oversight

Export Credit Agencies: Movement Toward Common Environmental Guidelines, but National Differences Remain

Published by the Government Accountability Office on 2003-09-10.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Requesters




September 2003
                 EXPORT CREDIT
                 AGENCIES
                 Movement Toward
                 Common
                 Environmental
                 Guidelines, but
                 National Differences
                 Remain




GAO-03-1093
                 a
                                                September 2003


                                                EXPORT CREDIT AGENCIES

                                                Movement Toward Common
Highlights of GAO-03-1093, a report to          Environmental Guidelines, but National
congressional requesters
                                                Differences Remain



Export credit agencies (ECA) are                Since OECD negotiations began, members have made progress in developing
responsible for providing billions              environmental guidelines for their ECAs and are moving toward common
of dollars worth of support for                 environmental review practices. However, important differences remain.
large-scale industrial projects                 Having agreed to voluntarily implement the Common Approaches beginning
annually, but until recently most               in 2002, many OECD members adopted similar basic procedures for
ECAs did not formally review the                reviewing sensitive projects. However, OECD members’ guidelines and
environmental impacts of these                  practices differ in areas where the United States believes it has among the
projects. The United States,                    more advanced policies, including which technical standards ECAs use to
whose Export-Import Bank began                  review projects and the extent to which environmental impact information is
using environmental guidelines in               publicly disclosed. Although OECD members are considering revising the
1995, pushed for negotiations on                Common Approaches in 2003, the United States is unlikely to achieve all of
common ECA environmental                        its original negotiating objectives because of the desire by some OECD
guidelines at the Organization for              members to gain more experience with the guidelines before renegotiating
Economic Cooperation and                        them and the reluctance of other members to take any steps that might be
Development (OECD). The                         perceived as having a negative effect on the competitiveness of their
OECD negotiations halted in 2001                exporters.
because the United States
believed that the results, called               There is limited evidence that the Export-Import Bank’s environmental
the Common Approaches, were                     guidelines have affected U.S. exports, although the complexity of potential
insufficient. The remaining                     effects and the lack of information make identifying and quantifying impacts
OECD members then pledged to                    difficult. The evidence GAO reviewed indicates that impacts are likely to be
voluntarily implement the                       concentrated in the energy sector. Most Export-Import Bank transactions
Common Approaches. In                           do not require an environmental review because they are either short-term
response to congressional                       transactions, are in certain excluded sectors, or are not considered
interest in ECA environmental                   environmentally sensitive. Finally, while some businesses are more
guidelines, GAO assessed (1) the                concerned about the impacts of environmental guidelines than others, their
level of convergence among                      specific concerns are largely anecdotal and difficult to confirm.
OECD members and the
prospects for further                           Milestones in Efforts to Develop Common Environmental Guidelines for ECAs
advancement and (2) what
impacts such guidelines may have                        1995               1996            1997          1998              1999             2000           2001           2002           2003

on U.S. exports.

                                                 February: Ex-Im Bank             April: OECD ECG       July: ECG agrees          April: ECG issues      November:               April: ECAs
                                                 finalizes environmental          issues statement of   to information            work plan for          U.S. declines           complete first
                                                 guidelines                       intent on export      sharing on large          export credit          to support              project review
                                                                                  credits and the       projects                  negotiations within    Common                  reporting
                                                 April: Ex-Im Bank                environment;                                    ECG                    Approaches,             exercise
                                                 gives detailed proposal          members ready to      October: OECD                                    blocking
                                                 for common guidelines            consider              negotiations begin                               agreement               September: ECG
                                                 to OECD                          environment when                                                                               scheduled to
                                                                                  deciding on export                                                                             review Common
                                                                                  credits                                                                                        Approaches
                                                                                                                                                    January: Other ECG
                                                                                                                                                    members begin voluntary
                                                                                                                                                    implementation of
                                                                                                                                                    Common Approaches


www.gao.gov/cgi-bin/getrpt?GAO-03-1093          Source: GAO.


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.
Contents



Letter                                                                                                  1
                             Results in Brief                                                           3
                             Background                                                                 4
                             Common Approaches Offers Environmental Policy Framework, but
                               National Differences Remain                                              8
                             Prospects Mixed for Further Advancement on Common
                               Environmental Guidelines for ECAs                                       15
                             Limited Evidence of Economic Impact, but Assessment Difficult for
                               Several Reasons                                                         20
                             Agency Comments and Our Evaluation                                        29


Appendixes
               Appendix I:   Objectives, Scope, and Methodology                                        30
              Appendix II:   OECD Members and Common Approaches Adherents                              33
             Appendix III:   Description of Five ECA-Supported Projects                                35
                             Batu Hijau Mine Project                                                   35
                             Camisea Natural Gas Project                                               36
                             Chad-Cameroon Petroleum Pipeline Project                                  38
                             Olkaria III Geothermal Power Plant                                        39
                             Three Gorges Dam                                                          40
              Appendix IV:   Comparison of ECA Environmental Policies for Seven
                             Selected Countries                                                        43
              Appendix V:    Comments from the Department of the Treasury                              49
             Appendix VI:    Comments from the Export-Import Bank                                      50
             Appendix VII:   GAO Contacts and Staff Acknowledgments                                    51
                             GAO Contacts                                                              51
                             Acknowledgments                                                           51


