FINANCE:

Ex-Im Bank approves new scrutiny of fossil fuel projects

The Export-Import Bank voted yesterday to ramp up financing for renewable energy and impose new reviews of large fossil fuel projects as part of a broad new climate change strategy.

Bank President Fred Hochberg is expected to announce the new carbon policy today when President Obama joins the institution's annual meeting. The strategy, with a centerpiece $250 million loan guarantee program for renewable energy projects, is the first of its kind among export credit agencies.

"Just having a carbon policy is farther than any export credit agency in the world," said Export-Import Bank spokesman Phil Cogan. "That's pretty significant."

The move is part of a 2009 settlement resolving a lawsuit involving Friends of the Earth, Greenpeace and several cities. The suit alleged that the agency -- which provides loans, guarantees and insurance to subsidize U.S. exports -- provided more than $32 billion to fossil fuel projects without considering the impacts of global warming under the National Environmental Policy Act (NEPA).

But it also comes as other global lending institutions like the World Bank look for ways to balance the work they do with a new international emphasis on reducing greenhouse gas emissions and phasing out support for fossil fuels.

For the most part, environmental advocates say the agencies are failing to make fundamental changes to steer the world away from dirty fuel and toward zero- and low-carbon energy development.

Activists reacted with particular fury to the Export-Import Bank's policy, arguing it does nothing to curb the carbon emissions the agency is responsible for creating, and may even create new avenues to support the financing of coal projects.

An 'Orwellian' policy?

"This could not be more of a slap in the face. It's Orwellian," said Steve Kretzmann, director of Oil Change International.

Under the plan, the Export-Import Bank vows to adopt a "rigorous enhanced due diligence process for all high carbon intensity projects." Officials plan to categorize projects based on their carbon intensity levels. "High" intensity proposals producing between 700 and 850 grams of CO2 per kilowatt will be required to meet certain standards, like using the "best appropriate technology."

Coal gasification, oil-fueled power plants and coal plants that are developed with the capacity to include carbon capture and storage technology would not have to meet any additional requirements. And for the most inefficient, subcritical boiler plants, the agency plans to require offsets to reduce the project's carbon intensity level. The standards allow for the possibility that a project might be denied because of its climate change impacts, but set no threshold nor give any description of what might trigger a denial.

Doug Norlen, policy director for the environmental nonprofit Pacific Environment, noted that the Export-Import Bank rarely finances coal projects. He maintained that the new carbon policy barely addresses the agency's enormous oil and gas portfolio. Moreover, he said, the coal provisions appear to open the door for financing new power plants rather than protect against the possibility.

"They are avoiding their responsibility to curb their mainstream portfolio of fossil fuel emissions and potentially setting up a stalking horse for future expansion of emissions through future support of coal," Norlen said.

Cogan, when asked if he envisioned the Export-Import Bank financing a coal-fired power plant under the new policy, said "it depends," based on the criteria laid out in the policy. He also said the agency simply can't shift away from fossil fuel lending.

U.S. jobs appear to trump fossil fuel restrictions

"Our mission is to help create and sustain U.S. jobs by helping finance U.S. exports," Cogan said. "The dilemma is, without worldwide actions, if we unilaterally stop today supporting fossil fuel projects, all that will do is shift the jobs to other countries. It's a balance, and that's part of what the board struggles with."

"By creating disincentives in its policy, what the board is attempting to do is discourage those projects that are higher-emission projects," he said.

Nichole Westin, director of government relations for the Coalition of Employment Through Exports -- a trade organization that includes a number of multinational corporations that do business with the Export-Import Bank -- agreed.

"I think we should do everything we can to promote clean energy, but I'm always wary of anything that denies the Export-Import Bank the ability to finance U.S. businesses," she said. Westin praised the new carbon policy and said provisions like one that allows developers of renewable energy projects to pay certain fees in installments over the life of the loan will help U.S. companies that develop green technology.

The calculus will not be simple

Meanwhile, at least one trade group representing fossil fuel industries is raising questions. Bill Bush, a spokesman for the American Petroleum Institute, noted that the Export-Import Bank proposes new transparency measures in tracking and reporting carbon emissions.

"We think that the Export-Import Bank's initiative on transparency in tracking and reporting CO2 emissions is an important one, but the complexity of that effort should not be underestimated," Bush said. Noting that the United States is only starting to collect such data under U.S. EPA regulations, he added, "We hope that the Ex-Im's decisions on what does and does not qualify under its carbon policy are not flawed ones based on inaccurate emissions reporting."

According to the Export-Import Bank's 2009 annual report, it authorized $101 million in transactions that supported U.S. renewable energy exports. It's a vast increase from the $30.4 million it spent the previous year, but is dwarfed by oil and gas spending.

In 2009, the bank said it authorized $1.06 billion for five new fossil-fuel power plants, as well as nearly $1.5 billion to support oil-field and gas-field exploration, development and production projects.

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