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Export-Credit Agencies and Energy in Asia: Prospects for Strengthening Climate Governance
Panel: Presentations
Author:
Christopher Wright, University of Oslo
Abstract
There is a growing interest among academics and policy-makers on how international trade influences the environment. It is increasingly recognized that incoherent policies across different policy areas – such as environment, social, trade, and security - is undermining efforts to mitigate climate change. In a surprise development, the G20 leaders recently committed to „rationalize and phase out fossil-fuel subsidies‟ because they, among other things, „impede investment in clean energy sources and undermine efforts to deal with climate change.‟ (Group of Twenty 2009) The scope of the G20 initiative includes supply-side subsidies that support fossil-fuel based energy production, such as direct grants, preferential tax treatments, and subsidized government loans. However, the G20 process has to date paid little attention to how the widespread government practice of financing domestic exports influences global efforts to curb global greenhouse gas emissions. (EDF 2009; Maurer and Nakhooda 2003; Schaper 2004; UNEP 2004) This is a missed opportunity.
This article will consider the relationship between official export financing and climate change. Governments provide export financing to support national exports of large manufactured goods with very high capital costs, such as airplanes, ships, weaponry, and equipment for power plants. Between 2002 and 2008, OECD governments provided $2.9 billion/year of long-term export financing to carbon- intensive energy development and only $534 million to exporters of low-carbon technologies, with large-scale hydro power accounting for a large share. (Corfee- Morlot et.al; OECD 2007a) Other estimates put export finance support for fossil fuels to more than $10 billion annually. (GSI-UNEP 2010) In aggregate, export financing that locks in emission-intensive energy development for decades to come undermines the impact of public financing schemes specifically designed to mitigate long-term climate change, such as climate-related ODA ($3.5 bill/year), projects financed by the Global Environment Facility (GEF) ($163 million/year), and the climate investment funds managed by multilateral development banks. ($6.4 billion in total donor pledges)
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