Tables                       Table 1: Comparison of Environmental Review Procedures for the
                                      Export-Import Bank of the United States and the OECD’s
                                      Common Approaches                                                 9
                             Table 2: Air Emissions and Effluent Discharge Standards for ECA
                                      Project Review of Steam Driven Thermal Power Plants              12
                             Table 3: Percentage of Ex-Im Bank’s Financing in Selected Sectors
                                      before and after Implementing Environmental
                                      Guidelines                                                       25
                             Table 4: OECD Members and Common Approaches Adherents                     33



                             Page i                                     GAO-03-1093 Export Credit Agencies
          Contents




          Table 5: Comparison of Environmental Review Procedures and
                   Policies for ECAs of Selected OECD Countries                                  43


Figures   Figure 1: Milestones in Efforts to Develop Common Environmental
                    Guidelines for ECAs                                                              6
          Figure 2: Generic Flow Chart of Basic Environmental Review
                    Framework                                                                        7
          Figure 3: Environmental Review Category of Long-Term Projects,
                    October 1995-May 2003                                                        21
          Figure 4: Sector Distribution of Full Review Projects: October 1995
                    - May 2003                                                                   22




          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

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          Page ii                                              GAO-03-1093 Export Credit Agencies
A
United States General Accounting Office
Washington, D.C. 20548



                                    September 10, 2003                                                                                Leter




                                    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)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



                                    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.




                                    Page 1                                                   GAO-03-1093 Export Credit Agencies
and Development (OECD) in 19992 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



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.




Page 2                                                 GAO-03-1093 Export Credit Agencies
                   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




                   Page 3                                       GAO-03-1093 Export Credit Agencies
             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,3 OECD members agreed in November 2001
             to voluntarily implement a version of this framework, known as the




             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.




             Page 4                                               GAO-03-1093 Export Credit Agencies
Common Approaches. This process of negotiation followed a 1997
communiqué from the Group of Eight (G-8)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)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.)




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.




Page 5                                                  GAO-03-1093 Export Credit Agencies
Figure 1: Milestones in Efforts to Develop Common Environmental Guidelines for ECAs




                                         Some ECAs have used environmental guidelines from the World Bank
                                         Group6 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.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


                                         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.




                                         Page 6                                                 GAO-03-1093 Export Credit Agencies
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




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



Page 7                                         GAO-03-1093 Export Credit Agencies
                             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.8



Common Approaches            While most OECD members have adopted a common environmental policy
                             framework through the Common Approaches, some notable differences
Offers Environmental         remain in their ECA environmental review procedures and policies.
Policy Framework, but        Because the Common Approaches is only a framework, it allows important
                             differences in members’ national polices in certain key areas, such as the
National Differences         application of technical standards and the disclosure of project-specific
Remain                       information.



Ex-Im Bank’s                 Ex-Im Bank guidelines provide much more specific detail than the
Environmental Guidelines     Common Approaches framework (see table 1). Ex-Im Bank guidelines
                             clearly describe which types of applications must undergo environmental
Are More Specific than the
                             review. For those transactions requiring review, Ex-Im Bank guidelines
Common Approaches            contain nine detailed sector tables delineating specific environmental
                             requirements.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


                             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.




                             Page 8                                                GAO-03-1093 Export Credit Agencies
                                             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                     Export-Import Bank of the                          OECD’s
review process                              United States                                      Common Approaches
Initial application and screening process   Specifies that projects either exceeding a         Broadly outlines the goals of a screening
                                            $10 million threshold or exceeding a 7-year        process but does not specify how the
                                            repayment period must submit a screening           process should proceed. Expects that
                                            document containing environmental                  members will screen projects exceeding 10
                                            information                                        million special drawing rightsa
Categorization                              Places projects in three classes of                Places projects in three classes of
                                            environmental review: high, medium, and            environmental review: high, medium, and
                                            low                                                low
Technical standards for evaluation          Utilizes preestablished technical standards        Allows individual members to determine
                                            against which projects are evaluated               which standards are applied to projects.
                                                                                               Members may establish their own standards
                                                                                               or draw upon other organizations’ or
                                                                                               countries’ preestablished standards
Project disclosure                          Requires that some project information,     Encourages members to make project
                                            including the environmental impact          information public but makes no disclosure
                                            assessment, be made public prior to funding requirement prior to funding decisions
                                            decisions
Final approval                              Requires the Bank’s Board of Directors to          Does not specify a process for making final
                                            make final funding decisions for long-term         funding decisions
                                            projects
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.




