This is the accessible text file for GAO report number GAO-03-1093
entitled 'Export Credit Agencies: Movement Toward Common Environmental
Guidelines, but National Differences Remain' which was released on
September 10, 2003.
This text file was formatted by the U.S. General Accounting Office
(GAO) to be accessible to users with visual impairments, as part of a
longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to Congressional Requesters:
September 2003:
Export Credit Agencies:
Movement Toward Common Environmental Guidelines, but National
Differences Remain:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-1093] GAO-03-
1093:
GAO Highlights:
Highlights of GAO-03-1093, a report to congressional requesters
Why GAO Did This Study:
Export credit agencies (ECA) are responsible for providing billions of
dollars worth of support for large-scale industrial projects annually,
but until recently most ECAs did not formally review the environmental
impacts of these projects. The United States, whose Export-Import Bank
began using environmental guidelines in 1995, pushed for negotiations
on common ECA environmental guidelines at the Organization for
Economic Cooperation and Development (OECD). The OECD negotiations
halted in 2001 because the United States believed that the results,
called the Common Approaches, were insufficient. The remaining OECD
members then pledged to voluntarily implement the Common Approaches.
In response to congressional interest in ECA environmental guidelines,
GAO assessed (1) the level of convergence among OECD members and the
prospects for further advancement and (2) what impacts such guidelines
may have on U.S. exports.
What GAO Found:
Since OECD negotiations began, members have made progress in
developing environmental guidelines for their ECAs and are moving
toward common environmental review practices. However, important
differences remain. Having agreed to voluntarily implement the Common
Approaches beginning in 2002, many OECD members adopted similar basic
procedures for reviewing sensitive projects. However, OECD members’
guidelines and practices differ in areas where the United States
believes it has among the more advanced policies, including which
technical standards ECAs use to review projects and the extent to
which environmental impact information is publicly disclosed. Although
OECD members are considering revising the Common Approaches in 2003,
the United States is unlikely to achieve all of its original
negotiating objectives because of the desire by some OECD members to
gain more experience with the guidelines before renegotiating them and
the reluctance of other members to take any steps that might be
perceived as having a negative effect on the competitiveness of their
exporters.
There is limited evidence that the Export-Import Bank’s environmental
guidelines have affected U.S. exports, although the complexity of
potential effects and the lack of information make identifying and
quantifying impacts difficult. The evidence GAO reviewed indicates
that impacts are likely to be concentrated in the energy sector. Most
Export-Import Bank transactions do not require an environmental review
because they are either short-term transactions, are in certain
excluded sectors, or are not considered environmentally sensitive.
Finally, while some businesses are more concerned about the impacts of
environmental guidelines than others, their specific concerns are
largely anecdotal and difficult to confirm.
www.gao.gov/cgi-bin/getrpt?GAO-03-1093
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Loren Yager, (202)
512-4347, yagerl@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Common Approaches Offers Environmental Policy Framework, but National
Differences Remain:
Prospects Mixed for Further Advancement on Common Environmental
Guidelines for ECAs:
Limited Evidence of Economic Impact, but Assessment Difficult for
Several Reasons:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: OECD Members and Common Approaches Adherents:
Appendix III: Description of Five ECA-Supported Projects:
Batu Hijau Mine Project:
Camisea Natural Gas Project:
Chad-Cameroon Petroleum Pipeline Project:
Olkaria III Geothermal Power Plant:
Three Gorges Dam:
Appendix IV: Comparison of ECA Environmental Policies for Seven
Selected Countries:
Appendix V: Comments from the Department of the Treasury:
Appendix VI: Comments from the Export-Import Bank:
Appendix VII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Tables:
Table 1: Comparison of Environmental Review Procedures for the Export-
Import Bank of the United States and the OECD's Common Approaches:
Table 2: Air Emissions and Effluent Discharge Standards for ECA Project
Review of Steam Driven Thermal Power Plants:
Table 3: Percentage of Ex-Im Bank's Financing in Selected Sectors
before and after Implementing Environmental Guidelines:
Table 4: OECD Members and Common Approaches Adherents:
Table 5: Comparison of Environmental Review Procedures and Policies for
ECAs of Selected OECD Countries:
Figures:
Figure 1: Milestones in Efforts to Develop Common Environmental
Guidelines for ECAs:
Figure 2: Generic Flow Chart of Basic Environmental Review Framework:
Figure 3: Environmental Review Category of Long-Term Projects, October
1995-May 2003:
Figure 4: Sector Distribution of Full Review Projects: October 1995 -
May 2003:
Abbreviations:
ECA: Export Credit Agency:
ECG: Working Party on Export Credits and Credit Guarantees:
ECGD: Export Credit Guarantee Department:
EDC: Export Development Canada:
EIA: Environmental Impact Assessment:
G-8: Group of Eight:
JBIC: Japan Bank for International Cooperation:
NGO: nongovernmental organization:
OECD: Organization for Economic Cooperation and Development:
OND: Office National du Ducroire:
SDR: Special Drawing Rights:
Letter September 10, 2003:
The Honorable Henry J. Hyde
Chairman
Committee on International Relations:
The Honorable Peter T. King
Chairman
Subcommittee on Domestic and International Monetary Policy, Trade, and
Technology
Committee on Financial Services:
The Honorable Doug Bereuter
Chairman
Subcommittee on Europe
Committee on International Relations
House of Representatives:
Concerns about the environmental impacts of large-scale industrial
projects in developing countries have led international development
agencies such as the World Bank to implement guidelines to minimize
environmental damage. Until recently, however, the world's
industrialized nations have not required that their export credit
agencies (ECA)[Footnote 1] apply such policies to the projects they
support. Since ECAs annually finance around $60 billion in exports each
year for medium-and long-term projects, environmental organizations
have been pressuring industrialized nations to develop guidelines to
review the environmental implications of export credit-sponsored
projects. In 1995, in response to language in its revised charter, the
Export-Import Bank of the United States (Ex-Im Bank) became the first
ECA to implement guidelines incorporating environmental standards as
part of the project review process.
To ensure that its exporters were not disadvantaged by environmental
standards that other nations' exporters did not have to meet, the
United States began an effort to establish common environmental
guidelines for ECAs. Negotiations began at the Organization for
Economic Cooperation:
and Development (OECD) in 1999[Footnote 2] but concluded without formal
agreement at the end of 2001 due to U.S. objections. The United States
was concerned that the negotiators' recommendations, formally called
the Draft Recommendation on Common Approaches on Environment and
Officially Supported Export Credits (Common Approaches) did not level
the playing field for exporters. Specifically, the U.S. negotiators
felt that the Common Approaches granted ECAs too much latitude in
establishing guidelines and did not provide for sufficient public
disclosure or explicit direction regarding which technical standards to
use in the review process, such as those for allowable emissions. While
the lack of consensus prevented the OECD from formally adopting the
Common Approaches, most members nevertheless voluntarily agreed to
abide by the terms of the most recent version of the Common Approaches.
They also agreed to undertake a review of efforts to revise the Common
Approaches by the end of 2003.
As a result of the potential impact of different ECA environmental
requirements on U.S. exports, you asked us to assess (1) the
achievements of the Common Approaches and the remaining differences
among the OECD members, (2) the prospects for further advancement on
common environmental guidelines for export credit agencies, and (3) the
impact that environmental guidelines for export credit agencies may
have on U.S. exports.
To meet these objectives, we reviewed documentation and interviewed
knowledgeable officials from the departments of the Treasury and State
and the Ex-Im Bank, the key U.S. agencies involved in export credit
negotiations. We also traveled to Belgium, Canada, France, Germany, and
the United Kingdom to interview senior government and ECA officials and
OECD officials, and met with senior officials from the Japanese ECA in
Washington. To evaluate the impact of environmental guidelines and
regulations of ECAs on U.S. exports, we analyzed financing data and
environmental assessments for 24 medium-and high-risk Ex-Im Bank
projects. We supplemented this information with interviews with U.S.
and foreign business representatives and nongovernmental organization
representatives familiar with the environmental review process for both
ECAs and multilateral development banks. (App. I provides detailed
information on our scope and methodology.):
Results in Brief:
ECAs have moved toward common environmental policies, but important
differences remain. While the environmental guidelines of the Export-
Import Bank are more specific than the Common Approaches, many OECD
members are following similar basic procedures for reviewing
environmentally sensitive projects. However, given the latitude
permitted by the Common Approaches, there are differences in OECD
member guidelines and practices, including which technical standards
are used to review projects and the extent to which environmental
impact information is publicly disclosed. For example, the French
export credit agency recently developed its own technical standards for
its three primary export sectors, including thermal power and
hydroelectricity. In contrast, the German export credit agency
guidelines require that projects meet host country environmental
standards, and only call for further explanation if the host country
standards are deemed significantly below other internationally
recognized standards. With respect to public disclosure, while several
OECD members are taking steps to provide environmental information on
potential projects before project approval, as does the Export-Import
Bank, some OECD members do not routinely disclose project information
at any point, and some maintain that they are legally prohibited from
doing so.
While OECD members are considering revising the Common Approaches, it
will be challenging for OECD members to go beyond approving limited
changes in the near term. The current version of the Common Approaches
contains provisions for members to review their collective experience
with environmental guidelines by the end of 2003. However, certain
factors continue to make advancement difficult. For example, a number
of OECD members prefer to gain more experience with environmental
guidelines before renegotiating the Common Approaches, and some OECD
countries are reluctant to take any steps that might be perceived as
having a negative effect on the competitiveness of their exporters.
While OECD members stated that they would like the United States to
join the Common Approaches, the United States is unlikely to achieve
all of its original negotiating objectives. Nevertheless, recent
events, including an informal effort that environmental experts at
export credit agencies undertook to share their experiences in applying
standards to specific projects, may ultimately provide greater
confidence to members about the benefits of having better defined
technical standards. This could become the basis for a possible
compromise on the Common Approaches.
There is limited evidence of the Export-Import Bank's environmental
guidelines having affected U.S. exports, although the complexity of
potential effects and the lack of information make identifying and
quantifying impacts difficult. The vast majority of transactions
authorized by the Export-Import Bank do not require an environmental
review because they are either short-term transactions, are in certain
excluded sectors such as aircraft, or are not considered to be
potentially environmentally sensitive. Most projects that receive a
full review are in the energy sector, largely because of the financing
structure of many energy projects. For the types of projects that are
subject to environmental review, available information does not show
significant impacts, but assessments are difficult for several reasons.
Trends in Export-Import Bank financing to sectors where environmental
reviews have been concentrated do not show clear changes since the
guidelines have been in place. In addition, available data on
applications and approvals do not capture decisions early in the
applications process or through informal channels and cannot account
for other factors that affect the competitiveness of U.S. exports.
Finally, while some businesses are more concerned about the impacts of
environmental guidelines than others, their specific concerns are
largely anecdotal and difficult to confirm.
The Department of the Treasury and Ex-Im Bank provided written comments
on a draft of this report, which are reprinted in appendixes V and VI,
respectively. The agencies generally agreed with the contents of the
report and also provided technical comments that have been incorporated
into this report as appropriate.
