by Justin Guay
The best way to understand the Obama administration’s support for clean energy internationally is to understand the tale of two agencies: The US Overseas Private Investment Corporation (OPIC) and The U.S. Export Import Bank (Ex-Im Bank).
The administration’s biggest success story comes from one of its smallest agencies, OPIC, which under the leadership of Elizabeth Littlefield is punching well above its weight when it comes to supporting clean energy. But for every clean energy dollar OPIC puts on the table, it’s sister agency, the U.S. Export Import Bank (Ex-Im Bank) puts two to three more toward dirty coal. With the clean energy market topping $263 billion globally, and a solar trade war raging, the ending to this tale is crucial for U.S. competitiveness in the technologies of the future.
Our tale begins with the settlement of an historic lawsuit brought by Greenpeace, Friends of the Earth and others to limit the emissions of Greenhouse Gases (GHG) these agencies financed. The suit was filed in response to nearly $32 billion in fossil fuel lending that OPIC and the Ex-Im Bank had authorized against intense opposition. The settlement led to the establishment of a low carbon policy at Ex Im Bank and a GHG cap at OPIC; two incredibly fateful policy choices that would determine the divergent paths of each respective agency.
Three years later the OPIC GHG cap, along with President Littlefield’s leadership, has created an exemplary institution. The main driver, its GHG cap, forces a 30 percent GHG reduction across its portfolio over 10 years and 50 percent reduction over 15 years. With past fossil fuel projects eating up precious cap space, the agency simply can’t fund big fossil fuel projects given these constraints. That combined with the fast start finance pledge the administration made in Copenhagen, the rapidly changing clean energy market, and President Littlefield’s leadership has brought about a fundamental shift at the agency.
Pre-2007, OPIC was financing billions in fossil fuels. In 2011, nearly one quarter of its $4 billion portfolio went to expand the clean energy market and provide energy access for the world’s poor. Even more importantly, they are funding no fossil fuel projects. Not one. It’s one of the greatest climate change and clean energy success stories this administration has to tell.
The only problem is that the Obama Administration hasn’t told the story. Which means few policy makers know about OPIC’s achievements, and even fewer are trying to replicate its success.
But to really understand and appreciate what OPIC has done you need to understand how little it’s moribund cousin Ex-Im Bank has done to reign in fossil fuel financing. The low carbon policy the original lawsuit established was meant to discourage Ex Im Bank from investing in dirty outdated coal plants. It did not however, mandate the agency reject such projects, nor did it impose a binding cap on the emissions its finance could generate.
Despite the weak nature of the policy, the institution initially adhered to its spirit and intent by rejecting the enormous 4 GW Indian coal plant Sasan. However the subsequent approval of the project (after bowing to heavy political pressure) has essentially invalidated the already weak policy. Ironically, the Sasan project is now under investigation for its environmental impacts, demonstrating the real financial risks of poor environmental policies.
Since the invalidation of the carbon policy, the Ex-Im Bank’s President Fred Hochberg has taken the institution careening down a path of financing the world’s largest, most destructive coal projects, including potential coal export projects located inside the Great Barrier Reef. From India to South Africa, the U.S. to Australia, the institution under the leadership of Hochberg has gotten worse in its fossil fuel financing than it was prior to the lawsuit. It now finances projects as though clean energy were not one of the most strategic long term market opportunities today — and worse, as if GHG’s were no limitation at all.
To further illustrate the divergent paths these two agencies are on, OPIC shined at the lackluster Rio+20 conference as one of the only institutions to pony up new funds for off-grid clean energy access. Unlike their colleagues at the World Bank, they listened to the calls from social entrepreneurs for increased access to funding — and they delivered. Now they are not only rolling out hundreds of millions in clean energy finance, they are supporting innovative efforts to address energy poverty.
The only question now is how this tale of two agencies ends. Congress has the opportunity to further strengthen OPIC with more staff to support clean energy finance and a continued commitment to a strong GHG policy. Indeed, it missed its opportunity to do something about the mess that is Ex-Im Bank under President Fred Hochberg. While Ex-Im has increased clean energy finance, its reckless support for coal casts a long shadow.
Unless the agency gets its act together, it’s time for new leadership. Perhaps the staff at OPIC could teach a new agency president a thing or two about how the Ex-Im bank can become a modern institution.
Justin Guay leads Sierra Club’s International Program.