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News / 19 June 2014

No to export financing for coal

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Global public support for coal is decreasing. Obama has pledged to stop American support for public financing of  new coal plants outside the U.S., the World Bank has announced to phase out support for coal projects and some large private banks are withdrawing from fossil fuels. But what about export credit agencies (ECAs)?  Until now, ECAs have not withdrawn from coal projects. On the contrary: while other investors gradually cease their support to coal projects, export credit agencies are investing in coal more than ever. On June 11, an alliance of 50 NGOs, including Both ENDS, published a recommendation to the OECD calling for an end to export credit support for coal.

What are Export Credit Agencies?

Like a large number of other countries, the Netherlands has an export credit agency (ECA) that provides cover for certain entrepreneurial risks in exchange for a premium. The Dutch ECA is Atradius DSB. For example, a Dutch company supplying parts to a power plant abroad can get an insurance against certain risks, such as a buyer that is unwilling to pay or an unstable political situation in the host country. These insurance policies are offered by both private insurance companies and by Atradius DSB, the Dutch ECA. If the risks of a transaction are too large to be insured by a private insurance company, an exporter can turn to Atradius DSB. In such a case, the state guarantees part of any suffered damage or loss.

 

Increasing ECA support for coal projects

ECA support for coal projects increased from $3 billion in 2007 to $10 billion in 2012.

For Both ENDS, Wiert Wiertsema has been following ECA policies and practice carefully. "It is increasingly likely that ECAs from OECD countries will end up as a place of last resort for carbon intensive industries that are no longer able to secure funding through other channels due to the high risk and poor environmental performance of coal projects. It’s not without reason that 90% of the financial support from OECD countries for coal projects abroad comes from ECAs! "

 

Guidelines

According to Wiert, the environmental guidelines of ECAs are lagging behind the policies of comparable financial institutions, such as multilateral development banks and large private banks. "The 50 NGOs, under the umbrella of ECA Watch, are calling on all OECD countries to ban their ECA support for coal projects and invest in renewable energy, just like other financial institutions are currently doing. Right now would be a good time to take action, because the next major global climate conference, in Paris, is to be held in 2015 in Paris. Both ENDS is pleased that the Dutch government has announced to follow Obama’s example."

 

Recommendation ECA Watch

Website ECA Watch (including infographic on export credits)

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