(Global Trade Review, London, 23 April 2023) Export credit agencies (ECAs) are set to play a vital part in the EU’s Critical Raw Materials Act (CRMA), introduced to help secure supplies of metals and minerals needed for the transition from fossil fuels to sustainable energy.The act is part of the EU’s bid to minimise the effect of rocketing prices and supply chain disruptions in the wake of Russia’s war with Ukraine and the pandemic, as well as to mitigate its reliance on a small number of countries, including China, for access to minerals and metals essential to the production of more environmentally friendly energies.It also intends to set up an EU export credit facility and a critical raw materials “club” aimed at all countries interested in strengthening global supply chains. The EU’s list of critical raw materials includes nickel, lithium, aluminium, cobalt and graphite, which are crucial for technologies such as solar photovoltaic panels and electric vehicles. Major investment is required to set up upstream, midstream and downstream operations in Europe.
Newsletter
FOE investigates EXIM fossil fuel influence peddling in Alaska carbon bomb
(Friends of the Earth, Washington, 13 April 2023) Friends of the Earth has filed an open records request of the Alaska Gasline Development Corporation (AGDC), the state entity developing the Alaska LNG Project–a proposed $38.7 billion LNG project with a potential carbon footprint of 2.7 billion metric tons of CO2, ten times the climate pollution of the recently approved Willow Project. The Alaska LNG Project is already angling for significant federal subsidies. A provision snuck into the Infrastructure Investment and Jobs Act (IIJA) makes the project potentially eligible for a $25.6 billion loan guarantee. The project was also “provided official correspondence” that it will receive a Letter of Interest from the U.S. Export-Import Bank (EXIM), the export credit agency of the US. Thanks to its new Make More in America Initiative, passed in 2022 and widely seen as benefiting LNG developers, EXIM can now finance domestic projects like Alaska LNG as well as international ones. “Hopefully the Biden Administration isn’t about to greenlight another carbon bomb,” said Lukas Ross, Program Manager at Friends of the Earth. “A story about two former fossil fuel executives shaping climate policy seems like something out of the Trump Administration.”
Export Finance Australia (EFA) can no longer justify fossil fuel funding
(Lowy Institute, Sydney, 6 April 2023) Since 2009 EFA has helped to underwrite global heating by providing roughly AU$1.69 billion to fossil fuel firms, while offering a relatively paltry AU$20 million for renewable energy projects. Last year, many of Australia’s key allies signed the so-called Glasgow Statement, which commits signatories to ending public support for international fossil fuel projects. The reasoning was clear: continuing to use taxpayer dollars to underwrite new oil, gas and coal projects, such as coal-fired power plants, is inconsistent with the 1.5°C warming limit and goals of the Paris Agreement. Our ECA research suggests this pattern of lending is likely a result of interrelated pressures from large, politically influential exporting firms that argue EFA’s support is critical for the Australian economy, and national security concerns about the future of Australia’s energy security. However, these arguments no longer stack up. First, fossil fuel firms that benefit from billions in EFA support are among Australia’s largest and most profitable corporations; second, ending public financial support for the export of coal and gas will not prevent the sector from maintaining energy security necessary to power the country’s economy and third, and related, if Australia is to be a renewable energy superpower as the PM has declared, Canberra can ill afford to delay supporting renewables industries.
DeSmog: “UKEF locks us all into more carbon emissions for decades”
(DeSmog, London, 6 April 2023) UKEF has been accused of “locking us all into more carbon emissions for decades to come” by giving so much assistance to the sector. UKEF, a UK government agency, has provided billions of pounds worth of financial support to the high-carbon aviation sector since the Paris climate agreement was adopted in 2015, DeSmog analysis shows. UK Export Finance (UKEF) has effectively subsidised new airports, aircraft, and maintenance, despite stating that the oil-dependent industry is unlikely to begin cutting emissions “materially” until the 2030s. A spokesperson for UKEF, who did not dispute DeSmog’s findings, said: “UK Export Finance supports British businesses, such as the aerospace sector, to export and grow the economy. During the pandemic, UKEF supported the aviation industry with £7.4 billion to safeguard the industry and jobs. “UKEF is working with aerospace customers to help decarbonise the sector. This year we are setting a decarbonisation target for our aviation exposures to help deliver our pledge to net zero transition by 2050. Over half the financial support provided by UKEF since the landmark climate accord has gone to aviation, with Rolls Royce, Airbus, Boeing, and British Airways taking the lion’s share. UKEF offers a range of loans, insurance and guarantees to help British companies secure business abroad. Just one of the 62 deals supported, listed in the agency’s annual reports, came with any climate-related conditions attached. Aviation accounts for the majority of the greenhouse gas emissions currently generated by UKEF’s finance, according to its latest estimate: 8.2 million tons, equivalent to putting 1.8 million petrol-powered cars on the road. DeSmog has previously reported on the significant donations made by aviation-linked individuals and companies to political parties, particularly the Conservatives. Airbus gave a total of £35,000 to the Tories between 2015 and 2018, according to official records, though there is no suggestion that the UKEF financing was influenced by any of the donations.
OECD countries reach historic agreement to modernize export credit support
(Trade Finance Global, London, 7 April 2023) A modernisation package agreed in principle by participants will specifically allow countries to offer greater support for green projects while also expanding the use of export credits in the context of an evolving world economy and an increasingly competitive landscape. Within the package of reforms, the Participants agreed to expand the scope of green or climate-friendly projects eligible for longer repayment terms, as permitted under the Climate Change Sector Understanding (CCSU). “The modernisation package agreed by Participants to the Arrangement on Officially Supported Export Credits is a great milestone to help increase the impact of trade and finance flows on securing our climate objectives,” OECD Secretary-General Mathias Cormann said. “It will allow the scaling up and a better targeting of public and private finance to support climate-friendly investments and help us meet our global net zero emissions objective.” This reform is expected to come into effect later this year, once Participants complete their formal internal decision-making processes and agree to the new Arrangement text. [As noted in the next What’s New article, OECD ECAs have a long way to go to brag about reducing the current $1 to $7 ratio of renewable to fossil fuel project support!]