Background:
Between 1999 and 2001, the OECD member nations negotiated environmental
policy framework for their ECAs. (See fig. 1.) With the exception of
the United States,[Footnote 3] OECD members agreed in November 2001 to
voluntarily implement a version of this framework, known as the
Common Approaches. This process of negotiation followed a 1997
communiqué from the Group of Eight (G-8)[Footnote 4] that indicated a
strong interest in negotiating common environmental guidelines for
ECAs. At the 1999 G-8 summit, the heads of state issued a second
communiqué stating that they hoped for agreement within the OECD by
their 2001 summit, a deadline the G-8 reiterated the following year.
The United States led the effort to regularly place common ECA
environmental procedures on the G-8 agenda. The United States sought to
promote uniform standards because it was concerned about unequal export
market conditions and growing concern from nongovernmental
organizations (NGO) that ECA-funded projects had the potential to cause
significant environmental harm. However, the most current version of
the Common Approaches required neither public disclosure of project
information nor establishment of a single set of technical standards.
Because the United States believed that these provisions were
essential, it objected and said it would block the agreement if it were
sent before the OECD Council for approval. Twenty-eight of 29 OECD
members of the Working Party on Export Credits and Credit Guarantees
(ECG)[Footnote 5] subsequently opted to voluntarily adhere to the
Common Approaches, thus implementing the framework without a formal
decision. Application of the Common Approaches began on January 1,
2002. (See app. II for a list of OECD participants and ECG members that
are implementing the Common Approaches.):
Figure 1: Milestones in Efforts to Develop Common Environmental
Guidelines for ECAs:
[See PDF for image]
[End of figure]
Some ECAs have used environmental guidelines from the World Bank
Group[Footnote 6] as a model for the development of environmental
procedures and standards to use in evaluating projects. The
environmental guidelines of Ex-Im Bank, for example, were developed
using World Bank standards as a reference point.[Footnote 7] While the
environmental review policies of different organizations within the
World Bank Group vary somewhat, they generally follow a similar
screening and categorization process (see fig. 2). The World Bank's
environmental policies include evaluation and technical standards, such
as those for emissions, which are laid out in the Pollution Prevention
and Abatement Handbook. It also has a set of qualitative environmental
and social standards, known as safeguard policies. These outline broad
project and evaluation expectations, including guidelines on
involuntary movement of peoples, impacts on cultural property, and
conservation of natural habitats.
Figure 2: Generic Flow Chart of Basic Environmental Review Framework:
[See PDF for image]
[End of figure]
Representatives of both the business community and the environmental
NGO community have expressed considerable interest in the issue of
environmental review procedures for ECAs, but for different reasons.
Some businesses in the United States are concerned that if Ex-Im Bank
maintains environmental standards more stringent than the standards of
some competitor ECAs, the additional project review and mitigation
costs may hurt U.S. exports. Businesses in other OECD countries are
also concerned that disclosure requirements, which the United States
proposed in OECD negotiations, will make sensitive business information
public. In contrast, environmental NGOs in numerous countries have
become interested in ECA environmental review standards as a result of
actual or proposed ECA funding of large potentially environmentally
harmful projects as the Three Gorges Dam in China, the Chad-Cameroon
oil pipeline, and the Camisea gas field development project in Peru.
(See app. III for descriptions of selected ECA projects.) NGO
representatives stated that ECAs, as public entities, should provide
members of the public with the opportunity to provide input on projects
that their governments are supporting. A number of these NGOs have
joined in a campaign to change ECA practices to include strong review
standards and open disclosure policies.[Footnote 8]
Common Approaches Offers Environmental Policy Framework, but National
Differences Remain:
While most OECD members have adopted a common environmental policy
framework through the Common Approaches, some notable differences
remain in their ECA environmental review procedures and policies.
Because the Common Approaches is only a framework, it allows important
differences in members' national polices in certain key areas, such as
the application of technical standards and the disclosure of project-
specific information.
Ex-Im Bank's Environmental Guidelines Are More Specific than the Common
Approaches:
Ex-Im Bank guidelines provide much more specific detail than the Common
Approaches framework (see table 1). Ex-Im Bank guidelines clearly
describe which types of applications must undergo environmental review.
For those transactions requiring review, Ex-Im Bank guidelines contain
nine detailed sector tables delineating specific environmental
requirements.[Footnote 9] Ex-Im Bank guidelines also provide for a
public disclosure period prior to a final decision by its Board of
Directors. During this period, it lists the name and location of
projects which will be subject to an environmental review and makes
certain environmental information available upon request. In contrast,
the Common Approaches is a framework that allows for variations in
project review specifics. The Common Approaches framework differs from
Ex-Im Bank guidelines in that it does not specify the use of a single
set of technical standards, does not establish a set review procedure,
and does not require public disclosure of project information prior to
final funding decisions. Adherents to the Common Approaches are,
however, expected to assess projects using specific standards selected
by the ECA involved, categorize projects according to environmental
risk level, and annually report to the OECD information on
environmentally sensitive projects.
Table 1: Comparison of Environmental Review Procedures for the Export-
Import Bank of the United States and the OECD's Common Approaches:
Stages in environmental review process: Initial application and
screening process; Export-Import Bank of the United States: Specifies
that projects either exceeding a $10 million threshold or exceeding a
7-year repayment period must submit a screening document containing
environmental information; OECD's Common Approaches: Broadly outlines
the goals of a screening process but does not specify how the process
should proceed. Expects that members will screen projects exceeding 10
million special drawing rights[A].
Stages in environmental review process: Categorization; Export-Import
Bank of the United States: Places projects in three classes of
environmental review: high, medium, and low; OECD's Common Approaches:
Places projects in three classes of environmental review: high, medium,
and low.
Stages in environmental review process: Technical standards for
evaluation; Export-Import Bank of the United States: Utilizes
preestablished technical standards against which projects are
evaluated; OECD's Common Approaches: Allows individual members to
determine which standards are applied to projects. Members may
establish their own standards or draw upon other organizations' or
countries' preestablished standards.
Stages in environmental review process: Project disclosure; Export-
Import Bank of the United States: Requires that some project
information, including the environmental impact assessment, be made
public prior to funding decisions; OECD's Common Approaches:
Encourages members to make project information public but makes no
disclosure requirement prior to funding decisions.
Stages in environmental review process: Final approval; Export-Import
Bank of the United States: Requires the Bank's Board of Directors to
make final funding decisions for long-term projects; OECD's Common
Approaches: Does not specify a process for making final funding
decisions.
Source: GAO.
Note: Analysis based on Ex-Im Bank's environmental guidelines and the
OECD's Common Approaches as outlined in Revision 6.
[A] Special Drawing Rights is a standardized unit of money calculated by
the International Monetary Fund and not associated with a particular
currency. As of July 24, 2003, $1 was equal to 0.713 special drawing
rights.
[End of table]
Framework Has Promoted Some Convergence of ECA Environmental Policies:
When the OECD members developed the Common Approaches, they effectively
established a framework to create or update their own ECA environmental
review policies. Most OECD members have taken action to implement the
Common Approaches' provisions. Some members, including Belgium, Greece,
Hungary, and Portugal, did not previously have any environmental review
practices but since adopting the Common Approaches have taken steps to
create them. These include hiring staff to review projects for
environmental concerns or training current staff to do so and
implementing procedures for reviewing potential projects.
Many of the members that had environmental policies in place before
adopting the Common Approaches have revised those policies since
January 2002 to adhere to the Common Approaches. For example, as shown
in appendix IV, ECAs in the six countries we visited have made
revisions based on the provisions of the Common Approaches. Other OECD
members have made similar revisions. For example, Norway introduced an
environmental review policy in 1998 but reviewed it in 2003 to be sure
it conformed to the Common Approaches.
Most OECD members are now following similar basic procedures for
reviewing sensitive projects. For example, most of the countries we
visited require applicants for financing to complete a questionnaire
regarding the potential environmental impacts of their proposed
project, which the ECA uses to categorize the project. Projects likely
to have significant adverse environmental impacts are placed in
category A, while projects with questionable environmental impacts are
classified as category B. Most ECAs place projects with little or no
potential environmental impact in category C. Most ECAs require
applicants to complete an environmental impact assessment[Footnote 10]
if their projects are placed in category A (high risk of environmental
impact).
ECA projects may be approved despite adverse environmental impacts.
Each ECA we visited relies on the judgment of its experts to evaluate
the overall environmental impact of projects. Moreover, several ECAs,
including Ex-Im Bank, allow their Boards to approve projects,
notwithstanding the results of the environmental review. For example,
Canada's ECA cites grounds where it could approve projects with adverse
impacts under certain circumstances, including if it believes that the
project represents an opportunity to improve environmental conditions
in the host country or transfer environmentally sound technology and
services.
Differences Exist in OECD Members' Specific Environmental Guidelines:
Despite the commonalities among OECD members' environmental impact
review systems, differences exist in how ECAs review potential projects
and report on projects they undertake. These differences involve the
application of technical standards and the disclosure of certain
information.
Technical Standards Vary but Have Common Elements:
OECD members vary in terms of the technical standards they use to
assess environmental impacts. We found that it is common for members to
use World Bank technical standards for their reviews. For example, most
countries review projects for compliance with World Bank technical
standards regarding air quality, greenhouse gas emissions, water
consumption, and waste management (see table 2 for selected examples of
air emissions and water quality not-to-exceed standards).
Table 2: Air Emissions and Effluent Discharge Standards for ECA Project
Review of Steam Driven Thermal Power Plants:
[See PDF for image]
Source: GAO analysis based on published environmental guidelines for
relevant organizations.
Legend:
mg/Nm^3 = milligrams per normal cubic meter.
MWe = megawatts electricity.
ng/J = nanograms per joule of heat input.
mg/l = milligrams per liter.
[A] Ex-Im Bank's standards were drawn from the 1995 version of World
Bank guidelines; the World Bank guidelines were updated in 1998.
[B] Plants larger than 500 MWe may emit an additional 0.10 tons per day
for each MWe of capacity beyond 500 Mwe.
[C] Not applicable to diesel driven plants.
[D] Indicates effluent should result in a temperature change of no more
than the degrees indicated; from the ambient temperature of receiving
water at the edge of the zone where initial mixing and dilution take
place.
[E] Values shown for chromium represent total chromium.
[End of table]
While most members use World Bank technical standards, many also look
to standards that other organizations have established. The World Bank
has not updated its technical standards since 1998, and some officials
stated that they prefer standards that are more up to date. For
example, several ECA officials said they use World Bank standards in
the majority of cases; but in some situations, standards set by the
World Health Organization or the European Union are more appropriate or
current. Canadian ECA officials reported that they use standards of the
World Bank, World Health Organization, Canada, and regional development
banks as benchmarks in their reviews. The French ECA established its
own set of technical standards for three sectors. These sectors involve
the most environmentally sensitive projects and represent a large
portion of France's ECA-financed exports: conventional thermal power
plants, large dams, and oil and gas projects. The standards contain a
minimum set of criteria, which is largely linked to World Bank
standards. In addition, French ECA officials said they encourage but do
not require applicants to meet best practice standards, based on the
best available technology or practices within the project's sector.
