International credit agencies promote greenhouse gas emissions

Finance and trade agencies in the developed world are continuing to lend money to projects in the developing world that produce large amounts of greenhouse gas (ghg) emissions, despite the fact that the governments of many developed countries are officially trying to persuade poorer countries to bring emissions levels down.

Between 1994 and the end of the first quarter of 1999, European, Japanese, Canadian and US export credit agencies (ECAs) lent financial support to $103 billion-worth of exports and investments in fossil-fuelled power generation, oil and gas development, transportation infrastructure, aircraft sales and energy-intensive manufacturing in developing countries, a World Resources Institute (WRI) report, The Climate of Export Credit Agencies, shows.

“ECA financing, most of it from the seven leading industrialised countries, disproportionately benefits energy- and carbon-intensive industries. This leads to a policy perversity,” said Crescencia Maurer, lead author of the report.

The report says that while industrialised countries are negotiating reductions in their own ghg emissions and emphasising the importance of reducing emissions increases in developing countries, their finance and trade agencies ignore the climate implications of their activities.

Ruchi Bhandari, co-author of the report, notes that from the middle to late 1990s, just over 70% of ECA-supported projects ($73.8 billion) were concentrated in two sectors: fossil-fuelled power and oil and gas development. By contrast, renewable energy projects co-financed by ECAs totalled only about $2 billion.

“In effect, ECA financing undermines the formal commitments industrialised governments have made to facilitate the transfer of environmentally sustainable technologies that can help developing countries grow in a less carbon-intensive fashion,” said Dr. Nancy Kete, director of WRI’s climate, energy and pollution programme.

The leading destinations for this financing include developing countries with the highest accelerating ghg emissions rates: Brazil, China, India, Indonesia, and Mexico.

The report blames a lack of ECA transparency, and industrialised countries’ failure to negotiate rigorous ECA environmental guidelines. Current ECA practices for the disclosure of environmental information is seriously lacking, the report adds. Most ECAs do not publish the rules or methodologies they use to conduct environmental assessments, do not release project environmental evaluations, solicit public comment on projects being considered for financing or assess the CO2 emissions a project will generate.

To begin to harmonise climate protection objectives and ECA financing, the authors recommend that governments:

  • negotiate common ECA environmental standards that include criteria to evaluate the energy or emissions intensity of projects or exports
  • require ECAs to report on the projected lifetime and annual CO2 emissions associated with projects they co-finance, guarantee or insure
  • create financing mechanisms to increase investments in small-scale renewable energy and energy efficiency technologies

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