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