The German ECA, in contrast, does not rely on a defined set of
environmental standards. It requires that all projects meet the
environmental standards of the country in which the project is being
constructed. German ECA officials stated that if the host country's
standards are not comparable with internationally recognized standards
or German national environmental standards, additional information is
required before approval.
Some ECAs Consider Social Impacts:
ECAs do not commonly follow the World Bank safeguard policies on social
impacts. During the OECD negotiations there was no consensus on how to
account for these impacts, so they are not a part of the Common
Approaches. However, some ECAs have taken steps to include
considerations for social impacts in their environmental standards. For
example, the British ECA requires applicants to answer questions about
social and human rights impacts during the screening process. Projects
that will have social impacts must submit a social impact assessment or
some mitigation plan to address those potential impacts. The Japanese
ECA has also included provisions on social impacts, including impacts
on indigenous peoples, in its environmental policy. Ex-Im Bank also
considers social impacts in its reviews and has specific guidelines in
two of its nine sector tables (forestry operations and hydropower and
water resources management).
Disclosure Policies Differ across ECAs:
ECA policies regarding public disclosure of project information vary.
Some OECD members do not routinely disclose environmental or other
project information, some disclose information after project approval,
and others disclose before they make approval decisions. Many experts
stated that, although ECAs are publicly financed, they are commonly
less open about their activities than other government agencies because
of their private sector orientation. Some countries such as Belgium,
Germany, Portugal, and Spain cite national laws and regulations
prohibiting disclosure of some information regarding export credit
transactions as a barrier to disclosure of project information. Several
ECAs provide information to the public, but only after an export credit
transaction has been signed. For example, Canada and France are willing
to make environmental information about their projects available to the
public after the transactions have been approved.
Some ECAs are taking steps to provide environmental information on
projects to the public before making a decision on whether to approve
the project for financing. This is known as "ex ante" disclosure, the
policy practiced by the United States,[Footnote 11] and often involves
a public comment period in which outside parties are invited to submit
comments on projects that will then be incorporated into the ECA's
environmental review. For example, although it has a law restricting
disclosure of project-specific information without consent from the
financing applicant, the British ECA announced in April 2003 that it
would publish information on its Web site about the environmental
impacts of its most sensitive projects before making a financing
decision. Officials from the British ECA said they made this policy
change because they understand that environmental information often
becomes public through third parties anyway. In addition, they believe
that full disclosure of environmental information is an appropriate
policy. They also cited pressure from nongovernmental organizations as
a factor in their policy change.
Japan and Australia have made a similar commitment to disclosing
environmental information about their most sensitive projects before
finalizing an export credit agreement, with consent from their
exporters. For example, following the environmental screening process,
Japan's ECA discloses the project name, location, and sector, and
reason for its category placement. In addition, for projects that are
more sensitive, the ECA publishes on its Web site the status of major
environmental and social documents prepared by or on behalf of the
exporter, such as environmental impact statements, and makes these
documents available to the public. The Japanese ECA also says that it
encourages input from concerned organizations or stakeholders regarding
the environmental impacts of projects under review. Australia's ECA has
also adopted an ex ante disclosure policy. It provides for a 45-day
public consultation period for accepting and reviewing comments from
outside parties prior to final project approval.
Other Differences Remain in Policy Implementation:
In addition to the differences in their use of technical standards and
disclosure policies, ECAs differ in implementing their environmental
policies, specifically their criteria for categorizing and defining
projects. In instances where several ECAs provide financing for a
single project, they might place the project in different categories. A
mining project, for example, might be categorized as high risk
(category A) in one country, and medium risk (category B) in another.
The Common Approaches has no prescriptions requiring countries to place
specific types of projects in particular categories, thus allowing
categorization to be a subjective activity that depends on the opinion
of the official reviewing the project. In addition, the very nature of
how to define a project can be in dispute. For example, officials from
one ECA described a situation where another ECA treated a project with
multiple components as a single project for categorization purposes,
while they categorized each component separately.
Prospects Mixed for Further Advancement on Common Environmental
Guidelines for ECAs:
OECD members are currently reviewing their efforts to voluntarily abide
by the terms of the Common Approaches and may propose an alternative
version by the end of 2003. However, a number of factors, including the
resistance of some of the participants to certain proposed policies,
present challenges to revising the Common Approaches. Nevertheless,
several developments outside the formal OECD negotiations, including a
series of meetings between ECA environmental experts, may lend some
momentum to advancing the Common Approaches.
OECD Members Committed to Review and Revise the Common Approaches:
OECD members are in the process of reviewing the Common Approaches. The
most recent version of the Common Approaches contains a provision
stating that the ECG will review all aspects of the draft to enhance
it. Participants stated this is typical of OECD multilateral
negotiations, which often begin with general principles and gradually
advance to a more detailed, comprehensive agreement. In this regard,
officials from most of the countries we visited agreed to voluntarily
comply with the terms of the Common Approaches. They stated that the
most recent version is a good first step toward achieving a common
approach to environmental standards for ECAs. For example, one official
stated that, given the inexperience of many ECAs applying environmental
standards, it would take several years for OECD members to accept
guidelines similar to the Ex-Im Bank's.
A key aspect of the review process for the Common Approaches is the
annual reporting among members of information about sensitive projects.
During the negotiations, most members would not support prior
disclosure of projects, which would have allowed the public to evaluate
the application of environmental standards before projects are
approved. As a compromise, members agreed to report annually on
sensitive projects to evaluate how countries are abiding by their
voluntary obligations. The Common Approaches states that members shall
provide certain details about projects that members classified as
either category A or B projects exceeding 10 million special drawing
rights. The required details include a brief description of the
project, its sector, the type of environmental review conducted, and
the standards or benchmarks used in the review. Some ECA officials
stated that the quality of reporting was not uniform across ECAs. They
added that some of the countries have been very forthcoming with
information but others have not. For example, in several instances the
project's host country was not identified, making it difficult to
assess the technical standards used to review the project.
Several key meetings in 2003 will give ECG members an opportunity to
review and potentially revise the initial version of the Common
Approaches. In April, ECG members discussed the results of the first
annual report and agreed to provide recommendations for modifications
to the Common Approaches to the ECG Chair by July 2003. The Chair plans
to summarize these recommendations, which ECG members will then discuss
in September. The final meeting in November 2003 may then serve as the
venue for agreement on a revision of the Common Approaches that can be
put to the OECD Council for a formal decision, according to OECD
officials.
Near-Term Changes to Common Approaches May Be Limited:
Any revisions or enhancements to the Common Approaches during 2003 may
be limited because of the nature of the OECD negotiating process and
the resistance of many members to some of the more controversial
aspects of environmental guidelines. The United States is therefore
unlikely to fully achieve its original negotiating objectives, although
most OECD members would like the United States to accept the Common
Approaches as a formal OECD agreement.
The institutional framework of the OECD makes dramatic changes to the
Common Approaches unlikely. The OECD commonly uses a combination of
dialogue, peer review, and other forms of noncoercive peer pressure to
encourage members to coordinate policies. In addition, OECD committees
operate by consensus. Controversial topics can therefore be blocked by
any single member, as the United States did with the Common Approaches.
While such blocking is considered extreme and rare, according to OECD
officials, it ensures that OECD policies evolve gradually.
Several specific factors make it difficult to go beyond incremental
changes to the Common Approaches, particularly in areas of interest to
the United States. First, while the United States has sought to
negotiate a firm set of technical standards that all OECD members would
have to use in their reviews, most ECA officials we spoke with prefer
to apply a flexible approach to technical standards. Another, more
difficult, obstacle to surmount is the resistance to disclosing project
information. While the United States has pushed for ex ante disclosure
of project information, other ECG members are either unable or
unwilling to do this. In addition, some other ECG members are unwilling
to adopt disclosure practices that are significantly advanced over
their major ECA competitors. For example, the Canadian ECA pulled back
a proposed ex ante disclosure policy once it was clear that the Common
Approaches would not require such a policy, out of concern that the
competitiveness of Canadian exporters might be compromised.
A final impediment to achieving a more than incremental advance in the
Common Approaches is the effect of competing pressure on ECAs by both
public interest and business groups. OECD members' positions on
environmental standards reflect an internal balance achieved in
response to domestic pressure. While nongovernmental organizations in
some OECD countries were successful in getting their governments to
push for the start of negotiations on environmental standards for ECAs,
they have been less successful in achieving their objectives in the
negotiations. Nongovernmental organizations in all the countries we
visited are uniformly displeased with the results of the Common
Approaches to date and are pressing for a broader Common Approaches
that includes human rights, labor, and other social issues as part of
the review process. However, business groups we met with are resistant
to expanding the scope of the Common Approaches. While some ECAs, such
as those of the United Kingdom and Japan, may unilaterally take up
these social issues, most countries in our sample are not yet ready to
consider adopting them. This reluctance occurs primarily because
business concerns are considered of paramount importance to legislators
at this point, according to several experts.
It will be difficult for the United States to fully achieve the
objectives it sought at the conclusion of the Common Approaches
negotiations in 2001. The United States no longer has the level of
influence it had at the start of the negotiations. This is because the
United States did not join the Common Approaches, which remains a
source of resentment, and Ex-Im Bank no longer has the unique
environmental expertise that it once did. Nevertheless, OECD members
see benefits if the United States signs an OECD agreement. All the ECG
members we met with stated that they would like to see the United
States accept the OECD's Common Approaches. Some of these officials
believe that a formal OECD agreement will provide ECAs with a stronger
basis for improvements and convergence. For example, some officials
note that a multilateral agreement permits countries to bring
ministerial pressure to bear on issues. This is not possible under the
current framework, which is supported under a voluntary agreement.
Recent Events May Provide Impetus to Negotiations:
Several recent events, including an informal effort by ECG
environmental experts, may lend momentum to the negotiations. At the
negotiations' outset, many ECG members did not have environmental
guidelines and were reticent to negotiate on unfamiliar technical
issues. However, as OECD members become more familiar with the
application of environmental standards for ECAs, the likelihood of
compromise increases, according to a number of the participants.
Participants view a recent effort to share information among ECAs as a
particularly promising vehicle for increasing their familiarity with
technical aspects of environmental reviews. After the cessation of the
negotiations in 2001, some of the members that had environmental
experts (practitioners) in-house began to meet informally to discuss
technical issues that were not
addressed during the negotiations. These included issues such as
defining a "greenfield site,"[Footnote 12] applying technical standards
in specific instances, and more generally defining a project for the
purpose of environmental review. To date, three such practitioners'
meetings have been held, with broad participation by ECG members.
While the practitioners' meetings are an unexpected consequence of the
conclusion of the negotiations, ECA officials we spoke with stated that
the meetings may help advance the Common Approaches. First, they have
been very useful in giving practical information on technical issues to
ECG members that have only recently adopted environmental guidelines.
