD went into force, according to Boeing Capital Corp, which in a note to investors said that, barring any severe shock, export credit support for new aircraft deliveries is expected to keep declining. Moreover, commercial bank lending has become more expensive, leaving the capital markets as the most cost-effective option for funding.
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(Atradius Dutch State Business, Amsterdam, 15 October 2013) Dutch ECA Atradius Dutch State Business has announced that banks outside the OECD area are now eligible for export credit cover if they finance Dutch exports. Up to now, only banks from the Netherlands and other OECD countries could benefit from insurance and guarantees which Atradius provides on behalf of the Dutch State. By extending its cover to more banks globally, Dutch companies can attract financing for their exports from a larger pool of banks. This wider choice of bank financing gives them a competitive advantage.
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(Creditman, Vienna, 15 October 2013) At its Annual General Meeting 2013, the Berne Union – International Union of Credit & Investment Insurers, elected new officers, including President, Vice President and Committee Chairs and Vice Chairs. The Berne Union combines public export credit agencies (ECAs) and private market insurers of export credit and investment. Public and private players in the Berne Union cooperate and join their strengths in the form of underwriting expertise and insurance capacity. Since the global financial crisis in 2008, Berne Union members have indemnified approximately US$ 22 billion to exporters and investors, protecting them from losses suffered due to buyer defaults in all regions of the world.
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The Humboldt-Viadrina School of Governance, the OECD and the German Institute for Human Rights are holding a joint meeting on: Social and human rights standards in the promotion of foreign trade to implement the "Common Approaches on the Environment and Officially Supported Export Credits" of the OECD and the UN Guiding Principles on Business and Human Rights. The meeting will be held at the HUMBOLDT-VIADRINA School of Governance in Berlin from 18:00-21:00 on 11 November 2013. Some English-German simultaneous translation will be available.