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Multinational Fora

Letter to Sir Mark Moody-Stuart, Co-Chairman of the G8 Task Force on Renewables

Sir Mark Moody-Stuart
Co-Chairman
G8 Task Force on Renewables

and CC:

Dr. Corrado Clini
Co-Chairman
G8 Task Force on Renewables

Rome, 14th February, 2002

SUBJECT: Export Credit Agencies' reform - G8 TF on Renewables recommedations

Dear Sir Moody-Stuart,

Thank you for your kind invitation to the January 24 meeting in Rome organised by you and Mr. Clini as Co-Chairmen of the G8 Task Force on Renewables. I appreciated your support for many of the priorities of the international NGO network advocating for environmental reform of Export Credit and Investment Insurance Agencies (ECAs), such as percentage targets for sustainable energy technologies in ECA energy portfolios.

I am writing for your help. As you may know, ECA reform has gained ground on the international political agenda, but it risks losing that ground if there is not progress in the coming months. Both the OECD and the G8 mandates for environmental reform of ECAs had deadlines of the end of last year. And after years of negotiations (taking place within the OECD), there is deadlock. 24 out of 26 countries have said that they will unilaterally and on a voluntary basis implement the draft OECD proposal as it currently stands. The United States has so far refused to accept the proposal because it is too weak, it does not fulfil the G8 mandate, and it does not achieve upward harmonisation of ECA environmental policies with the significantly stronger standards and procedures of the U.S. Export-Import Bank.

The growing number of NGOs monitoring ECA finance believes that the OECD proposal is a sham. It does not approach even minimum international norms of environmental safeguards and assessment and does nothing about ECA contributions to global warming. Needless to say, the proposal does not include any reference to minimum standards of energy-efficiency or carbon-intensity for ECA-backed projects, as recommended by the G8 Task Force on Renewables.

The OECD Council of Ministers in May and the G8 Summit in July will be the last best chances to lend renewed vigour to the movement towards meaningful ECA reform, rather than letting it stop with the lowest common denominator of the OECD proposal. At both meetings, Ministers and heads of state will presumably have to address the failure to meet their mandates. It is imperative that new mandates be issued in the strongest possible terms directing governments and ECAs to follow through-and perhaps taking the negotiations out of the hands of the ECAs themselves and handing them over to another venue where environment and development ministries would have an equal voice.

We have two requests to make of you:

Please write soon to the OECD Secretary-General Mr. Donald J. Johnston; the Chairman of the OECD Export Credit Group Mrs. Birgitta Nygren; all OECD heads of state; and all OECD Trade, Economics, and Environment Ministers and ECAs. Please urge them to do what is necessary to achieve real upward harmonization of ECA environmental policies with those of the multilateral development banks, including transparent public release of environmental information and stakeholder consultations--prior to project approval. Please also urge them to incorporate into the OECD proposal those recommendations of the Task Force that are applicable to ECAs, as well as quantitative portfolio targets for sustainable energy technology exports.

[It should be noted that, under the OECD "Arrangement", Special Guidelines apply to certain transactions (the OECD Arrangement sets certain limits on the export credit terms and conditions that may be provided by participant governments). For instance, as concerns the energy sector, the maximum repayment term for conventional power plants is 12 years, which is two years more than is allowable for other large infrastructure projects; in the case of nuclear power plants, Special Guidelines allow a maximum repayment term of 15 years and the application of Special Commercial Interest Reference Rates (SCIRRs). Therefore, special guidelines permitting more generous export credit terms for certain energy technologies already exist, and OECD governments could easily adopt a specific "Sector Arrangement", or Special Guidelines, for export credits related to sustainable energy technology exports and projects.]

2. Please help recruit corporations and other private sector individuals and entities to state publicly, "We have no problem abiding by World Bank or EBRD environmental standards and safeguards, and we support the upward harmonisation of ECA environmental policies with those of the multilateral development banks, as the responsible thing to do." Currently, governments hear from only those financial and export industry voices most interested in maintaining the status quo and most in opposition to ECA reforms or safeguards. Mobilizing other segments of the business community to make their voices heard in favor of meaningful ECA reform could prove decisive.

We would be more than pleased to provide you with further information, resources, and contacts on these subjects. My colleagues and I are also available to meet with you at your convenience; in fact, I will be in London on February 27 if that is convenient for you.

ECAs are now, by far, the largest official sources of large project finance in developing countries, and they routinely support projects that do not meet the social, environmental, and economic tests of-and have often even been rejected by-other institutions. Your help is needed. We look forward to your prompt reply.

Warm regards,

Antonio Tricarico
Campagna per la riforma della Banca mondiale, Italy

Aaron Goldzimer
Environmental Defense, U.S.A.