In addition, they may provide helpful information to the negotiators on
technical issues. For example, the practitioners have recently created
four subgroups to focus on issues in specific sectors that will report
back to the ECG on their findings.[Footnote 13] Finally, the
practitioners may also provide members with some assurance that the
terms of the Common Approaches are being met. As one official told us,
the practitioners can ask specific questions of one another about how
environmental standards were applied to specific projects. This
information would not otherwise be available through the formal annual
reporting process.
Another development that may lend some momentum to advancement in the
Common Approaches is the commercial banking sector. Recently, 15 of the
world's leading project finance institutions agreed to apply a set of
principles incorporating environmental reviews of their
projects.[Footnote 14] These principles, called the Equator Principles,
set out provisions calling for the application of World Bank technical
standards in the Pollution Prevention and Abatement Handbook and the
International Finance Corporation safeguard policies standards for
projects costing $50 million or more and for which project sponsors are
seeking direct lending from the banks involved. The banks that follow
the Equator Principles pledged that they will screen and categorize
projects based on environmental risk. They also will require
environmental assessments demonstrating compliance with the World Bank
guidelines for projects with high or medium environmental or social
risk. While adherence to the Equator Principles is voluntary, it
indicates a growing understanding in the commercial banking sector of
the importance of assessing environmental risk along with credit risk
for these types of projects. Some officials believe that this is
evidence that the business community is increasingly accepting the
environmental assessment process as the norm for large development
projects. This development may exert a positive influence on the ECA
negotiations.
Limited Evidence of Economic Impact, but Assessment Difficult for
Several Reasons:
There is limited evidence that Ex-Im Bank's environmental guidelines
have affected U.S. exports, although the complexity of potential
effects and the lack of information make identifying and quantifying
impacts difficult. The evidence we reviewed indicates that any impacts
are likely to be concentrated in certain areas, especially the energy
sector. The majority of projects authorized by Ex-Im Bank do not
require significant environmental review, and most projects in the full
environmental review category are in the energy sector. Almost all are
project finance cases. Trends in Ex-Im Bank financing to sectors where
environmental reviews have been concentrated do not show clear impacts,
and available data on applications and approvals are not adequate to
capture decisions early in the applications process or through informal
channels. Finally, we found that the evidence of business impacts is
largely anecdotal and lack of data makes objective quantitative
analysis difficult.
Ex-Im Bank's Environmental Reviews Have Been Concentrated in Certain
Sectors:
A substantial portion of Ex-Im Bank financing does not require
significant environmental review. Ex-Im Bank's environmental reviews
are concentrated in the energy sector, largely because of the financing
structure of many energy projects. Energy sector projects are expected
to be of continuing importance to Ex-Im Bank because of rising energy
demand in developing countries.
Only about one third of long-term Ex-Im Bank financing undergoes an
environmental review after initial screening. Out of 522 long-term
transactions authorized by Ex-Im Bank from October 1995 to May 2003, 42
were subject to a full environmental review,[Footnote 15] and 181 were
subject to a medium review. As figure 3 shows, these transactions
represented 14 percent and 22 percent respectively of long-term Ex-Im
Bank financing in terms of contract value. The remaining long-term
transactions were only subject to an initial screening. This is because
Ex-Im Bank's guidelines exempt from further review certain categories
of projects considered to have little or no potential environmental
effects, such as sales of aircraft, locomotives, and air traffic
control systems.
Figure 3: Environmental Review Category of Long-Term Projects, October
1995-May 2003:
[See PDF for image]
[End of figure]
The remainder of Ex-Im Bank financing does not undergo environmental
review. This is because medium-and short-term transactions are
generally not subject to either screening or review.[Footnote 16] Our
analysis of Ex-Im Bank data showed that about 40 percent of its
financing is for short-term transactions.
Environmental reviews of Ex-Im Bank's long-term financing tended to be
concentrated in the energy sector. For example, from October 1995 to
March 2003, authorized transactions that underwent full environmental
reviews were mainly energy-related transactions (that is, thermal power
plants, oil and gas development, hydropower plants). Of the 42 that
went through a full environmental review, 16 were for thermal power
plants and 9 were for oil and gas exploration projects.[Footnote 17]
(See fig. 4 for the sector breakdowns for full review projects.):
Figure 4: Sector Distribution of Full Review Projects: October 1995 -
May 2003:
[See PDF for image]
[End of figure]
Energy-related projects represent a high percentage of projects
undergoing a full environmental review, largely because many are
financed under project financing terms,[Footnote 18] which signifies
greater overall financial risk to:
Ex-Im Bank. For example, the 16 thermal power projects and 9 oil and
gas exploration projects were all financed under project finance
terms.[Footnote 19]
Energy-related projects have been an important part of the financing
portfolio for both Ex-Im Bank, as noted above, and for other ECAs. For
example, financing for energy sector transactions represented about 27
percent of Ex-Im financing during the 1990s and was 47 percent in
1995.[Footnote 20] In 2001, out of $12.5 billion of U.S. exports
supported by Ex-Im Bank, nearly $2 billion was in energy sectors,
including electric power generation and transmission and oil and gas
explorations and refineries. In 2001, oil and gas facilities accounted
for 38 percent of the Japanese ECA's financing, and power generation
and transmission projects accounted for 25 percent of the British ECA's
financing. According to the OECD, 36 percent of OECD member projects
(18 out of 50) that required full environmental reviews (category A
reviews) in 2002 were energy projects, and these projects accounted for
48 percent of ECA financing.
Energy sector financing is expected to continue to be important for
ECAs because of projected increases in energy demand and associated
investment needs in developing countries. The International Energy
Agency's 2000 World Energy Outlook projects that over the next 2
decades, nearly $3 trillion worth of investment in worldwide
electricity generating capacities will be needed, not counting the need
for transmission and distribution network sectors. The same report
projects that world electricity generation is going to increase at an
annual rate of 2.7 percent until 2020 and nearly 3,000
gigawatts[Footnote 21] of new generating capacity is projected to be
installed around the world, with more than half of this in developing
countries, especially in Asia. The report also projects that OECD
countries' share of world energy demand will continue to decline while
developing nations' share will accelerate.
Impact of Environmental Guidelines Is Complex and Not Quantifiable:
For the types of ECA projects that are subject to environmental
reviews, available data are limited and do not show clear impacts, and
assessments are difficult because of the complex interplay of factors
affecting financing and export trends. Trends in Ex-Im Bank financing
to sectors where environmental reviews have been concentrated do not
show clear impacts. In addition, available data on applications and
approvals are insufficient for analytical purposes because they do not
capture decisions early in the applications process or through informal
channels. Further, environmental policies are only one among many
factors that may affect the competitiveness of U.S. exports, and
impacts vary depending on the nature of the exporter. At the company
level, business views on the impacts of environmental guidelines are
mixed. While many business representatives we spoke with have concerns
about the environmental review process, including project delays,
additional costs, and disclosure, most evidence is anecdotal. Several
business representatives said they were less concerned about meeting
technical standards of environmental guidelines than about dealing with
uncertainties associated with the environmental review process,
including reactions to the public disclosure of project information. We
could not generally assess the magnitude or the extent to which the
concerns reflected actual impacts caused by environmental guidelines.
In addition, some business representatives stated that meeting Ex-Im
Bank guidelines was consistent with their own requirements to identify
issues that could potentially undermine projects.
Impact of Guidelines Complex and Not Evident from Available Data:
Trends in Ex-Im Bank financing to certain environmentally sensitive
sectors do not show evidence of impacts of environmental guidelines,
although a simple trends analysis would not be able to isolate those
impacts from others. We reviewed Ex-Im Bank's financing in four
sectors: thermal power, oil and gas development, hydro power, and metal
mining. Table 3 illustrates the share of authorized financing to these
sectors for periods before and after the adoption of Ex-Im Bank
guidelines. The proportion of financing to oil and gas development
projects stayed about the same after the implementation of
environmental guidelines. Financing of thermal power plants experienced
a drop, and metal mining an increase.
Table 3: Percentage of Ex-Im Bank's Financing in Selected Sectors
before and after Implementing Environmental Guidelines:
Sectors: Thermal Power; 1988-1995: 13.28%; 1995-2003: 9.95%.
Sectors: Oil and Gas Development; 1988-1995: 10.41; 1995-2003: 10.31.
Sectors: Hydro Power; 1988-1995: 0.51; 1995-2003: 0.19.
Sectors: Metal Mining; 1988-1995: 0.57; 1995-2003: 1.12.
Source: Ex-Im Bank and GAO analysis.
[End of table]
An additional data limitation is that formal decisions on Ex-Im Bank
projects provide only partial information regarding the impact of
environmental guidelines on projects for several reasons. First,
several companies said they use informal channels to determine whether
environmental issues are likely to be a stumbling block before they
submit final applications and that they might not do so if they
anticipated concerns. Second, projects may be withdrawn or cancelled
throughout the application process for any number of reasons that are
not publicly reported. Finally, some projects that might have been
submitted to Ex-Im Bank in the past may have been withheld because of
the belief that Ex-Im Bank may no longer be willing to approve
applications for certain types of environmentally sensitive projects,
although it is impossible to determine the extent of this phenomenon.
Since the implementation of its environmental guidelines, Ex-Im Bank
has only denied one final application on environmental grounds--the
Peruvian gas field development project that was denied in August
2003.[Footnote 22] In 1996, it also rejected the Three Gorges project
in an earlier phase of the application process. After undertaking an
environmental assessment, the Ex-Im Bank Board of Directors decided not
to issue letters of interest--the document Ex-Im Bank issues in its
preliminary review of a project seeking long-term loans and guarantees.
Ex-Im Bank cited a number of environmental concerns that would have to
be addressed by the Three Gorges project sponsors before it would
reconsider requests for support, and requested information from the
sponsors to that end. The sponsors did not provide the information, and
the project eventually proceeded with financing from other sources.
Environmental policies are only one of many among many factors that
affect the competitiveness of U.S. exports financed by Ex-Im Bank.
Other factors include various Ex-Im Bank policies such as domestic
content requirements,[Footnote 23] its application process and
underwriting requirements, and the terms of coverage its policies
provide. Other competitiveness factors are unrelated to Ex-Im Bank
policies, such as foreign exchange rates and the geographic location of
projects. In addition, factors such as the technological specifications
of U.S. exports can be important to sourcing decisions. For example,
one multinational company told us that whether the host country has 50
cycle or 60 cycle electricity technology is the overriding factor for
determining where their products are going to be manufactured.
The potential impacts of ECA environmental guidelines on U.S. exports
depend in part on the overall business structure of the firms seeking
ECA financing. For businesses that produce, or source, their products
in the United States, the implementation of common environmental
guidelines across ECAs should theoretically lower the threat of losing
businesses to other ECAs with lax environmental standards. Since these
companies are generally confined to doing business with Ex-Im Bank,
they would otherwise lose export business if project sponsors select
another ECA instead of Ex-Im Bank; therefore these companies have been
the strongest business advocates for common guidelines. However,
multinational companies may not be affected to the same degree.