                                             Page 9                                                      GAO-03-1093 Export Credit Agencies
Framework Has Promoted    When the OECD members developed the Common Approaches, they
Some Convergence of ECA   effectively established a framework to create or update their own ECA
                          environmental review policies. Most OECD members have taken action to
Environmental Policies    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 assessment10 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,


                          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.




                          Page 10                                                GAO-03-1093 Export Credit Agencies
                               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      Despite the commonalities among OECD members’ environmental impact
Members’ Specific              review systems, differences exist in how ECAs review potential projects
                               and report on projects they undertake. These differences involve the
Environmental Guidelines
                               application of technical standards and the disclosure of certain
                               information.

Technical Standards Vary but   OECD members vary in terms of the technical standards they use to assess
Have Common Elements           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).




                               Page 11                                    GAO-03-1093 Export Credit Agencies
Table 2: Air Emissions and Effluent Discharge Standards for ECA Project Review of Steam Driven Thermal Power Plants

                                                     World                                 Export Import Bank of    Coface                    Hermes
Standards                                            Bank                                  the United Statesa       (France)                  (Germany)
Air emissions standards
Particulate matter                                   50                                    100                      50                        Varies according to
  (mg/Nm3)                                           (for units ≥ 50 MWe                   (for units > 50 MWe      (for units > 50           project location and
                                                     input)                                input)                   MWe input)                applicable host
                                                                                                                                              country standards.
                                                     100                                   100
                                                     (for units < 50 MWe                   (for units > 2.9 and <                             References World
                                                     input)                                50 MWe input)                                      Bank and other
Nitrogen oxides as NO2                                                                                                                        international
Fired using:                                                                                                                                  standards as
Coal or other solid fuel                             260                                   260                      260                       benchmarks.
Oil or other liquid fuel                             130                                   130                      130
Gaseous fuel                                         86                                    86                       86
    (ng/J)
Sulfur dioxide                                       2,000 (mg/Nm3) and                    100                      2,000 (mg/Nm3) and
                                                                                                             c
                                                     100 metric tons/day                   metric tons/day          100 metric tons/day for
                                                     for plants ≤ 500 Mweb                                          plants ≤ 500 MWeb
Effluent discharge standards
PH                                                   6-9                                   6-9                      6-9                       Varies according to
Oil and grease (mg/l)                                10                                    20                       10                        project location and
                                                                                                                                              applicable host
Total suspended solids (mg/l)                        50                                    60                       50                        country standards.
                  d
Temperature (C)                                      < 3°                                  +/- 5°                   < 3°
                                                                                           (< 3° if receiving                                 References World
                                                                                           waters > 28°)                                      Bank and other
                                                                                                                                              international
Metalse (mg/l)                                       Total -10                             Total -10                                          standards as
                                                     Cadmium -0.1                                                                             benchmarks.
                                                     Chromium -0.5                                                  Chromium -0.5
                                                     Copper -0.5                                                    Copper -0.5
                                                     Iron -1.0                                                      Iron -1.0
                                                     Zinc -1.0                                                      Zinc -1.0
Total residual chlorine                              0.2                                   0.5
Source: GAO analysis based on published environmental guidelines for relevant organizations.

                                                                   Legend:
                                                                   mg/Nm3 = 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.




                                                                   Page 12                                                     GAO-03-1093 Export Credit Agencies
                            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.


                            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   ECAs do not commonly follow the World Bank safeguard policies on social
Impacts                     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



                            Page 13                                                     GAO-03-1093 Export Credit Agencies
                                    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   ECA policies regarding public disclosure of project information vary. Some
ECAs                                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,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.


                                    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.




                                    Page 14                                                GAO-03-1093 Export Credit Agencies
                              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   In addition to the differences in their use of technical standards and
Policy Implementation         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           OECD members are currently reviewing their efforts to voluntarily abide by
                              the terms of the Common Approaches and may propose an alternative
Further Advancement           version by the end of 2003. However, a number of factors, including the
on Common                     resistance of some of the participants to certain proposed policies, present
                              challenges to revising the Common Approaches. Nevertheless, several
Environmental                 developments outside the formal OECD negotiations, including a series of
Guidelines for ECAs           meetings between ECA environmental experts, may lend some momentum
                              to advancing the Common Approaches.




                              Page 15                                         GAO-03-1093 Export Credit Agencies
OECD Members Committed     OECD members are in the process of reviewing the Common Approaches.
to Review and Revise the   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.
Common Approaches          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.


                           Page 16                                       GAO-03-1093 Export Credit Agencies
Near-Term Changes to    Any revisions or enhancements to the Common Approaches during 2003
Common Approaches May   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
Be Limited              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


                        Page 17                                       GAO-03-1093 Export Credit Agencies
                            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   Several recent events, including an informal effort by ECG environmental
Impetus to Negotiations     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




                            Page 18                                       GAO-03-1093 Export Credit Agencies
addressed during the negotiations. These included issues such as defining a
“greenfield site,”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. 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.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

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.




