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, firstname.lastname@example.org. 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 This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. 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. 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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)