Export Credit Agencies: Movement Toward Common Environmental	 
Guidelines, but National Differences Remain (10-SEP-03, 	 
GAO-03-1093).							 
                                                                 
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.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-1093					        
    ACCNO:   A08420						        
  TITLE:     Export Credit Agencies: Movement Toward Common	      
Environmental Guidelines, but National Differences Remain	 
     DATE:   09/10/2003 
  SUBJECT:   Environmental policies				 
	     Export regulation					 
	     Exporting						 
	     International agreements				 
	     International cooperation				 
	     International relations				 
	     Environmental monitoring				 
	     International organizations			 

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GAO-03-1093

                                       A

Report to Congressional Requesters

September 2003 EXPORT CREDIT AGENCIES Movement Toward Common Environmental
Guidelines, but National Differences Remain

GAO- 03- 1093

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

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.

Letter

September 10, 2003 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.

and Development (OECD) in 1999 2 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.

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
ExportImport

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

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.

Common Approaches. This process of negotiation followed a 1997 communique
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 communique 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.

Figure 1: Milestones in Efforts to Develop Common Environmental Guidelines
for ECAs

Some ECAs have used environmental guidelines from the World Bank Group 6
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.

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

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

Offers Environmental framework through the Common Approaches, some notable
differences

remain in their ECA environmental review procedures and policies. Policy
Framework, but

Because the Common Approaches is only a framework, it allows important
National Differences differences in members* national polices in certain
key areas, such as the Remain application of technical standards and the
disclosure of project- specific 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

Are More Specific than the clearly describe which types of applications
must undergo environmental

Common Approaches review. For those transactions requiring review, Ex- Im
Bank guidelines 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.

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 rights a 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.

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 Policies 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 10 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.

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

Environmental Guidelines and report on projects they undertake. These
differences involve the

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).

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 States a (France) (Germany) Air
emissions standards

Particulate matter 50 100 50 Varies according to (mg/ Nm 3 ) (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 2.9 and < References
World input)

50 MWe input) Bank and other

Nitrogen oxides as NO international 2 standards as

Fired using: benchmarks. Coal or other solid fuel 260 260 260 Oil or other
liquid fuel 130 130 130 Gaseous fuel 86

86 86 (ng/ J)

Sulfur dioxide 2,000 (mg/ Nm 3 ) and 100 2,000 (mg/ Nm 3 ) and 100 metric
tons/ day metric tons/ day c 100 metric tons/ day for for plants 500 Mwe b
plants 500 MWe b

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. Temperature d (C) < 3 +/- 5 < 3 (< 3 if receiving

References World waters > 28 ) Bank and other

Metals e (mg/ l) Total -10 Total -10

international Cadmium -0.1

standards as Chromium -0. 5

Chromium -0.5 benchmarks.

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/ Nm 3 = 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.

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

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.

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 Further Advancement

the terms of the Common Approaches and may propose an alternative 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 Environmental

challenges to revising the Common Approaches. Nevertheless, several
Guidelines for ECAs

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 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

Common Approaches 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 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

Be Limited 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 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) inhouse began to meet informally to
discuss technical issues that were not

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.

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 Economic Impact, but

affected U. S. exports, although the complexity of potential effects and
the lack of information make identifying and quantifying impacts
difficult. The Assessment Difficult

evidence we reviewed indicates that any impacts are likely to be for
Several Reasons 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 A substantial portion of Ex- Im Bank financing does not
require significant

Environmental Reviews environmental review. Ex- Im Bank*s environmental
reviews are

Have Been Concentrated in concentrated in the energy sector, largely
because of the financing

Certain Sectors 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, 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.

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

 8%

Full review

 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.

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%

 2



Hydro power

 5%

Hydro power

37% 38% 25%



Oil and gas

21%  9

Oil and gas development

37%  15

36%  Thermal

Other sectors power

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.

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 gigawatts 21 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.

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

Not Quantifiable 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

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.

Tabl e 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.

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. ExportImport
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.

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. ExIm
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. 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.

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

Our Evaluation 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. Loren Yager, Director International Affairs and
Trade

Appendi Appendi xes x I

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 longterm

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

Appendi x II

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.

Tabl e 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 + + +

(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 + + + Tur key + United Kingdom + + + United
States + + Source: GAO analysis based on OECD documents.

Appendi x III

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 1 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
NahuaKugapakori 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.

 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
oilloading 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

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

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.

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

Appendi x IV

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.

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.

(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.

(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.

(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 ExIm environment,

information as on additional 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

(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

impactprojects 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.

(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 Developedown 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.

Comments from the Department of the

Appendi x V Treasury

Appendi x VI Comments from the Export- Import Bank

Appendi x VII

GAO Contacts and Staff Acknowledgments 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.

(320158)

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a

GAO United States General Accounting Office

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. Milestones in Efforts to Develop Common
Environmental Guidelines for ECAs

February: Ex- Im Bank finalizes environmental guidelines

April: Ex- Im Bank gives detailed proposal for common guidelines to OECD

April: OECD ECG issues statement of intent on export credits and the
environment; members ready to consider environment when deciding on export
credits

July: ECG agrees to information sharing on large projects

October: OECD negotiations begin

April: ECG issues work plan for export credit negotiations within ECG

November: U. S. declines to support Common Approaches, blocking agreement

January: Other ECG members begin voluntary implementation of Common
Approaches

April: ECAs complete first project review reporting exercise

September: ECG scheduled to review Common Approaches 1995 1996 1997 1998
1999 2000 2003

Source: GAO. 2002 2001

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.

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 1093 To view the full product,
including the scope and methodology, click on the link above. For more
information, contact Loren Yager, (202) 512- 4347, yagerl@ gao. gov.
Highlights of GAO- 03- 1093, a report to congressional requesters
September 2003

EXPORT CREDIT AGENCIES

Movement Toward Common Environmental Guidelines, but National Differences
Remain

Page i GAO- 03- 1093 Export Credit Agencies

Contents

Page ii GAO- 03- 1093 Export Credit Agencies

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Appendix I

Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix II

Appendix II OECD Members and Common Approaches Adherents

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Appendix III

Appendix III Description of Five ECA- Supported Projects

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Appendix III Description of Five ECA- Supported Projects

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Appendix III Description of Five ECA- Supported Projects

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Appendix III Description of Five ECA- Supported Projects

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Appendix III Description of Five ECA- Supported Projects

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Appendix III Description of Five ECA- Supported Projects

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Appendix III Description of Five ECA- Supported Projects

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Appendix IV

Appendix IV Comparison of ECA Environmental Policies for Seven Selected
Countries

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Appendix IV Comparison of ECA Environmental Policies for Seven Selected
Countries

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Appendix IV Comparison of ECA Environmental Policies for Seven Selected
Countries

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Appendix IV Comparison of ECA Environmental Policies for Seven Selected
Countries

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Appendix IV Comparison of ECA Environmental Policies for Seven Selected
Countries

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Appendix V

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Appendix VI

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Appendix VII

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