Officials from several of the companies we met with stated that as
multinational companies they have been able to get financing from ECAs
other than the U.S. Export-Import Bank. These companies are large and
flexible enough that they can seek financing from ECAs in other
countries where they have a business presence if they believe that Ex-
lm Bank's policies, including its environmental review process, would
constitute a significant barrier to winning a project.
Business Groups Have Concerns, but Impacts Are Difficult to Confirm:
Business views on ECA environmental guidelines are mixed. Some business
representatives we spoke with expressed concerns about specific impacts
of the environmental review process, such as delays and costs. Others
were concerned about the impacts of more intangible aspects that lend
uncertainty to the process, such as public disclosure of project
information. Some business representatives also acknowledged that their
businesses are integrating the ECA environmental review policies and
procedures into their own risk assessment processes.
Representatives of several companies cited delays during the project
approval process as the key impact of the environmental assessment. Ex-
Im Bank often asks for additional information from the project sponsors
and suppliers to supplement the initial environmental impact assessment
submitted. In our review of 24 thermal power plant, oil and gas
development, and metal mining projects authorized by Ex-Im Bank between
1995 and 2003, we could not determine if the environmental assessment
caused any project delays claimed by the companies. We found delays in
some instances related to the gathering and submission of existing
documentation to Ex-Im Bank for review and discussion of any
outstanding issues, but the records were insufficient for attributing
delays to environmental reasons as opposed to financial or other
issues. We did find that Ex-Im Bank, in some cases, took measures to
limit delays caused by environmental reviews and requirements. This
included sending staff to review documentation in country, and making
project support contingent on certain documents being provided at a
later date.
Business representatives also cited additional costs as an area of
concern, especially when project costs increased due to modifications
necessary to meet environmental requirements. We found that in some
instances Ex-Im Bank engineering staff did require project
modifications to meet Ex-Im Bank guidelines for the 24 projects we
reviewed. For example, a coal-fired power plant located in China met
all of the air quality standards except for particulate emissions. The
Chinese-built pollution control device met local standards but daily
emissions would exceed the Ex-Im Bank guidelines. The local operator
agreed to operate the device at a slightly higher control efficiency,
which reduced emissions sufficiently to meet Ex-Im Bank's daily
emission limit. Ex-Im Bank officials noted that, as companies have
become more familiar with Ex-Im Bank guidelines, new projects are now
much less likely to require modifications upon review.
Some businesses are also concerned about other aspects associated with
the environmental review process. Many business representatives we
spoke with believe that their products can readily meet the technical
standards of environmental guidelines. They are concerned, however,
about aspects that may result in lost business. For example, some
elements of Ex-Im Bank's environmental guidelines require a more
qualitative judgment of project impacts, such as how to mitigate
socioeconomic and sociocultural impacts (such as those associated with
the dislocation of people). However, some business representatives
stated that these more qualitative areas of environmental standards
present challenges and risks to businesses, because of the importance
of other parties such as host governments in making and carrying out
commitments.
Disclosure of project information during environmental review is
another concern for some businesses.[Footnote 24] Some companies are
concerned that disclosure of project information may result in their
losing business to competitors if their competitors become aware of a
project through the disclosure process. Other companies were also
concerned about the potential impacts of public scrutiny. One company
representative said that part of the reason the company's sourcing has
shifted to Europe was because of Ex-Im Bank's disclosure policy, since
European ECAs do not disclose information prior to project approval,
although most did not identify differences in environmental guidelines
as the determining factor in sourcing decisions.
We did not find specific examples where the disclosure of project
information had negative impacts. Company representatives we spoke with
did not provide us with any specific cases where they lost business
because of the publication of the environmental impact assessment;
their concerns were primarily hypothetical. The environmental impact
assessments we reviewed did not contain any business proprietary
information and did not contain information on the specific companies
involved in the projects. According to Ex-Im Bank officials, any such
information would be removed by the applicant or owner of the
environmental assessment prior to the release of the document to
interested parties.
Some companies have acknowledged that they are integrating the ECA
environmental review policies and procedures into their own risk
assessment processes. For example, several companies said that
environmental review is increasingly viewed as a key component of their
overall due diligence, which they conduct regardless of ECA
requirements. Companies also acknowledge that since environmentally
sensitive projects are coming under increasing NGO scrutiny, their
reputations may be at risk if the projects they are involved in are
deemed to be environmentally damaging.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Secretaries of State and the
Treasury, and the Chairman of Ex-Im Bank. The Department of the
Treasury and Ex-Im Bank provided written comments on the draft report,
which are reprinted in appendixes V and VI, respectively. The
Department of the Treasury considered the report well balanced, but
also emphasized its belief that U.S. leadership on this issue has had a
significant positive impact among export credit agencies, despite the
lack of a formal OECD agreement. Ex-Im Bank stated that the report
provides a thorough analysis, but emphasized its view that, despite
progress, the broad nature of the Common Approaches does not yet level
the playing field for U.S. exporters. The Department of State did not
provide formal comments.
We are sending copies of this report to interested congressional
committees, the Secretaries of State and the Treasury, and the Chairman
of Ex-Im Bank. We will also make copies available to others upon
request. In addition, the report will be available at no charge on the
GAO Web site at [Hyperlink, http://www.gao.gov.] http://www.gao.gov.
If you or your staff have any questions about this report, please
contact me at (202) 512-4347. Other GAO contacts and staff
acknowledgments are listed in appendix VII.
Loren Yager, Director International Affairs and Trade:
Signed by Loren Yager:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
The Chairman of the House Committee on International Relations and the
Chairman of the Subcommittee on Europe, House Committee on
International Relations asked us to examine the effect of environmental
standards for export credit agencies. In response, we assessed (1) the
achievements of the Common Approaches and the remaining differences
among the members of the Organization for Economic Cooperation and
Development (OECD), (2) the prospects for further advancement on common
environmental guidelines for export credit agencies, and (3) the impact
that environmental guidelines for export credit agencies may have on
U.S. exports.
To identify the achievements of the Draft Recommendation on Common
Approaches on Environment and Officially Supported Export Credits
(Common Approaches) and the remaining differences among the OECD
members, we met with and obtained information from officials at the
OECD secretariat, export credit agency (ECA) officials in a number of
OECD member countries (Belgium, Canada, France, Germany, Japan, and the
United Kingdom), and from several U.S. government agencies.
Specifically, we interviewed officials in the OECD Trade Directorate's
Export Credit Division and reviewed OECD documents presented in
meetings of the Working Party on Export Credits and Credit Guarantees
(ECG). We also met with ECA and other government officials in Belgium,
Canada, France, Germany, and the United Kingdom. In addition, we met
with senior officials from the Japanese ECA in Washington, D.C. We
reviewed and compared the environmental policies of these countries'
ECAs as well. We also met with officials from the U.S. Departments of
the Treasury and State and the Export-Import Bank. We obtained an
understanding of the environmental policies of each ECA we visited
based on information we received in interviews and the documents we
were provided. We reviewed and compared the ECA policies according to
key procedural elements we identified, such as the screening and
categorization of projects, the technical standards used during the
review, and public disclosure policies.
To determine the prospects for further advancement on environmental
guidelines for ECAs, we interviewed and obtained information from OECD,
ECA, and other officials from Belgium, Canada, France, Germany, Japan,
and the United Kingdom. We also interviewed representatives from
nongovernmental organizations (NGO) active in ECA issues in Belgium,
Canada, France, Germany, the United Kingdom, and the United States. In
addition, we interviewed business groups knowledgeable about export
credit issues in Canada, France, Germany, the United Kingdom, and the
United States to understand their views on the progress that OECD
countries have made since the conclusion of the negotiations and on
what they believe will and should happen next. We gained these
officials' perspectives on their goals for further negotiations on ECA
environmental guidelines and what additional provisions they would like
to include in the next revision of the OECD Common Approaches. We also
reviewed documents from the OECD detailing members' experiences with
implementing the Common Approaches.
To understand what impacts environmental guidelines for export credit
agencies may have on U.S. exports, we met with, and obtained and
analyzed data from, officials at Ex-Im Bank and representatives of U.S.
businesses. We first obtained and analyzed data from Ex-Im Bank on
long-term transactions that had been authorized by Ex-Im Bank to
determine the number of transactions and the amount of Ex-Im Bank
financing that falls into each of the three environmental risk
categories. We determined that Ex-Im Bank data were sufficiently
reliable for analyzing for this engagement, based on our assessment of
the completeness and accuracy of the data. We reviewed the data to
determine industry sector representation in each of the categories. We
then selected 24 of the authorized projects to more specifically
determine how they had been affected by Ex-Im Bank environmental
guidelines. These 24 projects were selected using several criteria.
First, we focused on the three industry sectors (thermo power, oil and
gas development, and metal mining) representing about 70 percent of
non-nuclear long-term higher risk projects. We also selected projects
from the entire period that Ex-Im Bank's guidelines were in effect.
Finally, we selected projects that received both a full and a medium
environmental review, with an equal number in each category for oil and
gas and thermo power. We selected all four metal mining projects, since
there was a limited number. We analyzed Ex-Im Bank environmental
assessments for each of these projects and met with Ex-Im Bank
officials in the Engineering and Environment division to discuss the
environmental review process and their interaction with applicants for
financing. In addition, we interviewed representatives of nine U.S.
companies, including a U.S. subsidiary overseas, to obtain their views
and concerns about the impact of environmental guidelines on their
exports. These businesses were responsible for 82 out of the 522 long-
term projects authorized between October 1995 and May 2003 and 19 of
the 38 non-nuclear projects that underwent a full environmental review.
:
The information on foreign laws or regulations in this report does not
reflect our independent legal analysis but is based on interviews and
secondary sources.
We conducted our review from November 2002 through August 2003 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: OECD Members and Common Approaches Adherents:
Table 4 represents the membership of the OECD's ECG, and their
respective positions on Common Approaches issues. There are 29 members
of the ECG. With the United States declining to accept the Common
Approaches in November 2001, 28 ECG members agreed to voluntarily
adhere to the Common Approaches.
By March 2003, 24 countries had reported to the OECD on their category
A and B projects for 2002 (that number includes the United States,
although they do not have to report since they are not technically
adhering to the Common Approaches). Four adherents to the Common
Approaches had not reported anything as of March 2002--the Czech
Republic, Mexico, the Slovak Republic, and Turkey.
Seventeen countries reported that during 2002 they had reviewed at
least one category A or B project.
Table 4: OECD Members and Common Approaches Adherents:
ECG: members: (29): Australia; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Austria; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Belgium; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Canada; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Czech Republic; Common Approaches adherents: (28):
Yes; Members reporting on A and B projects: (24): No; Members with:
A and B projects for 2002: (17): No.
ECG: members: (29): Denmark; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Finland; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): France; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Germany; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Greece; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): No.
ECG: members: (29): Hungary; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): No.
ECG: members: (29): Ireland; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): No; Members with A
and B projects for 2002: (17): No.
ECG: members: (29): Italy; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Japan; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Korea; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Luxemburg; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): No.
ECG: members: (29): Mexico; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): No; Members with A
and B projects for 2002: (17): No.
