United Kingdom
Recommendations from Friends of the Earth
to the ECGD regarding Sustainable Energy and Climate Change
Paper for UK NGO Seminar on Export Credit Reform - "Beyond
Business Principles" May 2002
By Kate Hampton, International Coordinator, Climate Change Campaign
1. What is the ECGD already required to do to support sustainable energy?
As part of the Marrakech accords, adopted at the 7th Conference of the
Parties to the UN Framework Convention on Climate Change last November,
governments agreed that export credit agencies specifically should support
the global transfer of climate-friendly technologies. This decision forms
part of the rules implementing articles in both the 1992 Framework Convention,
which is already in force, and the 1997 Kyoto Protocol, which the UK has
ratified and will soon enter into force, requiring that industrialised
countries support the transfer of both adaptation and mitigation technologies
to developing countries.
Clearly, the ECGD should already be acting in accordance with the Framework
Convention on Climate Change, in addition to investigating how to implement
relevant clauses in the Marrakech Accords before the Kyoto Protocol enters
into force. This paper seeks to provide guidance on how this might be
done.
2. Why should ECGD support sustainable energy?
According to energy modellers, reducing emissions to a level that would
avoid dangerous climate change without relying on the widespread use of
nuclear power would require that energy efficiency be maximised and that
renewable energy account for at least 40% of global energy consumption
by 2050 and 80% by 2100 (Nakicenovic et al, IIASA, 1998). The deployment
of sustainable energy technologies, i.e. renewable energy and energy efficiency,
is also desperately needed to avoid further accumulation of the devastating
local environmental and social impacts associated with fossil fuels, large
dams and nuclear power.
However, business-as-usual investment trends do not support such a shift.
According to the Council of the Global Environment Facility (1999), “Less
than 2% of the energy investment being made annually in developing countries
is currently in [renewable energy technologies]… This is despite
the fact that [renewable energy technologies] are technically feasible
and financially feasible in many places and are often national priorities.”
Projections by the International Energy Agency (2000) suggest that renewable
energy will only represent 3% of global primary energy mix by 2020 if
these business-as-usual investment trends continue.
3. What role can ECGD play?
Obstacles to the deployment of sustainable energy technologies do exist.
They are:
· Obstacles that are characteristic of Small and Medium sized
Enterprises (e.g. weak balance sheets, small transaction sizes);
· Obstacles that are characteristic of developing countries (e.g.
lack of client creditworthiness, currency risk);
· Institutional obstacles (e.g. lack of staff experience with renewable
energy projects, support for competing technologies);
· Obstacles that are specific to the sustainable energy industry
(e.g.lack of investor familiarity, high up-front costs); and
· Wider political obstacles (e.g. lack of regulatory and fiscal
incentivesto strengthen sustainable energy companies either domestically
or overseas).
However, ECGD should already be familiar with and addressing obstacles
specific to SMEs and developing countries, and the regulatory and fiscal
framework is changing in favour of clean energy in many countries,
including the UK, and will continue to do so. Meanwhile, the remaining
obstacles, both institutional obstacles and obstacles that are specific
to the sustainable energy industry, can be addressed directly by ECGD.
Friends of the Earth International believes that if export credit agencies
do not begin a meaningful transformation towards binding environmental
and
social standards and significant portfolio shifts away from fossil fuels
towards renewable energy within two years, they should be abolished (FOEI
position paper, January 2002). In a recent letter to G8 energy ministers,
Friends of the Earth International, Greenpeace International and WWF International
called upon export credit agency funding for fossil fuels, large dams
and nuclear power to be phased out, starting with an immediate cessation
of all funding for export-oriented fossil fuel extraction projects, nuclear
power and dams that do not meet the standards of the World Commission
on Dams, as well as any projects that do not receive prior informed consent
from local communities in developing countries. In addition, the letter
said that export credit agencies should allocate 20%n of their energy
portfolios to sustainable energy starting now.
This view is echoed in the 2001 report of the G8 Renewable Energy Task
Force, which was chaired by Corrado Clini (Director General of the Italian
Ministry of Environment) and Mark Moody Stuart (former CEO of Shell International).
The report called upon export credit agencies to identify criteria to
assess the local and global environmental impacts of energy projects and
establish minimum standards of energy efficiency and carbon intensity.
The report noted that simply supporting renewable energy was not enough:
subsidies for conventional energy must be reduced simultaneously.
4. Recommendations
The ECGD should:
· Immediately provide maximum repayment terms available under
existing guidelines to support sustainable energy projects;
· Systematically consult with and target sustainable energy companies
when designing and marketing their products, especially SME products;
· Introduce a portfolio target of at least 20% in support of sustainable
energy;
· Negotiate common binding environmental and social standards for
export credit agencies within a context of seeking to eliminate support
for unsustainable energy projects;
· Improve staff capacity through programmes to train existing staff
and recruit new staff with experience in the sustainable energy sector
with the objective of having staff dedicated specifically to sustainable
energy;
· Negotiate with other export credit agencies to provide concessionary
rates for sustainable energy (e.g. in the form of SME Plus programmes)
that surpass those offered to other energy technologies;
· Develop safeguards against tied aid and technology dumping (e.g.through
the highest standards of public consultation and support for projects
that promote technology transfer, such as manufacturing and contractual
joint ventures).
The Seminar - "Beyond Business Principles"
- was organised jointly by Corner House, Friends of the Earth, Globe,
Ilisu Dam Campaign, Kurdish Human Rights Project, Campaign Against Arms
Trade, War on Want, Religious Society of Friends, WWF, World Development
Movement.
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