Page 19                                                   GAO-03-1093 Export Credit Agencies
                            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         There is limited evidence that Ex-Im Bank’s environmental guidelines have
                            affected U.S. exports, although the complexity of potential effects and the
Economic Impact, but        lack of information make identifying and quantifying impacts difficult. The
Assessment Difficult        evidence we reviewed indicates that any impacts are likely to be
                            concentrated in certain areas, especially the energy sector. The majority of
for Several Reasons         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                A substantial portion of Ex-Im Bank financing does not require significant
Environmental Reviews       environmental review. Ex-Im Bank’s environmental reviews are
                            concentrated in the energy sector, largely because of the financing
Have Been Concentrated in
                            structure of many energy projects. Energy sector projects are expected to
Certain Sectors             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,15 and 181 were subject to a


                            15
                             Four of the 42 transactions were nuclear projects, which are subject to separate
                            environmental procedures and guidelines.




                            Page 20                                               GAO-03-1093 Export Credit Agencies
                                                    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
Number of authorized long-term projects by environmental                 Percentage of financing of authorized long-term projects by environmental
review category                                                          review category


                                                         299                                                                     No review
                                                         No review

                                  •                      42
                                                         Full review                                    •                        Full review
               •                 8%                                                  •
              57%                                                                   64%                14%



                                                                                                               22%
                                            35% •        181                                                     •               Medium review
                                                         Medium review




 Source: GAO analysis of Ex-Im Bank data.




                                                    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.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

                                                    16
                                                     Ex-Im Bank’s Vice President for Engineering and Environment can determine that those
                                                    applications receive an environmental review in certain cases.




                                                    Page 21                                                   GAO-03-1093 Export Credit Agencies
                                                         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.17 (See fig. 4 for the sector
                                                         breakdowns for full review projects.)



Figure 4: Sector Distribution of Full Review Projects: October 1995 - May 2003

Sector distribution of full review projects (total 42)                          Sector distribution of full review projects by financing amount


                                                              16                                                                           Other sectors
                                                              Thermal
                                                              power
                                                                                                          •                                2%
                                •                                                           •                                              Hydro power
              •               5%                              2
                                                              Hydro power                  37%
             38%
                                                                                                                  25% •                    Oil and gas
                                           21% •              9
                                                              Oil and gas
                                                              development


                                                                                                                    36% •                  Thermal
                                           37% •              15                                                                           power
                                                              Other sectors




Source: GAO analysis of Ex-Im Bank data.




                                                         Energy-related projects represent a high percentage of projects undergoing
                                                         a full environmental review, largely because many are financed under
                                                         project financing terms,18 which signifies greater overall financial risk to

                                                         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.




                                                         Page 22                                                     GAO-03-1093 Export Credit Agencies
Ex-Im Bank. For example, the 16 thermal power projects and 9 oil and gas
exploration projects were all financed under project finance terms.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 1995.20
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 gigawatts21 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.




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.




Page 23                                                GAO-03-1093 Export Credit Agencies
Impact of Environmental          For the types of ECA projects that are subject to environmental reviews,
Guidelines Is Complex and        available data are limited and do not show clear impacts, and assessments
                                 are difficult because of the complex interplay of factors affecting financing
Not Quantifiable                 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     Trends in Ex-Im Bank financing to certain environmentally sensitive
and Not Evident from Available   sectors do not show evidence of impacts of environmental guidelines,
Data                             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.




                                 Page 24                                       GAO-03-1093 Export Credit Agencies
Table 3: Percentage of Ex-Im Bank’s Financing in Selected Sectors before and after
Implementing Environmental Guidelines

Sectors                                          1988-1995                      1995-2003
Thermal Power                                        13.28%                         9.95%
Oil and Gas Development                                10.41                         10.31
Hydro Power                                             0.51                          0.19
Metal Mining                                            0.57                          1.12
Source: Ex-Im Bank and GAO analysis.


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. 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


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.




Page 25                                               GAO-03-1093 Export Credit Agencies
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,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.



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.




Page 26                                                GAO-03-1093 Export Credit Agencies
Business Groups Have Concerns,   Business views on ECA environmental guidelines are mixed. Some
but Impacts Are Difficult to     business representatives we spoke with expressed concerns about specific
Confirm                          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



                                 Page 27                                      GAO-03-1093 Export Credit Agencies
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.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


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.




Page 28                                                 GAO-03-1093 Export Credit Agencies
                      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   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
Our Evaluation        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
                      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




                      Page 29                                      GAO-03-1093 Export Credit Agencies
Appendix I

Objectives, Scope, and Methodology                                                          AA
                                                                                             ppp
                                                                                               ep
                                                                                                ned
                                                                                                  n
                                                                                                  x
                                                                                                  id
                                                                                                   e
                                                                                                   x
                                                                                                   Iis




              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



              Page 30                                      GAO-03-1093 Export Credit Agencies
Appendix I
Objectives, Scope, and Methodology




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.