ECG: members: (29): Netherlands; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): New Zealand; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): No.
ECG: members: (29): Norway; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): No.
ECG: members: (29): Poland; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): No.
ECG: members: (29): Portugal; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): No.
ECG: members: (29): Slovak Republic (joined 5/27/02); Common Approaches
adherents: (28): Yes; Members reporting on A and B projects: (24):
No; Members with A and B projects for 2002: (17): No.
ECG: members: (29): Spain; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Sweden; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Switzerland; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): Yes; Members with A and
B projects for 2002: (17): Yes.
ECG: members: (29): Turkey; Common Approaches adherents: (28): Yes;
Members reporting on A and B projects: (24): No; Members with A
and B projects for 2002: (17): No.
ECG: members: (29): United Kingdom; Common Approaches adherents: (28):
Yes; Members reporting on A and B projects: (24): Yes; Members with
A and B projects for 2002: (17): Yes.
ECG: members: (29): United States; Common Approaches adherents: (28):
No; Members reporting on A and B projects: (24): Yes; Members with
A and B projects for 2002: (17): Yes.
Source: GAO analysis based on OECD documents.
[End of table]
[End of section]
Appendix III: Description of Five ECA-Supported Projects:
ECAs provide financial support for a wide array of goods and services.
However, projects in certain areas, such as thermal power, hydropower,
and oil and gas, have been the most likely to require environmental
review under the Ex-Im Bank's or other export credit agencies'
guidelines. In this appendix, we describe five recent projects that
have been subject to environmental review and briefly discuss
environmental concerns associated with the projects and ECAs' project
involvement.
Batu Hijau Mine Project:
:
Project Description:
Batu Hijau is an open pit copper and gold mine located on Indonesia's
Sumbawa Island. A consortium, comprised of U.S.-based Newmont Mining
Corporation, Sumitomo (Japan), and PT Pukuafu Indah (Indonesia),
operates the mine. Newmont holds majority ownership in the joint
venture. Batu Hijau began operation in 2000 and is expected to continue
operation for 20 years. When the mine is completely excavated, 3
billion tons of rock will have been mined, creating a mine pit that
will be 2,625 meters wide (8,612 feet) and 460 meters deep (1,509
feet). As of January 2003, Batu Hijau employed approximately 6,700
people, 95 percent of whom are Indonesian. In 2002, the mine as a whole
contributed more than $171 million to the Indonesian economy. The mine
produced 657.7 million pounds of copper and 492 thousand ounces of gold
in 2002.
Environmental Concerns:
Batu Hijau is located primarily within a previously undisturbed
tropical forest. Environmental concerns associated with Batu Hijau
include:
* loss of vegetation, specifically loss of primary tropical forest and
habitat associated with the protected yellow-crested cockatoo;
* impact on local water levels and water quality (pH and
sedimentation);
* disposal of large amounts of excavated rock and tailings, waste rock
created during the extraction process;
* impact of air emissions from mine infrastructure and equipment; and:
* maintenance of mine pit environmental programs following cessation of
mine operation.
ECA Involvement:
In 1997, Ex-Im Bank provided $425 million in project financing to Batu
Hijau project sponsors and developers. Japan's export credit agency
also provided support for Batu Hijau.
Ex-Im required a number of environmental studies and project
modifications designed to minimize the project's environmental and
social impacts before providing financing. Project developers have
attempted to mitigate environmental concerns through, among other
efforts, development of a deep-sea tailings disposal system, operation
of a revegetation program, and study of water seepage patterns.
Camisea Natural Gas Project:
:
Project Description:
The over $2 billion Camisea natural gas project, located near the Lower
Urubamba River in the Echarte district in Peru, involves the extraction
and processing of natural gas and natural gas liquids and the
transportation of these products to markets in Lima and ports for
export. Royal Dutch/Shell first discovered the Camisea gas fields in
the mid-1980s, and Shell and Mobil Oil further explored the fields
between 1996 and 1998. In July 1998, Shell and Mobil withdrew from the
project, leading the government of Peru to pursue alternative
developers. In December 2000, the government of Peru signed a series of
contracts with PlusPetrol Corporation (Argentina) and with two
consortiums, including Grana y Montero (Peru), Hidrocarburos Andinos
(Argentina), Hunt Oil Company (USA), SK Corporation (Korea), Sonatrach
(Algeria), Sucursal del Peru, Sucursal Peruana, and Techint
(Argentina).
The Camisea project is expected to supply a substantial portion of
Peru's energy needs and allow for natural gas export. Camisea requires
construction of eight wells accessing the San Martin and Cashiriari
natural gas fields; a liquid separation plant to separate water and
liquid hydrocarbons; two pipelines (one for natural gas and one for
natural gas liquids), one estimated to run 540 kilometers (336 miles)
and the other 680 kilometers (423 miles); a coastal fractionation plant
to separate liquids into commercial quality products, and an offshore
loading facility. Construction of project components under the
consortium contracts began in 2001 and was roughly 60 percent complete
as of February 2003. The project is scheduled to begin commercial
production in August 2004. The San Martin and Cashiriari gas fields
together contain proven reserves[Footnote 25] of 8.7 trillion cubic
feet of natural gas and 545 million barrels of natural gas liquids.
Project officials estimate that project construction will employ an
average of 1,700 people during the construction period.
Environmental Concerns:
The Camisea project is located within Peru's Amazon jungle in close
proximity to several voluntarily isolated indigenous peoples. Two-
thirds of the project area, sometimes referred to as Block 88, lies
within the Nahua-Kugapakori Indigenous Reserve and straddles the
Camisea River. The coastal fractionation plant will be located in the
buffer zone of the Paracas National Reserve, Peru's only coastal marine
reserve. The project pipelines will traverse the rain forests between
Camisea and the coast, passing over the Andes Mountains at an altitude
of 4,500 meters (14,764 feet).
The location of the project has led to major concerns about Camisea's
environmental and social impacts that include:
* increased contact between indigenous peoples and project employees
and the associated risks of epidemic disease and cultural damage,
* improper use of project right-of-way by Peruvians seeking fertile
land and erosion and loss of biodiversity along the right-of-way,
* loss of biodiversity in the Camisea River and related effects on
indigenous peoples dependent on the river for fish and water,
* lack of sufficient information on alternative sites in the
environmental assessment needed to justify construction of the
project's marine terminal facility adjacent to the environmentally
sensitive Paracas Bay Natural Reserve, and:
* loss of biodiversity in Paracas National Reserve.
ECA Involvement:
On August 28, 2003, Ex-Im Bank's Board, in a 2 to 1 vote, declined to
support Camisea on environmental grounds.
Chad-Cameroon Petroleum Pipeline Project:
:
Project Description:
The Chad-Cameroon Petroleum Pipeline Project accesses the oil fields at
Doba in southern Chad and transports the oil 1,070 kilometers (665
miles) to an off-shore oil-loading facility on Cameroon's coast.
Sponsors of the project, ExxonMobil (USA), Petronas (Malaysia), and
ChevronTexaco (USA), estimate construction costs will be $3.5 billion.
Estimates indicate that the government of Chad will receive a total of
$2 billion in revenues from the project, while the government of
Cameroon will receive $500 million, assuming reserves of 917 million
barrels of oil. In Chad, revenues from the pipeline could increase
total government revenues by 45 to 50 percent. In the fourth quarter of
2002, wage payments of $12 million were made to the 9,643 workers from
Chad and Cameroon that the project employs. As construction concludes,
project developers are reducing the workforce; nonetheless, wage
payments totaling $10.1 million were made to workers from Chad and
Cameroon in the first quarter of 2003. Pipeline operation began July
24, 2003, and full operation is expected to commence by the end of
2003.
The World Bank Group has provided $92.9 million in direct loans to the
governments of Chad and Cameroon to finance the governments' minority
holdings in the project. Additionally, the International Finance
Corporation, the World Bank Group institution that facilitates private
sector projects, has provided $100 million in loans to the joint
venture pipeline companies and has mobilized an additional $100 million
from commercial lenders.
Environmental Concerns:
Project sponsors undertook some project modifications to meet project
standards established by the World Bank and Ex-Im Bank, including
alteration of the pipeline route and development of a community
consultation process. Concerned NGOs, however, claim that project
developers insufficiently addressed the concerns of local residents and
that few changes resulted from environmental reviews.
Environmental and social issues raised by both World Bank and
environmental NGOs include:
* possible oil spills occurring along the pipeline or at the offshore
oil-loading facility;
* decreases in biodiversity along the pipeline right-of-way,
particularly along the Sanaga River system, within Cameroon's Atlantic
littoral rainforest, and in the Kribi coastal region;
* negative effects on indigenous Bakola pygmies living in the vicinity
of the pipeline; and:
* governmental repression of opposition to the pipeline as seen in the
imprisonment of a Member of Parliament as a result of his opposition to
the project.
ECA Involvement:
Both Ex-Im Bank and France's ECA, Coface, have provided support to the
Chad-Cameroon project. In 2000, Ex-Im Bank approved $200 million in
export credit guarantees for a U.S.-based engineering firm contracted
to build the pipeline portion of the project.
Olkaria III Geothermal Power Plant:
:
Project Description:
The Olkaria III geothermal power plant, located in the Olkaria Domes
geothermal field near Lake Naivasha, is Kenya's first privately
developed and owned geothermal power plant. Olkaria III is the third
geothermal development project undertaken in the Olkaria region but the
first under ORMAT, a U.S.-based geothermal developer. Olkaria I has
been operational since 1981 under the governance of Kenya Electricity
Generating Company Ltd. (KenGen), a Kenyan energy state-owned
enterprise. KenGen is supervising the public sector development of
Olkaria II, scheduled to begin operation in September 2003. Olkaria III
began operation of an early production facility in August 2000 with
scheduled expansion of production from 12 megawatts to 48 megawatts.
ORMAT funded the entire $50 million first phase of the Olkaria III
project.
Environmental Concerns:
In 1984, 3 years after Olkaria I began operation, but before the
creation of Olkaria II and III, Kenya created Hell's Gate National
Park, including in the park the tract of land upon which the Olkaria
geothermal plants are located. Additionally, indigenous Maasai peoples
have historically occupied the land surrounding Lake Naivasha. These
two complicating factors have led to environmental and social concerns
surrounding the Olkaria developments that include:
* possible emissions-related negative health impacts on local Maasai
communities,
* Maasai loss of historically occupied lands, and:
* possible negative impacts on local flower growers and wildlife
dependent upon Lake Naivasha water.
Olkaria III project developers have addressed some environmental
concerns through use of air-cooled geothermal technology and
reinjection of geothermal fluids produced by the plant, technologies
not employed in Olkaria I or II.
ECA Involvement:
ORMAT's application for Ex-Im Bank support has been pending since 2001.
No decision had been made as of August 28, 2003. Ex-Im officials stated
that the project delay was not due to environmental concerns.
Three Gorges Dam:
:
Project Description:
The government-owned Three Gorges Dam, located on the Yangtze River in
China's Hubei Province, will be the largest hydroelectric plant in the
world when it is completed in 2009. Dam construction began in 1994, and
the water sluice gates were first closed on June 1, 2003. Companies
headquartered throughout the world have received construction
contracts.