ECAs of a wide range of OECD countries still finance oil and gas
(Energy Monitor, London, 17 April 2023) All 38 members of the OECD have pledged to reach net zero, with the US and EU in the middle of hugely significant domestic decarbonisation programmes. Yet export finance remains misaligned with the requirements of net zero, directing seven times more support to fossil fuels ($33.5bn per year) than renewables (just $4.7bn per year) on average from 2019 to 2021, according to the OCI. Between 2019 and 2021, OECD ECAs were the world’s largest public international financiers of energy projects. Although China is not subject to the OECD Arrangement guidelines, “a general trend has seen Chinese international public finance eventually follow the OECD guidelines, which also help shape G7 and G20 commitments”, says Nina Pušić, from the NGO Oil Change International (OCI). China’s international coal financing ban, for example, came into effect the same year that the OECD ECAs introduced a similar ban. OECD ECAs (most notably Japan, South Korea and Canada) were the world’s largest public international financiers of oil and gas between 2019 and 2021. Canada has since implemented a pledge made at COP26 to end export finance for oil and gas, but others, including Japan, the US and South Korea, have yet to either make such a pledge or fully follow on through on it. There is a campaign under way from 175 civil society groups from more than 45 countries – including the OCI, the Club of Rome and Friends of the Earth – for the OECD to phase out international public financing of fossil fuels.
Russians urging greater EXIAR engagement with Africa
(Weekly Blitz, Dhaka, 29 April 2023) Russia’s weak economic presence in Africa has become a significant question of concern for some experts as they wonder why the nation is not aggressive with this like its ally, China. Smaller countries, such as Turkey, are visibly broadening their economic influence, strengthening business investments and so are a number of Gulf States. “It is important for us to expand and improve competitive government support instruments for business. Senator Igor Morozov, a member of the Federation Council Committee on Economic Policy and Chairman of the Coordinating Committee on Economic Cooperation with Africa stressed: “It is obvious that over the thirty years when Russia left Africa, a number of countries such as China, India, the United States and the European Union have significantly increased their investment opportunities there in the region”. The meeting collectively acknowledged Africa as a huge continent that still requires economic development. Its active demographic growth and abundance of natural resources offer conditions to become the world’s biggest market in the next few decades. Nikita Gusakov, Head of the Russian Export Credit and Investment Insurance Agency (EXIAR), reiterated that Africa was a priority for the agency, outlining a number of deals that EXIAR has been involved in on the continent. He reiterated at the meeting, one of the roadblocks is the lack of adequate knowledge among Russian companies about the opportunities available in Africa. It is partly due to limited interaction with the private sector actors and civil society. During the Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC), Chinese President Xi Jinping said: “China will expand cooperation in investment and financing to support sustainable development in Africa. China provided $60 billion of credit line to African countries to assist them in developing infrastructure, agriculture, manufacturing and small and medium-sized enterprises.” Russia could consider the Chinese model of financing various infrastructure and construction projects in Africa. Secretariat of the Russia-Africa Partnership Forum (RAPF) agreed during a recent meeting that lack of financial support was the major reason for Russia’s weak economic footprints across Africa. The representatives leading Russian companies and banks, in attendance, discussed an effective system of financing projects and supporting investment in Africa.
COPE to investigate corruption charges against Sri Lanka ECA General Manager
(Island Online, Sri Lanka, 9 March 2023)The Committee on Public Enterprises (COPE) has proposed that a three-member committee be appointed by the Secretary to the Ministry of Finance to investigate corruption charges levelled against the General Manager of the Sri Lanka Export Credit Insurance Corporation (SLECIC). The recommendation came following a revelation made during a recent COPE meeting about several accusations of corruption being made against the SLECIC General Manager, Dilruk Ranasinghe.
Speaking in this regard, Sri Lanka Podujana Peramuna (SLPP) MP Attorney-at-Law Madhura Withanage stated that Ranasinghe should currently be ‘behind bars or in police custody’. He accused Ranasinghe of fraudulently obtaining funds from SLECIC for his personal vehicular expenses, amongst other accusations, adding that he has also received information that Ranasinghe had defrauded the company by issuing fake bills. Accordingly, COPE recommended that a committee be appointed to investigate these accusations and that the relevant report be submitted within three weeks.
Embraer closes US$ 200 million EXIM credit facility with Citibank
(ARGS, London, 9 March 2023) Embraer has closed a US$ 200 million credit facility to finance purchases from direct suppliers in the United States. This financing is being provided by Citibank and guaranteed by the Export-Import Bank of the United States (EXIM), the country’s official export credit agency. This credit facility with EXIM and Citibank will support Embraer’s efforts to diversify its credit operations in the aviation market worldwide, providing the company with additional financing options and improving its loan profile.
Polish ECA supporting US$73m (£60m) project to expand Angolan University
(Construction Index, London, 30 March 2023) The project will extend the university and improve access to higher education. The project is being developed by a joint venture led by Quenda Business, a Polish project management, international business advisory and consulting company that operates across sub-Saharan Africa, particularly in Angola and the Democratic Republic of Congo. Quenda’s partner is Polish contractor Torhamer, a specialist in rail and infrastructure. Standard Chartered bank is acting as the social loan coordinator, bookrunner and coordinating bank, supported by the Polish export credit agency Korporacja Ubezpieczeń Kredytów Eksportowych (KUKE).