Page 31                                      GAO-03-1093 Export Credit Agencies
Appendix I
Objectives, Scope, and Methodology




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.




Page 32                                      GAO-03-1093 Export Credit Agencies
Appendix II

OECD Members and Common Approaches
Adherents                                                                                    Appendx
                                                                                                   Ii




              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

                               Common          Members                Members with
              ECG              Approaches      reporting on A and B   A and B projects for
              members          adherents       projects               2002
              (29)             (28)            (24)                   (17)
              Australia        +               +                      +
              Austria          +               +                      +
              Belgium          +               +                      +
              Canada           +               +                      +
              Czech Republic   +
              Denmark          +               +                      +
              Finland          +               +                      +
              France           +               +                      +
              Germany          +               +                      +
              Greece           +               +
              Hungary          +               +
              Ireland          +
              Italy            +               +                      +
              Japan            +               +                      +
              Korea            +               +                      +
              Luxemburg        +               +
              Mexico           +
              Netherlands      +               +                      +



              Page 33                                      GAO-03-1093 Export Credit Agencies
Appendix II
OECD Members and Common Approaches
Adherents




(Continued From Previous Page)
                            Common              Members                Members with
ECG                         Approaches          reporting on A and B   A and B projects for
members                     adherents           projects               2002
(29)                        (28)                (24)                   (17)
New Zealand                 +                   +
Norway                      +                   +
Poland                      +                   +
Portugal                    +                   +
Slovak Republic             +
(joined 5/27/02)
Spain                       +                   +                      +
Sweden                      +                   +                      +
Switzerland                 +                   +                      +
Turkey                      +
United Kingdom              +                   +                      +
United States                                   +                      +
Source: GAO analysis based on OECD documents.




Page 34                                                     GAO-03-1093 Export Credit Agencies
Appendix III

Description of Five ECA-Supported Projects                                                              Appendx
                                                                                                              iI




                         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




                         Page 35                                       GAO-03-1093 Export Credit Agencies
                      Appendix III
                      Description of Five ECA-Supported Projects




                      • 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



                      Page 36                                      GAO-03-1093 Export Credit Agencies
                         Appendix III
                         Description of Five ECA-Supported Projects




                         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 reserves1 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



                         1
                          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.




                         Page 37                                              GAO-03-1093 Export Credit Agencies
                         Appendix III
                         Description of Five ECA-Supported Projects




                         • 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


                         Page 38                                       GAO-03-1093 Export Credit Agencies
                         Appendix III
                         Description of Five ECA-Supported Projects




                         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



                         Page 39                                        GAO-03-1093 Export Credit Agencies
                         Appendix III
                         Description of Five ECA-Supported Projects




                         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




                         Page 40                                       GAO-03-1093 Export Credit Agencies
                         Appendix III
                         Description of Five ECA-Supported Projects




                         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.




                         Page 41                                       GAO-03-1093 Export Credit Agencies
                  Appendix III
                  Description of Five ECA-Supported Projects




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.




                  Page 42                                      GAO-03-1093 Export Credit Agencies
Appendix IV

Comparison of ECA Environmental Policies
for Seven Selected Countries                                                                                                                       Appendx
                                                                                                                                                         iIV




                                               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

                                                                                                              United
                 Belgium          Canada              France            Germany            Japan              Kingdom            United States
                                                                                           Japan Bank
                 Office           Export                                                   for                Export Credit
                 National du      Development                                              International      Guarantee          Export Import
                 Ducroire         Canada                                                   Cooperation        Department         Bank
                 (OND)            (EDC)               Coface            Hermes             (JBIC)             (ECGD)             (Ex-Im Bank)
Date of policy   2002             1999                1999              2001               1999               2000               1995
introduction                      (revised 2001)      (revised          (implemented       (revised 2002)     (revised 2003)     (revised 1998)
                                                      periodically      Common
                                                      since 2001)       Approaches
                                                                        2002)
Cost thresholds Applications      Applications        Applications      Applications       All applications   All applications   Application
                subject to        subject to          subject to        subject to         subject to         screened for       subject to
                environmental     environmental       environmental     environmental      environmental      environmental      environmental
                screening if      screening if        screening if      screening if       review. If         impact.            screening if
                requested         requested           requested         requested          requested                             requested
                coverage is for   coverage is for     coverage is for   coverage is at     coverage is for                       coverage is for
                10 million        10 million SDR      10 million        least 15 million   less than 10                          $10 million or
                special           or more and         euros or more.    euros or if        million SDR,                          greater, or
                drawing rights    repayment term                        project has        project is                            repayment
                or more, unless   is for 2 years or                     potential to       immediately                           term exceeds
                project is in a   more.                                 cause              classified as                         7 years.
                sensitive                                               significant        category C, and
                location.                                               adverse            no further
                                                                        impacts.           environmental
                                                                                           review is
                                                                                           required, unless
                                                                                           project has
                                                                                           sensitive
                                                                                           characteristics
                                                                                           or is in a
                                                                                           sensitive
                                                                                           location.