The Chinese government has undertaken construction of the dam,
primarily to increase China's power generation capacity, control
downstream flooding of the Yangtze, and improve river navigation for
large vessels. The annual energy generating capacity of the dam's 26
turbine generators will be 84.7 billion kilowatt hours, generated from
a renewable energy source without creating pollution. The dam itself
will stand 181 meters (594 feet) high and create a reservoir stretching
over 600 kilometers (373 miles). The reservoir is expected to have a
floodwater storage capacity of 28.97 billion cubic yards. A multistage
ship lock and lift will provide upstream navigation to river vessels.
Environmental Concerns:
Throughout planning and construction of the Three Gorges Dam, the
project has raised environmental and social concerns that include:
* inadequate treatment of water discharged above the dam and associated
health risks for communities bordering the reservoir,
* relocation and provision of housing and employment for the up to 1.3
million people residing in the plain of the reservoir,
* loss of historical and archeological artifacts located in the plain
of the reservoir,
* possibility of sedimentation limiting the dam's ability to control
flooding and increasing regional seismic activity, and:
* alterations in the Yangtze River's ecosystem and surrounding river
basin.
The Chinese government has taken steps to address several of the above
issues, including relocation of the 1.3 million people affected by the
dam's construction beginning in 1995, efforts to remove historical and
archeological artifacts from the reservoir area, and creation of water
treatment plants upstream of the dam. The results of the government's
efforts to improve the environmental impact of the dam have been
subject to debate.
ECA Involvement:
In May 1996, Ex-Im Bank's Board of Directors declined to issue a letter
of interest to exporters seeking a financing commitment for the Three
Gorges Dam project. This action was based on a determination that the
information made available to date indicated that the project as
planned would not meet the Bank's environmental guidelines. The Ex-Im
Bank sent a letter in July 1996 detailing the type and scope of
information that it would need to identify and assess proposed
mitigation measures that could be incorporated into the project in
order to meet its guidelines. That information was never provided, and
project developers eventually successfully sought support from other
OECD export credit agencies.
[End of section]
Appendix IV: Comparison of ECA Environmental Policies for Seven Selected
Countries:
Table 5 details the environmental review procedures and policies of the
export credit agencies of six OECD countries that have agreed to
voluntarily adhere to the Common approaches, and of Ex-Im Bank. The
screening procedures, impact categories, and environmental review
processes are generally similar for all of the ECAs. The main
differences are in the ECAs' public disclosure policies and in their
use of technical standards for environmental reviews.
Table 5: Comparison of Environmental Review Procedures and Policies for
ECAs of Selected OECD Countries:
Date of policy introduction; Belgium: Office National du Ducroire:
(OND): 2002; Canada: Export Development Canada: (EDC): 1999; (revised
2001); France: Coface: 1999; (revised periodically since 2001);
Germany: Hermes: 2001; (implemented Common Approaches 2002); Japan:
Japan Bank for International Cooperation: (JBIC): 1999; (revised 2002);
United Kingdom: Export Credit Guarantee Department: (ECGD): 2000;
(revised 2003); United States: Export Import Bank: (Ex-Im Bank):
1995; (revised 1998).
Cost thresholds; Belgium: Office National du Ducroire: (OND):
Applications subject to environmental screening if requested coverage
is for 10 million special drawing rights or more, unless project is in
a sensitive location; Canada: Export Development Canada: (EDC):
Applications subject to environmental screening if requested coverage
is for 10 million SDR or more and repayment term is for 2 years or
more; France: Coface: Applications subject to environmental
screening if requested coverage is for 10 million euros or more;
Germany: Hermes: Applications subject to environmental screening if
requested coverage is at least 15 million euros or if project has
potential to cause significant adverse impacts; Japan: Japan Bank for
International Cooperation: (JBIC): All applications subject to
environmental review. If requested coverage is for less than 10 million
SDR, project is immediately classified as category C, and no further
environmental review is required, unless project has sensitive
characteristics or is in a sensitive location; United Kingdom: Export
Credit Guarantee Department: (ECGD): All applications screened for
environmental impact; United States: Export Import Bank: (Ex-Im
Bank): Application subject to environmental screening if requested
coverage is for $10 million or greater, or repayment term exceeds 7
years.
Screening procedures; Belgium: Office National du Ducroire: (OND): All
applicants submit completed environmental questionnaire with
application, which is used for categorizing potential projects;
Canada: Export Development Canada: (EDC): EDC may rely on past agency
experience, applicable outside resources, and/or completed
environmental screening questionnaires to screen potential projects and
categorize them; France: Coface: All applications are prescreened,
based on amount of requested coverage and sensitivity of project
location. Applications that meet the cost threshold then complete a
screening questionnaire, which is used for categorizing potential
projects; Germany: Hermes: Projects that meet the cost thresholds
undergo a preliminary examination, and the applicant must submit
information on environmental impact. Underwriters evaluate each project
based on cost and sector; Japan: Japan Bank for International
Cooperation: (JBIC): All applicants submit a completed environmental
questionnaire, which is used for categorizing potential projects;
United Kingdom: Export Credit Guarantee Department: (ECGD): ECGD
screens applications to determine need for further environmental
information. Applicants for high impact projects must submit a full
Environmental Impact Assessment (EIA). Applicants for medium impact
projects must complete an impact questionnaire. Applicants for low
impact projects have no further requirements; United States: Export
Import Bank: (Ex-Im Bank): Applications for projects above the
threshold(s) must include a screening document, which allows Ex-Im to
determine if an environmental review is necessary, and if so, the scope
of that review. Applications for projects below the threshold(s) are
screened internally to determine if a review is necessary.
Impact categories; Belgium: Office National du Ducroire: (OND): High
impact (Category A) Project has a definitive negative impact on the
environment, and requested coverage is for more than 10 million SDR;
Medium impact (Category B) Project has an uncertain impact on the
environment or has a definitive negative impact on the environment but
requested coverage is less than or equal to 10 million SDR; Low impact
(Category C) Project has no impact on the environment, or the impact is
positive; Canada: Export Development Canada: (EDC): High impact
(Category A) Project is likely to have significant adverse impacts that
are sensitive, diverse, or unprecedented and may affect an area broader
than the sites subject to physical works; Medium impact (Category B)
Project has potential adverse impacts that are less adverse than those
of category A projects and are site-specific and rarely irreversible.
Mitigation measures are more readily available; Low impact (Category
C) Project is likely to have minimal or no adverse impacts; France:
Coface: High impact (Category A) Project has potentially significant
adverse impact; Medium impact (Category B) Project has potentially
adverse impacts, which may require additional review; Low impact
(Category C) Project has little or no impacts; Germany: Hermes: High
impact (Category A) Project is assumed to have strong ecological,
social, or developmental impacts, which in most cases appear to be not
locally limited and/or reversible; Medium impact (Category B) Project
is assumed to have limited ecological, social, or developmental
impacts, which usually appear to be locally limited and reversible;
Low impact (Category C) Project is expected to have no or only
insignificant ecological, social, or developmental impacts; Japan:
Japan Bank for International Cooperation: (JBIC): High impact (Category
A) Project is likely to have significant, complicated, and/or
unprecedented adverse impacts that are sensitive and may affect an area
broader than the sites subject to physical works; Medium impact
(Category B) Project has potential adverse impacts that are less
adverse than those of category A projects and are site specific and
rarely irreversible. Mitigation measures are more readily available;
Low impact (Category C) Project has little or no adverse environmental
impacts; United Kingdom: Export Credit Guarantee Department: (ECGD):
High impact (Category A) Project has potential for major adverse
impacts on environment, workforce, immediate dependents, or community
that may not be predictable and are usually irreversible, diverse, or
sensitive; Medium impact (Category B) Project could cause adverse
impacts but are unlikely to be as diverse or sensitive as those for
high impact projects. Remedial measures can be implemented more
easily; Low impact (Category C) Project is unlikely to cause material
adverse impacts; United States: Export Import Bank: (Ex-Im Bank):
High impact (Category B) Project has potential for significant impact
and/or is a project finance transaction, is associated with a
hydroelectric or forestry project, or is in or near a sensitive
location; Medium impact (Category C) Project has potential for some
impact; Low impact (Category A) Project has little or no potential
impact. The export is a product not identified with a particular
project or the project it is identified with is in one of several
exempt sectors.
Environmental review process; Belgium: Office National du Ducroire:
(OND): High impact Environmental impact assessment is requested and
then assessed using OND's internal checklist ; Medium impact Exporter
must complete extensive questionnaire, analyzed by the underwriter
according to an objective scoring method. If the questionnaire
indicates an acceptable impact on the environment, the review is
complete. If an important impact on the environment is indicated, OND
refuses the project unless mitigation measures are put in place or an
EIA is submitted; Low impact; No further review required; Canada:
Export Development Canada: (EDC): High impact Environmental impact
assessment (or comparable report) must be carried out by an independent
expert not affiliated with the project; Medium impact; Scope and form
of environmental review may vary from project to project; Low impact;
No environmental review is required beyond such information as may be
required for project categorization; France: Coface: High impact
Environmental review is based on the EIA submitted by the applicant.
The review assesses the potential environmental impact of the project
and the results are checked against the environmental regulations of
the host country and international standards; Medium impact
Environmental review is based on additional environmental provided by
the applicant and consultation with the project stakeholders, including
sponsor, exporter, and other sources; Low impact; No environmental
review required beyond screening; Germany: Hermes: High impact
Applicant submits an exhaustive description of all relevant
environmental aspects; Medium impact Plausible criteria for
environmental relevance or generally acceptable information is
sufficient; Low impact No further information required; Japan: Japan
Bank for International Cooperation: (JBIC): High impact Environmental
impact assessment is required and JBIC will likely visit the project
site. If the project results in large-scale resettlement, applicants
must submit a resettlement plan. JBIC's environmental review is based
on the EIA and other reports prepared by project proponents and
submitted through the borrower; Medium impact; Scope and form of
environmental review may vary from project to project but will examine
potential positive and negative effects and mitigation options. JBIC's
environmental review is based on information; United Kingdom: Export
Credit Guarantee Department: (ECGD): High impact EIA (or other
comparable assessment) must be carried out, with inputs from experts;
Medium impact; Full review of application forms and impact
questionnaire undertaken; Low impact Initial screening of the
application forms with no further review of the project; United
States: Export Import Bank: (Ex-Im Bank): High impact Applicant
required to submit an EIA, on which Engineering and Environment
Department bases its evaluation of the project; Medium impact
Applicant must submit sufficient information for Engineering and
Environment Department to determine if the project adheres to Ex-Im
guidelines; Low impact No further review is required.
Japan: Japan Bank for International Cooperation: (JBIC): Public
disclosure of environmental information: provided by borrowers and
related parties; Low impact; No environmental review is required
beyond such information as may be required for project categorization;
United Kingdom: Export Credit Guarantee Department: (ECGD): Public
disclosure of environmental information: No; United States:
Export Import Bank: (Ex-Im Bank): Public disclosure of environmental
information: No.
