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, OECD members agreed in November 2001  to voluntarily implement a version of this framework, known as the Common Approaches. This process of negotiation followed a 1997  communiqué from the Group of Eight (G-8) 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)  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.)
Some ECAs have used environmental guidelines from the World Bank  Group 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.  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  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.
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  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.

	Common Approaches Offers Environmental Policy Framework, but National Differences Remain

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

		Ex-Im Bank’s Environmental Guidelines Are More Specific than the Common Approaches

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

		Framework Has Promoted Some Convergence of ECA Environmental Policies

When the OECD members developed the Common Approaches, they  effectively established a framework to create or update their own ECA  environmental review policies. Most OECD members have taken action to  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 assessment 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,  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 Members’ Specific Environmental Guidelines

Despite the commonalities among OECD members’ environmental impact  review systems, differences exist in how ECAs review potential projects  and report on projects they undertake. These differences involve the  application of technical standards and the disclosure of certain  information.

			Technical Standards Vary but Have Common Elements

OECD members vary in terms of the technical standards they use to assess  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).
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 Impacts

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

ECA policies regarding public disclosure of project information vary. Some  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, 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.
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 Policy Implementation

In addition to the differences in their use of technical standards and  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 Further Advancement on Common Environmental Guidelines for ECAs

OECD members are currently reviewing their efforts to voluntarily abide by  the terms of the Common Approaches and may propose an alternative  version by the end of 2003. However, a number of factors, including the  resistance of some of the participants to certain proposed policies, present  challenges to revising the Common Approaches. Nevertheless, several  developments outside the formal OECD negotiations, including a series of  meetings between ECA environmental experts, may lend some momentum  to advancing the Common Approaches.

		OECD Members Committed to Review and Revise the Common Approaches

OECD members are in the process of reviewing the Common Approaches.  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.  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.

		Near-Term Changes to Common Approaches May Be Limited

Any revisions or enhancements to the Common Approaches during 2003  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  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  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 Impetus to Negotiations

Several recent events, including an informal effort by ECG environmental  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 addressed during the negotiations. These included issues such as defining a  “greenfield site,” 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. 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.  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  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 Economic Impact, but Assessment Difficult for Several Reasons

There is limited evidence that Ex-Im Bank’s environmental guidelines have  affected U.S. exports, although the complexity of potential effects and the  lack of information make identifying and quantifying impacts difficult. The  evidence we reviewed indicates that any impacts are likely to be  concentrated in certain areas, especially the energy sector. The majority of  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 Environmental Reviews Have Been Concentrated in Certain Sectors

A substantial portion of Ex-Im Bank financing does not require significant  environmental review. Ex-Im Bank’s environmental reviews are  concentrated in the energy sector, largely because of the financing  structure of many energy projects. Energy sector projects are expected to  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, and 181 were subject to a  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.
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. 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  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.  (See fig. 4 for the sector  breakdowns for full review projects.)
Energy-related projects represent a high percentage of projects undergoing  a full environmental review, largely because many are financed under  project financing terms, which signifies greater overall financial risk to Ex-Im Bank. For example, the 16 thermal power projects and 9 oil and gas  exploration projects were all financed under project finance terms.
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.   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 gigawatts 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.

		Impact of Environmental Guidelines Is Complex and Not Quantifiable

For the types of ECA projects that are subject to environmental reviews,  available data are limited and do not show clear impacts, and assessments  are difficult because of the complex interplay of factors affecting financing  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 and Not Evident from Available Data

Trends in Ex-Im Bank financing to certain environmentally sensitive  sectors do not show evidence of impacts of environmental guidelines,  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.
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.
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. 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, 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.

			Business Groups Have Concerns, but Impacts Are Difficult to Confirm

Business views on ECA environmental guidelines are mixed. Some  business representatives we spoke with expressed concerns about specific  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  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.  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  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 Our Evaluation

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  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.

Objectives, Scope, and Methodology

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  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.
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.

OECD Members and Common Approaches Adherents

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.

Description of Five ECA-Supported Projects

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   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  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 reserves 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   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  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-  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   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  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   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  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   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.

		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.

Comparison of ECA Environmental Policies for Seven Selected Countries

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.

Comments from the Department of the Treasury

Comments from the Export-Import Bank

GAO Contacts and Staff Acknowledgments

	GAO Contacts

	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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Summary:
Why GAO Did This Study

Export credit agencies (ECA) are responsible for providing billions of dollars worth of support for large-scale industrial projects annually, but until recently most ECAs did not formally review the environmental impacts of these projects. The United States, whose Export-Import Bank began using environmental guidelines in 1995, pushed for negotiations on common ECA environmental guidelines at the Organization for Economic Cooperation and Development (OECD). The OECD negotiations halted in 2001 because the United States believed that the results, called the Common Approaches, were insufficient. The remaining OECD members then pledged to voluntarily implement the Common Approaches. In response to congressional interest in ECA environmental guidelines, GAO assessed (1) the level of convergence among OECD members and the prospects for further advancement and (2) what impacts such guidelines may have on U.S. exports.

What GAO Found

Since OECD negotiations began, members have made progress in developing environmental guidelines for their ECAs and are moving toward common environmental review practices. However, important differences remain. Having agreed to voluntarily implement the Common Approaches beginning in 2002, many OECD members adopted similar basic procedures for reviewing sensitive projects. However, OECD members' guidelines and practices differ in areas where the United States believes it has among the more advanced policies, including which technical standards ECAs use to review projects and the extent to which environmental impact information is publicly disclosed. Although OECD members are considering revising the Common Approaches in 2003, the United States is unlikely to achieve all of its original negotiating objectives because of the desire by some OECD members to gain more experience with the guidelines before renegotiating them and the reluctance of other members to take any steps that might be perceived as having a negative effect on the competitiveness of their exporters. There is limited evidence that the Export-Import Bank's environmental guidelines have affected U.S. exports, although the complexity of potential effects and the lack of information make identifying and quantifying impacts difficult. The evidence GAO reviewed indicates that impacts are likely to be concentrated in the energy sector. Most Export-Import Bank transactions do not require an environmental review because they are either short-term transactions, are in certain excluded sectors, or are not considered environmentally sensitive. 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.