Press Responses : Saturday, May 26, 2001

Inter Press Service
May 26, 2001 [available online June 1, 2001]
 
ENVIRONMENT: ACTIVISTS FAULT WEALTHY NATIONS FOR FOOTDRAGGING
 
By Danielle Knight
WASHINGTON,
 
Environmental and human rights groups say the world's wealthiest nations are failing to fulfil their own mandate by not creating common ecological and social guidelines for their publicly-backed export lending and investment insurance agencies.
 
Last week, representatives of the world's industrialized nations met at an Organization of Economic Cooperation and  Development (OECD) Ministerial meeting in Paris, in art to work on establishing common environmental guidelines for these  export credit lending agencies (ECAs). These government agencies provide loans, guarantees and insurance to help companies  compete for business abroad.
 
At the meeting, an OECD body in charge of developing common environmental standards, known as the Export Credit  Group, released draft documents outlining their proposals. But activists immediately criticised the drafts as weak and full of  loopholes.
 
 
"So much is left unexplained and to the discretion of the individual export credit lending agency," says Emilie Revil, coordinator  of a Canadian coalition of civil society organizations, known as the NGO Working Group on the Export Development  Corporation, which is Canada's export lending agency.
 
In recent years, these export credit lending agencies (ECAs) - - such as the U.S. and Japanese Export-Import Banks, the  German Hermes Guarantee, France's COFACE and Italy's SACE -- have subsidized about 10 percent of world trade.
 
Despite their vast reach, these agencies lack common human rights and environmental standards that would prevent them from  competing to finance socially and environmentally destructive projects in developing countries – a process environmental  groups call a "race to the bottom."
 
Acknowledging the problem, the Group of Seven (G7) wealthy industrialized nations agreed at a 1999 summit in Cologne to  work towards common environmental guidelines for export finance and to complete the task within two years.
 
But in the absence of greater pressure from G7 finance ministers, the ECAs have hardly made any progress in environmental  reform, according to an international coalition of about 40 non-governmental organizations (NGOs) from 18 countries.
 
"The OECD Export Credit Group has failed so far to create substantive, uniform guidelines that will protect against the kinds  of environmental and social harm defined and experienced by affected communities," says a statement released this month by  the coalition.
 
ECAs, say environmental groups, routinely use public money to finance ecologically and socially harmful projects, including  fossil fuel power plants, mining, chemical plants, nuclear power, logging and the arms trade.
 
Several governments, including the United States, Britain, and Australia, are pressing for reform. But the coalition says  Germany, Spain and Austria are holding up the process.
 
"Germany, in particular, must be singled out for its intransigence," says Heffa Shucking, with the German environmental group,  Urgewald. "They are dragging down the Export Credit Group negotiations and perpetuating a race to the bottom."
 
Activists criticised the draft documents on common guidelines for not requiring consultation with local communities and civil  society groups on projects.
 
Aaron Goldzimer with Environmental Defense, a large U.S. environmental organization, noted that the OECD proposed  guidelines do not require the public release of information on projects funded by export credit agencies.Such requirements, he  says, "are the heart of environmental assessments."
 
"The whole thing is full of meaningless loopholes," says Goldzimer. Environmentalists also criticised the drafts for not laying out  concrete environmental standards.
 
One draft, for example, states that the OECD will require projects funded by ECAs to adhere to international standards, but it  does not specify which standards, says Goldzimer.
 
Groups also disapproved of the term "flexible standards" used by the OECD working group.
 
"By promoting the oxymoronic 'flexible standards' approach, the Export Credit Group is clear in its intentions to minimize the  impacts of environmental assessment processes on trade rather than minimizing trade impacts on the environment," says Revil.
 
A few export credit agencies have environmental guidelines. In 1992, the U.S. Export Import Bank (Ex-Im) was required by  Congress to adopt strong environmental standards, and has since shunned lending for some projects including China's Three
Gorges Dam.
 
Without common guidelines, however, European ECAs, including Germany's Hermes Kreditversicherungs AG, have stepped  into the gap and are providing support for the controversial hydropower project, which is expected to flood several cities,  ancient archaeological sites, and relocate more than one million people.
 
Environmentalists also charge export finance agencies with fuelling deforestation in Indonesia because they have backed huge  pulp and paper manufacturing facilities.
 
Hundreds of thousands of hectares of Indonesia's remaining forests were clear-cut in order to feed the country's rapid  expansion of pulp and paper production during the last decade, Tito Soentoro, an environmental activist with the Indonesian  group, Bioforum.
 
She says export credit lending agencies in Europe, Japan and North America provided approximately four billion dollars in  support to these production facilities but did not require even minimal environmental or social standards.
 
"Many ECA projects virtually colonize rural communities in order to exploit their natural resources," says Soentoro.
 
Environmental groups also charge export financing agencies with contributing to global warming by providing support for fossil-  fuel intensive energy projects that emit heat-trapping greenhouse gases.
 
According to a report released last year by the World Resources Institute (WRI), from 1994 through the first quarter of 1999,  three-fifths of financial backing from ECAs in Europe, Japan, Canada and the United States – or $ 216.6 billion out of $ 376  billion -- went to fossil-fuel power generation, oil and gas development, and energy-intensive manufacturing like  petrochemicals.
 
The leading destinations for this type of ECA financing include some of the largest emitters of greenhouse gases among  developing nations: Brazil, China, India, Indonesia and Mexico, says Crescencia Maurer, a research associate at WRI and  lead author of the report.
 
These investments, she says, are not balanced by financing for renewable energy or energy efficient technologies. ECAs  supported only about $ 2 billion in financing for hydroelectric and geothermal power projects, according to the report.