US funds fossil fuel projects

by Danielle Knight

Washington, Apr 29 -- The US government's export credit agencies have financed fossil fuel projects aboard to the tune of $23 billion - ignoring the fact they release the heat-trapping "greenhouse gas" blamed for global warming, says a new environmental report.

The report, by the Institute for Policy Studies and Friends of the Earth, says this funding for coal-fired power plants and oil and gas extraction projects contradicts US foreign policy objectives to reduce the reliance of developing countries on fossil fuels in order to avert the impact of climate change.

According to the report , titled "Business as Usual," between 1992 and 1996, the US Export-Import Bank (Ex-Im) and the Overseas Private Investment Corporation (OPIC) underwrote $23.2 billion in financing for oil, gas, and coal projects worldwide.

During the life of these projects, some 25.5 billion tons of carbon dioxide, an amount equivalent to total global greenhouse gas emissions for 1996, will be released into the atmosphere, the report alleges.

The US rate of financing far outpaced that of the European Bank for Reconstruction and Development which provided $1.2 billion in loans for fossil fuels projects between 1992 and 1997, the report says. The World Bank, in comparison, underwrote $13.6 billion in financing for such projects between 1992 and 1998.

"OPIC and Ex-Im are guaranteeing climate change for all of us," says Daphne Wysham, energy policy analyst with the Institute for Policy Studies, a Washington-based progressive think-tank.

"Money talks and our billions of dollars in support for fossil fuels are out-talking and totally contradicting our stated foreign policy goals of 'meaningful participation' by the developing countries under the Kyoto Protocol."

This international treaty, drawn up two years ago in the Japanese city of Kyoto, binds the United States and 37 other industrialised countries to reduce their emissions of greenhouse gases by an average of at least five percent below their 1990 levels by the year 2012.

Most scientists believe that these gases - produced through burning oil, petrol, coal and other mostly carbon-based chemicals - have been gradually warming Earth's atmosphere and altering its climate.

If current record-breaking warming trends continue, average global temperatures could rise between one and 3.5 degrees centigrade by the year 2050, according to expert studies.

The US Senate has effectively blocked any action by Washington under the Protocol until key developing countries also agree to limit their greenhouse gas emissions.

"Even if we could eventually halt all emissions from the industrial nations required to limit emissions under the Kyoto Protocol, emissions from the 134 developing nations would continue to grow and atmospheric concentrations of greenhouse gases continue to increase," Sen. Frank Murkowski, the Republican chairman of the Senate Energy Committee, said this week.

"It is hypocritical for the US government to ask for meaningful participation of developing countries while simultaneously funnelling billions of taxpayer dollars towards the opposite goal," says Jon Sohn, a policy analyst at Washington-based Friends of the Earth. The money went in the form of loans, investment guarantees and insurance designed to help US companies compete for business

Larry Spinelli, a spokesman for OPIC, told IPS, that the agency will be studying the report but, at first glance, "the numbers are inflated and misleading."

"I question the way they have utilized these numbers and calculated out the total emissions," he says.

Spinelli says OPIC calculates its contribution to global emissions to be only 1/300th of the total. "About 60% of the projects funded by OPIC in 1998 were natural gas - which produces less carbon emissions," he adds.

Officials at the Import-Export Bank were unavailable for comment.

'Business as Usual' says that OPIC and Ex-Im, however, are investing in coal- fired power projects in countries where less carbon-intensive energy options, from natural gas to solar, are abundantly available.

In Indonesia, for example, the two agencies committed a combined $1.47 billion in support of the 4,920 megawatt Paiton coal-fired power complex, despite Indonesia's massive proven natural gas reserves, according to the report.

"OPIC later matched its record-breaking assistance package for this Indonesia burner in support of a coal-fired power plant in Morocco, the biggest private power project in Africa," it said. This project was near a 50 megawatt wind farm project.

Ex-Im has been similarly devoted to fossil fuels in China, committing a combined $1.66 billion toward the development of seven power plants in the country over six years. Six of these were coal fired while only one was fuelled by gas.

"If we really want China and India to stop burning coal shouldn't we be providing development assistance and export support to US industries that make solar or wind power cheaper and more attractive for developing countries to consider than yet another coal burner?," asks the report.

Staff at both OPIC and Ex-Im is not encouraged to invest time in labour intensive smaller scale wind and solar projects that have less pay-offs for the institutions than an offshore oil drilling project, the report says.

"This sort of internal change in staffing and incentive structures - from chasing after the 'big deal' to cultivating the small players - must be encouraged."

The report also urges Ex-Im to build on its existing "Environment Exports Programme," which is designed to increase the agency's support for environmentally beneficial goods and services. To date, this programme has been used mainly to encourage the enhanced efficiency for fossil fuel power plants, not renewables.

OPIC and Ex-Im should no longer fund coal-fired plants in developing countries, because of their adverse health and environmental impacts, says the report. "There is no disputing the fact that large coal fired power plants play a large role in affecting the earth's climate," it says. "Further support of these plants sends the wrong signal to policy makers in developing countries."

The above article by the Inter Press Service appeared in the South-North Development Monitor(SUNS).

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