Public disclosure of environmental information; Belgium: Office
National du Ducroire: (OND): No commitment to providing public with
project information before or after making a financing decision, due to
national regulations; Canada: Export Development Canada: (EDC): No
commitment to providing public with project information before making a
financing decision, but encourages project sponsors to make information
available; makes limited project information available after export
credit agreement is signed; France: Coface: No commitment to
providing public with project information before making a financing
decision; publishes some projects' environmental assessments after
making financing decision; Germany: Hermes: No commitment to
providing public with project information before making a financing
decision, but says will publish information about large and sensitive
projects, after making a financing decision, with consent from
exporter; Japan: Japan Bank for International Cooperation: (JBIC):
Commitment to providing public with project information before making a
financing decision, with consent of exporter; will publish information
on its Web site prior to making financing decision; encourages public
input; United Kingdom: Export Credit Guarantee Department: (ECGD):
Commitment to providing public with project information before making a
financing decision, with consent from exporter; will publish
information on its Web site, prior to making financing decision;
United States: Export Import Bank: (Ex-Im Bank): Commitment to
providing public with project information before making a financing
decision, requiring exporter to permit release of its project's EIA.
Will publish information on high and medium impact projects on its Web
site prior to making financing decision, as well as information on how
to obtain a project's EIA. Encourage public comments on potential
projects.
Technical standards used; Belgium: Office National du Ducroire: (OND):
Use both host country and international standards; Canada: Export
Development Canada: (EDC): No single set of standards; benchmarking
based on standards from World Bank, regional development banks, Canada,
World Health Organization; France: Coface: Developed own standards
for three industry sectors, using World Bank standards, and industry
best practices as benchmarks; Germany: Hermes: No single set of
standards; projects have to meet host country standards or applicants
can explain why they do not; host country standards are then compared
with international standards; Japan: Japan Bank for International
Cooperation: (JBIC): Benchmarking based on standards from host country
and international organizations; JBIC will consult with stakeholders
for projects that do not meet either of these standards; United
Kingdom: Export Credit Guarantee Department: (ECGD): Benchmarking based
on standards from several sources: World Bank Group, UK/EU standards,
industry best practices, regional development banks; United States:
Export Import Bank: (Ex-Im Bank): All projects must meet Ex-Im's own
standards, as adapted from World Bank standards, and host country
standards.
Source: GAO analysis based on OECD and county documents.
[End of table]
[End of section]
Appendix V: Comments from the Department of the Treasury:
DEPARTMENT OF THE TREASURY WASHINGTON, D.C. 20220:
August 28, 2003:
Loren Yager:
Director, International Affairs and Trade U.S. General Accounting
Office:
441 G Street, N. W. Washington, D.C. 20548:
Dear Mr. Yager:
Thank you for providing the opportunity to comment on GAO's draft
report entitled, "Export Credit Agencies: Movement Toward Common
Environmental Guidelines, but National Differences Remain" (GAO-03-
1093).
We were glad to assist your staff in understanding the fairly complex
negotiating history of this subject. Since your review began in late
2002, I hope that the meetings and other communications between our
organizations have been helpful to GAO's task.
We find your report to be a thorough and thoughtful analysis of the
OECD process and effort to develop common environmental guidelines for
export credit agencies. It was a difficult task to convince export
credit agencies to introduce entirely new considerations into their
analyses, when those analyses have historically been purely financial
in nature. Despite the fact that a formal OECD agreement has not yet
been reached, we believe that U.S. leadership on this issue has had a
significant impact on highlighting the environmental issue among export
credit agencies generally. We consider this to be a positive outcome in
any event.
We look forward to the upcoming OECD negotiations and hope that they
will be an opportunity to further improve upon the draft OECD agreement
known as "Common Approaches.":
Thank you again for a well-balanced report.
Sincerely,
Clay Lowery:
Deputy Assistant Secretary:
Debt, Development and Quantitative Policy:
Signed by Clay Lowery:
[End of section]
Appendix VI: Comments from the Export-Import Bank:
EXPORT-IMPORT BANK OF THE UNITED STATES:
September 8, 2003:
Dear Mr. Yager:
Thank you for providing the Draft GAO report entitled "Export Credit
Agencies: Movement toward Common Environmental Guidelines, but National
Differences Remain".
The Export-Import Bank of the United States ("Ex-Im Bank") believes
that the draft provides a thorough analysis of the events and positions
that have led to the present level of ECA environmental review
procedures. Moreover, Ex-In Bank agrees with the GAO's observations
that, despite real progress over the past couple of years in a number
of national ECA review procedures (including the introduction of World
Bank standards and information sharing regimes), the broad nature of
the Common Approaches framework does not yet contain the provisions
necessary to level the playing field for U.S. exporters. Ex-Im Bank's
objective has always been to provide a transparent process and clear,
predictable procedures to ensure that U.S. exporters' competitiveness
is not impaired by the flexible implementation of environmental review
procedures by other ECAs.
Ex-Im Bank appreciates the opportunity to comment on the draft report.
Sincerely,
James C. Cruse
Senior Vice President - Policy:
Signed by James C. Cruse:
[End of section]
Appendix VII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Celia Thomas, (202) 512-8987 Anthony Moran (202) 512-8645:
Acknowledgments:
In addition to the persons named above, Stephanie Robinson, Ming Chen,
Laura Yannayon, Sarah Ellis Peed, Rona Mendelsohn and Jane-yu Li made
key contributions to this report.
:
(320158):
:
:
FOOTNOTES
[1] Export credit agencies are public institutions that provide
official assistance in the form of government-backed loans, guarantees,
and insurance to private corporations that do business abroad,
particularly in the developing world.
[2] The OECD is an organization of 30 industrialized countries,
operating by consensus, that fosters dialogue among members to discuss,
develop, and refine economic and social policies and provides an arena
for setting rules when multilateral agreements are necessary.
[3] Turkey agreed to adhere to all provisions of the Common Approaches
with the exception of a provision in Annex I of the Common Approaches
dealing with locations significant to ethnic groups.
[4] The G-8 is a group of industrialized countries whose heads of state
meet annually to discuss economic and political issues.
[5] Twenty-nine of the 30 OECD members participate in the ECG, a forum
to review export credit issues; this is the setting in which the
negotiations on environmental standards for ECAs took place.
[6] The World Bank Group is made up of the original "World Bank"--the
International Bank for Reconstruction and Development--as well as the
International Development Association, the International Finance
Corporation, the Multilateral Investment Guarantee Agency, and the
International Center for Settlement of Investment Disputes.
[7] Ex-Im Bank's environmental guidelines were last revised in April
1998. The current guidelines will remain in effect until March 31,
2004, having been extended several times. According to Ex-Im Bank
officials, some aspects of the guidelines need to be updated, although
a specific time frame for that has not been announced due to
uncertainty with regard to the final outcome of negotiations on the
Common Approaches.
[8] For more information about this campaign, see http://www.eca-
watch.org/.
[9] The Ex-Im Bank's environmental tables address the following areas:
air quality; water use and quality; waste management; natural hazards;
ecology; socioeconomic and sociocultural framework; and noise.
[10] An environmental impact assessment is a report that evaluates a
project's potential environmental risks and impacts, examines project
alternatives, identifies potential project improvements that could
minimize or mitigate any adverse impacts, and suggests mitigation and
management measures that should be put in place to address potential
impacts. Generally, the applicant contracts with independent experts to
carry out the environmental impact assessment.
[11] Ex-Im Bank officials emphasize that the Bank does not release
confidential business information. Its ex ante disclosure includes
project description and location for medium review projects, and the
project's environmental impact assessment for full review projects,
with any confidential information removed.
[12] "Greenfield site" generally refers to an area of land on which
there previously has not been any commercial development beyond that of
agriculture.
[13] The subgroups are hydroelectricity, oil and gas, power, and pulp
and paper.
[14] The 15 banks that have signed on to the Equator Principles are ABN
AMRO Bank NV, Barclays Bank PLC, Citigroup Inc., Credit Lyonnais,
Credit Suisse Group, Dresdner Bank, HSBC Group, HVB Group, ING Group,
MCC, Rabobank, Royal Bank of Canada, Royal Bank of Scotland, WestLB AG,
and Westpac Banking Corporation.
[15] Four of the 42 transactions were nuclear projects, which are
subject to separate environmental procedures and guidelines.
[16] Ex-Im Bank's Vice President for Engineering and Environment can
determine that those applications receive an environmental review in
certain cases.
[17] For medium review projects, 62 out of 181 were in the energy
sector, accounting for 52 percent of long-term authorized financing.
[18] These are projects that do not have the same degree of financial
backing of host governments, financial institutions, or established
corporations, and thus present greater financial risk to Ex-Im Bank.
Ex-Im Bank defines the term "project finance" as the financing of
projects that are dependent on project cash flows for repayment, as
defined by the contractual relationships within each project.
[19] Thirty four of the 38 non-nuclear projects undergoing full
environmental review were project finance transactions.
[20] For a description of Ex-Im Bank's energy sector financing over the
past decade, see U.S. General Accounting Office, Export-Import Bank:
Energy Financing Trends Affected by Various Factors, GAO-02-1024
(Washington, D.C. 2002).
[21] A gigawatt is a unit of electric generation capacity. According to
the U.S. Department of Energy, U.S. total installed electric generating
capacity was 813 gigawatts as of 2001.
[22] The Ex-Im Bank Board of Directors reviews the environmental
effects of projects on a case-by-case basis, and may approve a project
that does not meet all Ex-Im Bank environmental guidelines, considering
significant mitigating effects and circumstances. Financing may be
conditioned on the implementation of mitigating measures.
[23] Ex-Im Bank maintains limitations on the level of foreign content
that may be included in an Ex-Im Bank financing package. To be eligible
for Ex-Im Bank financing, goods and services in a U.S. supply contract
must be shipped from the United States to a foreign buyer. Ex-Im Bank
will finance goods and services at the lesser amount of either 85
percent of the value of all eligible goods and services in the U.S.
supply contract; or 100 percent of the U.S. content in all eligible
goods and services in the U.S. supply contract.
[24] Ex-Im Bank guidelines require that for its projects in its full
environmental review category, Ex-Im Bank will make available to
interested parties a copy of the project's environmental impact
assessment during the application review process.
[25] Proven reserves are mineral reserves considered economically
viable for extraction and that have been explored sufficiently to make
reliable estimates of the reserve volume, tonnage, and quality.
GAO's Mission:
The General Accounting Office, the investigative arm of Congress,
exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability
of the federal government for the American people. GAO examines the use
of public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO's commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains
abstracts and full-text files of current reports and testimony and an
expanding archive of older products. The Web site features a search
engine to help you locate documents using key words and phrases. You
can print these documents in their entirety, including charts and other
graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document
files. To have GAO e-mail this list to you every afternoon, go to
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order
GAO Products" heading.
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. General Accounting Office
441 G Street NW,
Room LM Washington,
D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.
General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.
20548: