Report: Export Credit Agencies Fuel Greenhouse Gas Woes

A new report reveals that a group of public financing institutions, known as export credit agencies, are promoting exports and investments in developing countries that will contribute to long-term increases in greenhouse gas emissions.

From 1994 through the first quarter of 1999, ECAs from Europe, Japan, Canada, and the United States supported $103 billion in exports or investments for fossil-fueled power generation, oil and gas development, transportation infrastructure, aircraft sales, and energy-intensive manufacturing (such as petrochemicals, pulp and paper, and iron and steel) in developing countries.

"ECA financing, most of it from the seven leading industrialized countries, disproportionately benefits energy- and carbon-intensive industries. This leads to a policy perversity," said Crescencia Maurer, research associate of the World Resources Institute (WRI) and lead author of The Climate of Export Credit Agencies.

The report, released May 31, said that while industrialized countries are negotiating reductions in their own greenhouse gas emissions and emphasizing 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, noted that from the middle to late 1990s, just over 70 percent of ECA-supported projects ($73.8 billion) were concentrated in two sectors: fossil-fueled power and oil and gas development. By contrast, renewable energy projects co-financed by ECAs totaled only about $2 billion.

"In effect, ECA financing undermines the formal commitments industrialized 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 program.

The report identified the following ECAs as the leading sources of financing for energy-intensive projects and exports: the Compagnie Francaise d'Assurance pour le Commerce Exterieur (France), the Export Credit Guarantee Department (United Kingdom), the Export Development Corporation (Canada), Export Import Bank of Japan (now the Japan Bank or International Cooperation), the Export-Import Bank of the United States, Hermes Kreditversicherung-AG (Germany), Kreditanstalt fur Wiederaufbau (Germany), the Overseas Private Investment Corporation (United States), and Sezione Speciale Per l'Assicurazione Del Credito All'Esportazione (Italy).

The leading destinations for this financing include some of the largest developing country sources of greenhouse gas emissions: Brazil, China, India, Indonesia, and Mexico.