                                               Page 43                                                      GAO-03-1093 Export Credit Agencies
                                             Appendix IV
                                             Comparison of ECA Environmental Policies
                                             for Seven Selected Countries




(Continued From Previous Page)
                                                                                                          United
               Belgium            Canada           France             Germany          Japan              Kingdom            United States
                                                                                       Japan Bank
               Office             Export                                               for                Export Credit
               National du        Development                                          International      Guarantee          Export Import
               Ducroire           Canada                                               Cooperation        Department         Bank
               (OND)              (EDC)            Coface             Hermes           (JBIC)             (ECGD)             (Ex-Im Bank)
Screening      All applicants     EDC may rely     All applications   Projects that    All applicants     ECGD screens       Applications
procedures     submit             on past agency   are                meet the cost    submit a           applications to    for projects
               completed          experience,      prescreened,       thresholds       completed          determine          above the
               environmental      applicable       based on           undergo a        environmental      need for further   threshold(s)
               questionnaire      outside          amount of          preliminary      questionnaire,     environmental      must include a
               with               resources,       requested          examination,     which is used      information.       screening
               application,       and/or           coverage and       and the          for categorizing   Applicants for     document,
               which is used      completed        sensitivity of     applicant must   potential          high impact        which allows
               for categorizing   environmental    project            submit           projects.          projects must      Ex-Im to
               potential          screening        location.          information on                      submit a full      determine if an
               projects.          questionnaires   Applications       environmental                       Environmental      environmental
                                  to screen        that meet the      impact.                             Impact             review is
                                  potential        cost threshold     Underwriters                        Assessment         necessary, and
                                  projects and     then complete      evaluate each                       (EIA).             if so, the scope
                                  categorize       a screening        project based                       Applicants for     of that review.
                                  them.            questionnaire,     on cost and                         medium impact      Applications
                                                   which is used      sector.                             projects must      for projects
                                                   for categorizing                                       complete an        below the
                                                   potential                                              impact             threshold(s)
                                                   projects.                                              questionnaire.     are screened
                                                                                                          Applicants for     internally to
                                                                                                          low impact         determine if a
                                                                                                          projects have      review is
                                                                                                          no further         necessary.
                                                                                                          requirements.




                                             Page 44                                                   GAO-03-1093 Export Credit Agencies
                                               Appendix IV
                                               Comparison of ECA Environmental Policies
                                               for Seven Selected Countries




(Continued From Previous Page)
                                                                                                              United
               Belgium            Canada              France           Germany           Japan                Kingdom           United States
                                                                                         Japan Bank
               Office             Export                                                 for                  Export Credit
               National du        Development                                            International        Guarantee         Export Import
               Ducroire           Canada                                                 Cooperation          Department        Bank
               (OND)              (EDC)               Coface           Hermes            (JBIC)               (ECGD)            (Ex-Im Bank)
Impact         High impact        High impact         High impact      High impact       High impact          High impact       High impact
categories     (Category A)       (Category A)        (Category A)     (Category A)      (Category A)         (Category A)      (Category B)
               Project has a      Project is likely   Project has      Project is        Project is likely    Project has       Project has
               definitive         to have             potentially      assumed to        to have              potential for     potential for
               negative           significant         significant      have strong       significant,         major adverse     significant
               impact on the      adverse             adverse          ecological,       complicated ,        impacts on        impact and/or
               environment,       impacts that are    impact.          social, or        and/or               environment,      is a project
               and requested      sensitive,          Medium           developmental     unprecedented        workforce,        finance
               coverage is for    diverse, or         impact           impacts, which    adverse              immediate         transaction, is
               more than 10       unprecedented       (Category B)     in most cases     impacts that are     dependents, or    associated
               million SDR.       and may affect      Project has      appear to be      sensitive and        community that    with a
               Medium             an area broader     potentially      not locally       may affect an        may not be        hydroelectric
               impact             than the sites      adverse          limited and/or    area broader         predictable and   or forestry
               (Category B)       subject to          impacts, which   reversible.       than the sites       are usually       project, or is in
               Project has an     physical works.     may require      Medium            subject to           irreversible,     or near a
               uncertain          Medium              additional       impact            physical works.      diverse, or       sensitive
               impact on the      impact              review.          (Category B)      Medium               sensitive.        location.
               environment or     (Category B)        Low impact       Project is        impact               Medium            Medium
               has a definitive   Project has         (Category C)     assumed to        (Category B)         impact            impact
               negative           potential           Project has      have limited      Project has          (Category B)      (Category C)
               impact on the      adverse             little or no     ecological,       potential            Project could     Project has
               environment        impacts that are    impacts.         social, or        adverse              cause adverse     potential for
               but requested      less adverse                         developmental     impacts that are     impacts but are   some impact.
               coverage is        than those of                        impacts, which    less adverse         unlikely to be    Low impact
               less than or       category A                           usually appear    than those of        as diverse or     (Category A)
               equal to 10        projects and are                     to be locally     category A           sensitive as      Project has
               million SDR.       site-specific                        limited and       projects and are     those for high    little or no
               Low impact         and rarely                           reversible.       site specific and    impact            potential
               (Category C)       irreversible.                        Low impact        rarely               projects.         impact. The
               Project has no     Mitigation                           (Category C)      irreversible.        Remedial          export is a
               impact on the      measures are                         Project is        Mitigation           measures can      product not
               environment,       more readily                         expected to       measures are         be                identified with
               or the impact is   available.                           have no or only   more readily         implemented       a particular
               positive.          Low impact                           insignificant     available.           more easily.      project or the
                                  (Category C)                         ecological,       Low impact           Low impact        project it is
                                  Project is likely                    social, or        (Category C)         (Category C)      identified with
                                  to have minimal                      developmental     Project has little   Project is        is in one of
                                  or no adverse                        impacts.          or no adverse        unlikely to       several exempt
                                  impacts.                                               environmental        cause material    sectors.
                                                                                         impacts.             adverse
                                                                                                              impacts.




                                               Page 45                                                    GAO-03-1093 Export Credit Agencies
                                              Appendix IV
                                              Comparison of ECA Environmental Policies
                                              for Seven Selected Countries




(Continued From Previous Page)
                                                                                                             United
                 Belgium           Canada            France             Germany          Japan               Kingdom           United States
                                                                                         Japan Bank
                 Office            Export                                                for                 Export Credit
                 National du       Development                                           International       Guarantee         Export Import
                 Ducroire          Canada                                                Cooperation         Department        Bank
                 (OND)             (EDC)             Coface             Hermes           (JBIC)              (ECGD)            (Ex-Im Bank)
Environmental    High impact       High impact       High impact        High impact      High impact         High impact       High impact
review process   Environmental     Environmental     Environmental      Applicant        Environmental       EIA (or other     Applicant
                 impact            impact            review is based    submits an       impact              comparable        required to
                 assessment is     assessment (or    on the EIA         exhaustive       assessment is       assessment)       submit an EIA,
                 requested and     comparable        submitted by       description of   required and        must be           on which
                 then assessed     report) must be   the applicant.     all relevant     JBIC will likely    carried out,      Engineering
                 using OND’s       carried out by    The review         environmental    visit the project   with inputs       and
                 internal          an independent    assesses the       aspects.         site. If the        from experts.     Environment
                 checklist .       expert not        potential          Medium           project results     Medium            Department
                 Medium            affiliated with   environmental      impact           in large-scale      impact            bases its
                 impact            the project.      impact of the      Plausible        resettlement,       Full review of    evaluation of
                 Exporter must     Medium            project and the    criteria for     applicants must     application       the project.
                 complete          impact            results are        environmental    submit a            forms and         Medium
                 extensive         Scope and form    checked            relevance or     resettlement        impact            impact
                 questionnaire,    of                against the        generally        plan. JBIC’s        questionnaire     Applicant must
                 analyzed by       environmental     environmental      acceptable       environmental       undertaken.       submit
                 the underwriter   review may vary   regulations of     information is   review is based     Low impact        sufficient
                 according to an   from project to   the host           sufficient.      on the EIA and      Initial           information for
                 objective         project.          country and        Low impact       other reports       screening of      Engineering
                 scoring           Low impact        international      No further       prepared by         the application   and
                 method. If the    No                standards.         information      project             forms with no     Environment
                 questionnaire     environmental     Medium             required.        proponents and      further review    Department to
                 indicates an      review is         impact                              submitted           of the project.   determine if
                 acceptable        required          Environmental                       through the                           the project
                 impact on the     beyond such       review is based                     borrower.                             adheres to Ex-
                 environment,      information as    on additional                                                             Im guidelines.
                 the review is     may be            environmental                       Medium                                Low impact
                 complete. If an   required for      provided by the                     impact                                No further
                 important         project           applicant and                       Scope and form                        review is
                 impact on the     categorization.   consultation                        of                                    required.
                 environment is                      with the project                    environmental
                 indicated, OND                      stakeholders,                       review may vary
                 refuses the                         including                           from project to
                 project unless                      sponsor,                            project but will
                 mitigation                          exporter, and                       examine
                 measures are                        other sources.                      potential
                 put in place or                     Low impact                          positive and
                 an EIA is                           No                                  negative effects
                 submitted.                          environmental                       and mitigation
                 Low impact                          review required                     options. JBIC’s
                 No further                          beyond                              environmental
                 review                              screening.                          review is based
                 required.                                                               on information




                                              Page 46                                                    GAO-03-1093 Export Credit Agencies
                                             Appendix IV
                                             Comparison of ECA Environmental Policies
                                             for Seven Selected Countries




(Continued From Previous Page)
                                                                                                           United
                Belgium           Canada            France           Germany            Japan              Kingdom           United States
                                                                                        Japan Bank
                Office            Export                                                for                Export Credit
                National du       Development                                           International      Guarantee         Export Import
                Ducroire          Canada                                                Cooperation        Department        Bank
                (OND)             (EDC)             Coface           Hermes             (JBIC)             (ECGD)            (Ex-Im Bank)
                                                                                        provided by
                                                                                        borrowers and
                                                                                        related parties.
                                                                                        Low impact
                                                                                        No
                                                                                        environmental
                                                                                        review is
                                                                                        required
                                                                                        beyond such
                                                                                        information as
                                                                                        may be
                                                                                        required for
                                                                                        project
                                                                                        categorization.
Public          No                No commitment     No               No                 Commitment to      Commitment to     Commitment
disclosure of   commitment to     to providing      commitment to    commitment to      providing public   providing         to providing
environmental   providing         public with       providing        providing public   with project       public with       public with
information     public with       project           public with      with project       information        project           project
                project           information       project          information        before making a    information       information
                information       before making a   information      before making      financing          before making     before making
                before or after   financing         before making    a financing        decision, with     a financing       a financing
                making a          decision, but     a financing      decision, but      consent of         decision, with    decision,
                financing         encourages        decision;        says will          exporter; will     consent from      requiring
                decision, due     project           publishes        publish            publish            exporter; will    exporter to
                to national       sponsors to       some projects’   information        information on     publish           permit release
                regulations.      make              environmental    about large and    its Web site       information on    of its project’s
                                  information       assessments      sensitive          prior to making    its Web site,     EIA. Will
                                  available;        after making     projects, after    financing          prior to making   publish
                                  makes limited     financing        making a           decision;          financing         information on
                                  project           decision.        financing          encourages         decision.         high and
                                  information                        decision, with     public input.                        medium
                                  available after                    consent from                                            impact projects
                                  export credit                      exporter.                                               on its Web site
                                  agreement is                                                                               prior to making
                                  signed.                                                                                    financing
                                                                                                                             decision, as
                                                                                                                             well as
                                                                                                                             information on
                                                                                                                             how to obtain a
                                                                                                                             project’s EIA.
                                                                                                                             Encourage
                                                                                                                             public
                                                                                                                             comments on
                                                                                                                             potential
                                                                                                                             projects.




                                             Page 47                                                    GAO-03-1093 Export Credit Agencies
                                                           Appendix IV
                                                           Comparison of ECA Environmental Policies
                                                           for Seven Selected Countries




(Continued From Previous Page)
                                                                                                                       United
                       Belgium               Canada             France           Germany            Japan              Kingdom          United States
                                                                                                    Japan Bank
                       Office                Export                                                 for                Export Credit
                       National du           Development                                            International      Guarantee        Export Import
                       Ducroire              Canada                                                 Cooperation        Department       Bank
                       (OND)                 (EDC)              Coface           Hermes             (JBIC)             (ECGD)           (Ex-Im Bank)
Technical      Use both host                 No single set of   Developed own    No single set of   Benchmarking       Benchmarking     All projects
standards used country and                   standards;         standards for    standards;         based on           based on         must meet Ex-
               international                 benchmarking       three industry   projects have      standards from     standards from   Im’s own
               standards.                    based on           sectors, using   to meet host       host country       several          standards, as
                                             standards from     World Bank       country            and                sources: World   adapted from
                                             World Bank,        standards, and   standards or       international      Bank Group,      World Bank
                                             regional           industry best    applicants can     organizations;     UK/EU            standards, and
                                             development        practices as     explain why        JBIC will          standards,       host country
                                             banks, Canada,     benchmarks.      they do not;       consult with       industry best    standards.
                                             World Health                        host country       stakeholders for   practices,
                                             Organization                        standards are      projects that do   regional
                                                                                 then compared      not meet either    development
                                                                                 with               of these           banks.
                                                                                 international      standards.
                                                                                 standards.
Source: GAO analysis based on OECD and county documents.




                                                           Page 48                                                  GAO-03-1093 Export Credit Agencies
Appendix V

Comments from the Department of the
Treasury                                                       Append
                                                                    x
                                                                    i
                                                                    V




              Page 49         GAO-03-1093 Export Credit Agencies
Appendix VI

Comments from the Export-Import Bank                           Appendx
                                                                     iVI




              Page 50         GAO-03-1093 Export Credit Agencies
Appendix VII

GAO Contacts and Staff Acknowledgments                                                       Append
                                                                                                  x
                                                                                                  iVI




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)          Page 51                                   GAO-03-1093 Export Credit Agencies
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