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entitled 'Export-Import Bank: Reaching New Targets for Environmentally
Beneficial Exports Presents Major Challenges for Bank' which was
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
July 2010:
Export-Import Bank:
Reaching New Targets for Environmentally Beneficial Exports Presents
Major Challenges for Bank:
GAO-10-682:
GAO Highlights:
Highlights of GAO-10-682, a report to congressional committees.
Why GAO Did This Study:
The Export-Import Bank (Ex-Im) provides financing to support U.S.
exports, and its support for environmentally beneficial exports has
been of long-standing congressional interest. In fiscal year 2008,
Congress directed Ex-Im to allocate 10 percent of its annual financing
to renewable energy and environmentally beneficial products and
services. For fiscal years 2009 and 2010, it directed Ex-Im to
allocate 10 percent to renewable energy and energy efficient end-use
technologies. In 2009, it directed GAO to conduct a review of Ex-Im’s
efforts to meet congressional directives concerning environmental
exports financing. This report addresses (1) the extent of Ex-Im’s
financing of renewable energy, energy efficient end-use technologies,
and other environmentally beneficial exports; (2) Ex-Im's definitions
for, and its reporting on, these exports; and 3) the extent to which
Ex-Im has followed strategic planning key practices in its planning
efforts in these areas. GAO analyzed Ex-Im transaction data and
planning documents and interviewed officials from Ex-Im, other U.S.
agencies, state-level trade promotion agencies, environmental industry
associations, and other industry experts.
What GAO Found:
Ex-Im’s financing of exports it identified as environmentally
beneficial was 1.3 percent of its total financing from fiscal year
2003 through the first half of fiscal year 2010. Ex-Im’s
environmentally beneficial exports include renewable energy, energy
efficient exports including energy efficient end-use technologies, and
a mix of other products with beneficial effects on the environment.
Renewable energy was 0.23 percent of overall Ex-Im financing during
the period. Ex-Im did not specifically report its energy efficient end-
use financing through 2009, but officials stated the bank provided
very little such financing over the period. Thus, Ex-Im financing for
environmentally beneficial exports in general, and the smaller
renewable energy and energy efficient end-use portion, has been well
short of the 10 percent congressional target.
Ex-Im needs to further clarify its definitions and improve its
reporting on environmentally beneficial exports. Ex-Im recently began
tracking its financing of energy-efficient end-use technologies in its
internal data. In March 2010 the bank released a list of examples for
identifying the broader category of energy efficient technologies and
services, but the list does not clearly identify the energy efficient
end-use examples. Defining energy efficiency products and services is
inherently challenging overall, and agencies sometimes use terms
differently depending on their organizational needs. Thus, clear Ex-Im
definitions are important for communicating with Congress, potential
exporters, and others.
Ex-Im could benefit from more consistently following strategic
planning key practices in its environmentally beneficial financing
efforts. These include, for example, involving stakeholders, assessing
internal and external environments, and realigning resources if
needed. For example, while Ex-Im routinely shares information with
stakeholders, such as other trade promotion agencies, industry
associations, and lenders, it has not clearly communicated that it has
a target requiring substantial increases in financing for this area.
Figure: Ex-Im Financing of Renewable Energy and Other Environmentally
Beneficial Exports as Values and as Percentages of Total Ex-Im
Financing, Fiscal Year 2003—Second Quarter 2010:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year: 2003;
Renewable energy financing: $4 million;
Other environmentally beneficial financing: $209 million;
Percentage of Total Ex-Im Financing: 2.02%.
Fiscal year: 2004;
Renewable energy financing: $10 million;
Other environmentally beneficial financing: $156 million;
Percentage of Total Ex-Im Financing: 1.24%.
Fiscal year: 2005;
Renewable energy financing: $4 million;
Other environmentally beneficial financing: $72 million;
Percentage of Total Ex-Im Financing: 0.55%.
Fiscal year: 2006;
Renewable energy financing: $10 million;
Other environmentally beneficial financing: $121 million;
Percentage of Total Ex-Im Financing: 1.07%.
Fiscal year: 2007;
Renewable energy financing: $3 million;
Other environmentally beneficial financing: $80 million;
Percentage of Total Ex-Im Financing: 0.66%.
Fiscal year: 2008;
Renewable energy financing: $31 million;
Other environmentally beneficial financing: $196 million;
Percentage of Total Ex-Im Financing: 1.57%.
Fiscal year: 2009;
Renewable energy financing: $96 million;
Other environmentally beneficial financing: $280 million;
Percentage of Total Ex-Im Financing: 1.79%.
Fiscal year: Q1-Q2 2010;
Renewable energy financing: $103 million;
Other environmentally beneficial financing: $56 million;
Percentage of Total Ex-Im Financing: 1.20%.
Source: GAO analysis of Ex-Im Bank data.
[End of figure]
What GAO Recommends:
GAO recommends that Ex-Im (1) Develop clear definitions for its
subcategories of environmentally beneficial exports—specifically
energy efficient end-use exports–and report its financing in these
areas, and (2) Consistently implement key strategic planning practices
in this area.
View [hyperlink, http://www.gao.gov/products/GAO-10-682] or key
components. For more information, contact Loren Yager at (202) 512-
4347 or yagerl@gao.gov.
[End of section]
Contents:
Letter:
Background:
Since 2003, Environmentally Beneficial Exports Have Constituted 1.3
Percent of Ex-Im's Annual Financing:
Greater Clarity in Certain Ex-Im Definitions and More Detailed
Reporting Could Facilitate Understanding of Its Environmental Exports
Financing:
Ex-Im Could Benefit from Greater Use of Strategic Planning Key
Practices in Its Environmentally Beneficial Financing Efforts:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objective, Scope, and Methodology:
Appendix II: Ex-Im Energy Financing Levels and Composition:
Appendix III: Ex-Im's Description of Its Enhanced Due Diligence
Process for High Carbon Intensity Projects:
Appendix IV: Ex-Im Bank Incentives for Environmental Exports:
Appendix V: Data on Usage of Ex-Im's Financing under Its Environmental
Exports Program:
Appendix VI: Additional Detail on Financing Instruments Used for Ex-
Im's Environmentally Beneficial Exports:
Appendix VII: Additional Market Information on Environmentally
Beneficial Production and Trade:
Appendix VIII: Comments from the Export-Import Bank:
Appendix IX: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Ex-Im's Categories for Carbon Intensity and Bank Treatment:
Table 2: Environmental Exports Program Enhancements of the Standard Ex-
Im Financing Options:
Figures:
Figure 1: Shares of Ex-Im Financing of Environmentally Beneficial
Exports and Renewable Energy Exports, Relative to Ex-Im's Total
Financing, Fiscal Year 2003-Second Quarter Fiscal Year 2010:
Figure 2: Ex-Im's Annual Financing of Renewable Energy and Other
Environmentally Beneficial Exports as Amounts and as Percentages of Ex-
Im's Total Annual Financing, Fiscal Year 2003-Second Quarter Fiscal
Year 2010, with Congressional Targets, 2008-2010:
Figure 3: Relationships among and Descriptions and Examples of Ex-Im's
Subcategories of Environmentally Beneficial Exports, as of Fiscal Year
2010:
Figure 4: Ex-Im's Annual Energy Financing and Shares by Energy Type,
Fiscal Year 2003 through the Second Quarter of Fiscal Year 2010:
Figure 5: Typical Carbon Dioxide Emissions from Thermal Power Plants
with Proposed Benchmarks for Carbon Dioxide Intensity:
Figure 6: Annual Financing under Ex-Im's Environmental Exports Program
as a Share of Ex-Im's Total Annual Environmentally Beneficial
Financing, Fiscal Year 2003-Second Quarter Fiscal Year 2010:
Figure 7: Ex-Im Environmentally Beneficial Financing and Renewable
Energy Financing by Instrument, Fiscal Year 2003-Second Quarter,
Fiscal Year 2010:
Figure 8: Estimated Environmental Technology Production by Country and
Region, 2003-2008:
Figure 9: Estimated U.S. Environmental Technology Production, 2008:
Figure 10: Estimated U.S. Environmental Technology Exports by Country
and Region, 2003-2008:
Figure 11: Estimated U.S. Climate Change Industry Production by
Sector, 2008:
Abbreviations:
CHP: combined heating, cooling, and power:
CIRR: Commercial Interest Reference Rate:
EBI: Environmental Business International, Inc.
ENV: Environmental Small Business:
EU: European Union:
GPRA: Government Performance and Results Act:
NEPA: National Environmental Policy Act:
NGO: nongovernmental organization:
OECD: Organisation for Economic Cooperation and Development:
OPIC: Overseas Private Investment Corporation:
PV: photovoltaic:
SIDO: State International Development Organizations:
TPCC: Trade Promotion Coordinating Committee:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 14, 2010:
The Honorable Patrick Leahy:
Chairman:
The Honorable Judd Gregg:
Ranking Member:
Subcommittee on the Department of State, Foreign Operations and
Related Programs:
Committee on Appropriations:
United States Senate:
The Honorable Nita Lowey:
Chairman:
The Honorable Kay Granger:
Ranking Member:
Subcommittee on State, Foreign Operations and Related Programs:
Committee on Appropriations:
House of Representatives:
The Export-Import Bank of the United States' (Ex-Im) financing of
environmentally beneficial exports has been an area of long-standing
congressional interest. Since 1992, Congress has directed Ex-Im to
report on its financing of these exports. In recent years, Congress
has provided a 10 percent financing target for environmentally
beneficial exports, and in 2009 it stated that the target be
specifically for two subcategories of environmentally beneficial
exports--renewable energy and energy efficient end-use technologies.
The Obama administration announced in March a National Export
Initiative to substantially increase U.S. exports, and agency
responses have included steps to develop a strategy for increasing
renewable energy and energy efficient exports. As the U.S.
government's official export credit agency, Ex-Im will play a role in
this effort.
Fiscal year 2009 omnibus appropriations report language directed GAO
to assess Ex-Im's efforts to realize recent congressional directives
regarding the export of renewable energy and other environmentally
beneficial exports,[Footnote 1] which include Ex-Im's efforts to meet
a fiscal year 2008 directive that it develop a comprehensive strategy
for increased financing of these exports.[Footnote 2] To fulfill our
mandate, we provided a briefing to congressional staff in September
2009 that outlined relevant parts of Ex-Im's export financing to date
and identified several weaknesses in the strategy. This report
provides a more complete examination of those issues. Specifically,
this report addresses (1) the extent of Ex-Im's financing in recent
years of renewable energy, energy efficient end-use technologies, and
other environmentally beneficial exports; (2) Ex-Im's definitions for,
and its reporting on, renewable energy, energy efficient end-use
technologies, and other environmentally beneficial exports; and (3)
the extent to which Ex-Im has followed strategic planning key
practices in its planning efforts in these areas.
To determine the extent of Ex-Im's financing of environmental exports,
we obtained and analyzed financing and transaction data, from fiscal
year 2003 through the second quarter of fiscal year 2010, and related
documents from Ex-Im and interviewed Ex-Im officials responsible for
the data. To determine how Ex-Im has defined the various categories of
environmentally beneficial exports, we examined Ex-Im documents and
interviewed Ex-Im engineers and other officials involved with
identifying and reporting financing for these exports. We also
interviewed officials from other U.S. government agencies that have
developed definitions for their activities in these areas, and
reviewed relevant legislation concerning U.S. energy policy and
climate change containing definitions or examples of terms for various
types of environmental technologies. To determine to what extent Ex-Im
followed strategic planning key practices, we obtained and reviewed Ex-
Im staffing, budget, and strategic planning documents.[Footnote 3] We
interviewed Ex-Im officials and various external stakeholders,
including U.S. government agencies, state-level trade promotion
agencies, industry representatives, and industry experts. We also
reviewed information available on the size and scope of the
environmental, renewable energy, and energy efficiency industries. For
a more detailed explanation of our scope and methodology, see appendix
I. We performed our work between August 2009 and July 2010 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe the
evidence obtained provides a reasonable basis for our findings,
conclusions and recommendations.
In this report, we recommend that the Chairman of the Export-Import
Bank take steps to improve the planning and reporting of its
activities related to environmental exports. These include providing
clear definitions for it subcategories of environmentally beneficial
exports and reporting annually on financing of them, and consistently
implementing certain key practices of strategic planning. We provided
a draft of this report to Ex-Im. Ex-Im provided written comments and
agreed with our recommendations.
Background:
Ex-Im is the official export credit agency of the United States and
operates under the authority of the Export-Import Bank Act of 1945, as
amended.[Footnote 4] It operates as an independent agency of the U.S.
government with 358 full-time staff positions. Ex-Im's mission is to
support U.S. exports and jobs by providing export financing on terms
that are competitive with the official export financing support
offered by other governments. Ex-Im offers a variety of financing
instruments, including loans, loan guarantees, export credit
insurance, and working capital guarantees for pre-export financing.
[Footnote 5] Between fiscal years 2003 and 2008, Ex-Im authorized
financing averaging $12.8 billion annually. In fiscal year 2009, Ex-Im
had a record year, financing over $21 billion in 2,891 authorizations.
Since fiscal year 2008, Ex-Im has been "self-sustaining" for
appropriations purposes, financing its operations from receipts
collected from its borrowers.[Footnote 6]
Congressional directives to Ex-Im concerning renewable energy and
other environmental exports span many years. For example, 1989
legislation directed that Ex-Im should seek to provide at least 5
percent of its energy sector financing for renewable energy projects
and should undertake efforts to promote renewable energy.[Footnote 7]
Ex-Im generally did not achieve this numerical target. Ex-Im's 2002
reauthorization legislation contained directives to promote renewable
energy exports and report on promotion activities annually to Congress
without specifying a numeric target.[Footnote 8] See appendix II for
current information on renewable energy financing as a portion of Ex-
Im's overall energy sector financing.
The 10 percent financing targets for environmentally beneficial
exports, including specific subcategories, are contained in 2008-2010
appropriations language:
* Fiscal year 2008 legislation directed that not less than 10 percent
of Ex-Im's financing should be used for "renewable energy and
environmentally beneficial products and services."[Footnote 9]
* For each of fiscal years 2009[Footnote 10] and 2010,[Footnote 11]
Congress again specified a 10 percent target for Ex-Im financing but
changed the targeted exports to renewable energy technologies or
energy efficient end-use technologies.
In addition, the House Committee Report accompanying the fiscal year
2008 appropriations legislation directed Ex-Im to submit a
comprehensive strategy to increase the financing of renewable energy
and environmentally beneficial exports.[Footnote 12] The House
Appropriations Committee subsequently determined the quality and scope
of that strategy to be inadequate.[Footnote 13] Furthermore, in
addition to reiterating the 10 percent financing target, the House
Conference Report on Ex-Im's fiscal year 2010 appropriations directed
Ex-Im to identify and report on all financing carried out in fiscal
year 2009 for renewable energy or end-use energy efficiency
technologies, as well as other environmentally beneficial exports, and
to explain how Ex-Im defines and tracks such activities.[Footnote 14]
The wording changes in the financing targets are significant, since
renewable energy and energy efficient end-use technologies are
subcategories of environmentally beneficial goods and services
(generally referred to as environmentally beneficial exports in this
report). The changes leave out some environmentally beneficial exports
that were previously included. As a result, Ex-Im cannot count toward
this target many of the exports it classifies as environmentally
beneficial. According to Ex-Im, the exports excluded from the target
made up a substantial part of their environmentally beneficial exports
financing in 2003-2009. These include, for example, wastewater
treatment projects and technologies to reduce the carbon dioxide
emissions of existing fossil fuel plants. Although Ex-Im is not
required by law to meet the 10 percent target, Ex-Im officials have
stated that they view the goal seriously and are working to achieve it.
Several key and related terms are used in this report in reference to
Ex-Im's financing: (1) environmentally beneficial, (2) renewable
energy, (3) energy efficiency technologies, and (4) energy efficient
end-use technologies. Environmentally beneficial is an overarching Ex-
Im category encompassing the subcategories listed as well as
additional goods or services that Ex-Im identifies. Renewable energy
is generally considered to be energy and the technologies that derive
energy from naturally replenishing sources that are virtually
inexhaustible over time. Ex-Im considers the following sectors to be
eligible for financing incentives associated with renewable energy:
wind energy, hydropower, solar photovoltaic and solar thermal energy,
geothermal energy, ocean thermal energy, wave and tidal power, and bio-
energy.[Footnote 15] In addition to equipment that produces renewable
energy, Ex-Im typically considers all components, materials and
services, used to build or upgrade renewable energy facilities, as
renewable energy exports. Energy efficiency products and services--
including the energy efficient end-use component--are less clearly
defined, in part because they are frequently defined in comparison
with an often-improving conventional product or methodology. The
definitional issues are addressed below.
Ex-Im's energy financing, specifically its financing for fossil fuel
projects, was the subject of a 2002 lawsuit brought against the bank
and the Overseas Private Investment Corporation by environmental
nongovernmental organizations and four U.S. cities.[Footnote 16] The
lawsuit was settled in 2009 with Ex-Im agreeing to develop and
implement a carbon policy for Ex-Im's financing; provide the Board of
Directors with additional information about carbon dioxide emissions
associated with potential fossil fuel transactions; and take a
leadership role in consideration of climate change issues, promoting
emissions mitigation measures within the Organisation for Economic
Cooperation and Development (OECD) and among export credit agencies.
Ex-Im's Board of Directors approved a carbon policy in November 2009,
and Ex-Im announced an implementation policy for the plan in March
2010. Ex-Im's Carbon Policy Implementation Plan includes new
procedures for evaluating high-carbon fossil fuel plants, generally
coal-fired power plants, as well as additional incentives for some
environmentally beneficial exports.[Footnote 17] (For information on
Ex-Im's Enhanced Due Diligence Process for High Carbon Intensity
Projects, see appendix III.) Consistent with the settlement, Ex-Im is
advocating within the OECD that member export credit agencies
regularly report on their carbon output, as Ex-Im now does, and
consider adopting their own environmental guidelines on carbon
emissions.
Ex-Im offers enhanced financing terms for certain types of exports
under its Environmental Exports Program. Ex-Im established the program
in 1994, and recently announced additional enhancements for renewable
energy as part of its Carbon Policy Implementation Plan. The specific
enhancements Ex-Im offers reflect in part what financing terms are
allowed under international agreements among export credit agencies,
through the OECD. For example, under OECD agreements, renewable energy
and water treatment exports are eligible for up to 18-year repayment
terms, in contrast to the maximum 10-to 12-year terms available for
standard equipment sales or non-nuclear power plants, respectively,
under normal Ex-Im financing. (See appendix IV for additional
information on Ex-Im's incentives for environmental exports and
appendix V for additional information on financing amounts for Ex-Im's
Environmental Exports Program.)
Since 2003, Environmentally Beneficial Exports Have Constituted 1.3
Percent of Ex-Im's Annual Financing:
During fiscal year 2003 through the first half of fiscal year 2010,
according to Ex-Im data, Ex-Im provided $1.4 billion in financing for
environmentally beneficial exports, of which $260 million was for
renewable energy. Over that 7.5-year span, environmentally beneficial
exports financing represented 1.3 percent of Ex-Im's total $111
billion of financing. Renewable energy represented 0.23 percent of
total Ex-Im-financed exports. (See figure 1.) For information on how
this financing is distributed across Ex-Im's three financing
instruments, see appendix VI.
Figure 1: Shares of Ex-Im Financing of Environmentally Beneficial
Exports and Renewable Energy Exports, Relative to Ex-Im's Total
Financing, Fiscal Year 2003-Second Quarter Fiscal Year 2010:
[Refer to PDF for image: pie-chart and subchart]
All Ex-Im financing: 98.7%;
Environmentally beneficial–including energy efficiency, renewable
energy, and others: 1.3%:
- All environmentally beneficial except renewable energy: 1.1%;
-Renewable energy: 0.2%.
Source: GAO analysis of Ex-Im Bank transaction data.
[End of figure]
Ex-Im has not achieved the 10 percent environmental financing targets
set by Congress in 2008-2010 (see above for details on these targets).
Neither Ex-Im's financing of renewable energy and energy efficient end-
use technologies nor the broader category of environmentally
beneficial exports has approached 10 percent of total financing since
2003.[Footnote 18] As figure 2 shows, Ex-Im's financing for renewable
energy has recently increased. Ex-Im's renewable energy financing in
the first two quarters of fiscal year 2010 exceeded its renewable
energy financing for all of fiscal year 2009, which in turn
represented an increase over fiscal year 2008.[Footnote 19] For
reasons discussed below, Ex-Im did not track or report separately on
energy efficient exports through fiscal year 2009. However, Ex-Im
officials told us that they believed their financing of energy
efficient end-use technology exports, which was specified in the 10
percent target beginning with fiscal year 2009, would have been
minimal over the period.[Footnote 20]
Figure 2: Ex-Im's Annual Financing of Renewable Energy and Other
Environmentally Beneficial Exports as Amounts and as Percentages of Ex-
Im's Total Annual Financing, Fiscal Year 2003-Second Quarter Fiscal
Year 2010, with Congressional Targets, 2008-2010:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year: 2003;
Renewable energy financing: $4 million;
Other environmentally beneficial financing: $209 million;
Percentage of Total Ex-Im Financing: 2.02%.
Fiscal year: 2004;
Renewable energy financing: $10 million;
Other environmentally beneficial financing: $156 million;
Percentage of Total Ex-Im Financing: 1.24%.
Fiscal year: 2005;
Renewable energy financing: $4 million;
Other environmentally beneficial financing: $72 million;
Percentage of Total Ex-Im Financing: 0.55%.
Fiscal year: 2006;
Renewable energy financing: $10 million;
Other environmentally beneficial financing: $121 million;
Percentage of Total Ex-Im Financing: 1.07%.
Fiscal year: 2007;
Renewable energy financing: $3 million;
Other environmentally beneficial financing: $80 million;
Percentage of Total Ex-Im Financing: 0.66%.
Fiscal year: 2008;
Renewable energy financing: $31 million;
Other environmentally beneficial financing: $196 million;
Percentage of Total Ex-Im Financing: 1.57%;
10% of total Ex-Im financing: approximately $1.4 billion.
Fiscal year: 2009;
Renewable energy financing: $96 million;
Other environmentally beneficial financing: $280 million;
Percentage of Total Ex-Im Financing: 1.79%;
10% of total Ex-Im financing: approximately $2.2 billion.
Fiscal year: Q1-Q2 2010;
Renewable energy financing: $103 million;
Other environmentally beneficial financing: $56 million;
Percentage of Total Ex-Im Financing: 1.20%.
Source: GAO analysis of Ex-Im Bank data.
Note: The 10 percent target did not exist before fiscal year 2008. For
2009, the target applies only to the subcategories of renewable energy
and energy efficient end-use technologies, but the amount and
percentage shown here are for all environmentally beneficial exports
because Ex-Im did not separately track its financing for energy
efficient end-use technologies over this period. From fiscal years
2003 through 2007, renewable energy financing was $10 million or less
per year.
[End of figure]
Greater Clarity in Certain Ex-Im Definitions and More Detailed
Reporting Could Facilitate Understanding of Its Environmental Exports
Financing:
Ex-Im's environmentally beneficial exports constitute an overarching
category that includes renewable energy, energy efficient exports
including energy efficient end-use technologies, and a mix of other
products with beneficial effects on the environment. Ex-Im recently
publicly provided examples for identifying energy efficiency exports,
including energy efficient end-use exports, and began to track its
financing for those exports in its internal data. Energy efficiency is
inherently difficult to define because it depends on improvements
relative to a moving baseline of efficiency standards across
technologies. However, the examples Ex-Im released do not clearly
distinguish between energy efficient end-use technologies and other
energy efficiency technologies. Given the specific congressional
interest in financing in this area, it is important that Ex-Im be as
clear as possible in its application of terms, to facilitate
communicating financing goals to potential exporters and others and
communicating progress in meeting targets to Congress.
Composition of Ex-Im's Environmentally Beneficial Exports:
Ex-Im's environmentally beneficial exports constitute an overarching
category that encompasses the following subcategories, some of which
Ex-Im had not separately identified until recently: (1) renewable
energy products or services, (2) energy efficient end-use
technologies, (3) other energy efficiency technologies, and (4) a
number of technologies that improve the environment or mitigate
various types of pollution, but are often not directly related to
energy efficiency or carbon emissions.
Ex-Im engineers are responsible for determining whether export
transactions are considered environmentally beneficial, and are
consulted by Ex-Im staff in cases where the classification is not
clear to nontechnical staff. Ex-Im officials said that in classifying
exports, they examine the nature of the export or project, including
its purpose, as well as the intent of the importer. In April of 2010,
Ex-Im began identifying energy efficient end-use technologies as a
separate category within its internal transactions data.[Footnote 21]
Figure 3 shows relationships among Ex-Im's subcategories of
environmentally beneficial exports as of fiscal year 2010 and provides
descriptions and examples of the subcategories, based on discussions
with Ex-Im officials and review of Ex-Im documents. In the figure, the
set included by the heavy line would count toward Ex-Im's 10 percent
financing target as laid out for both fiscal year 2009 and fiscal year
2010. There is some overlap between the renewable energy and the
energy efficient end-use technology subcategories, according to how Ex-
Im has classified its transactions. For example, recent Ex-Im
transaction data show that three of the four transactions identified
as energy efficient end-use authorized during the first two quarters
of fiscal year 2010 were also renewable energy, because those
transactions covered renewable energy exports (such as solar panels)
destined for end-use applications.[Footnote 22]
Figure 3: Relationships among and Descriptions and Examples of Ex-Im's
Subcategories of Environmentally Beneficial Exports, as of Fiscal Year
2010:
[Refer to PDF for image: illustration]
Within heavy lines:
Renewable energy (circle);
Energy efficiency: A. Energy efficient end-use (half-circle).
Energy efficiency (circle):
A. Energy efficient end-use (half-circle);
B. Other energy efficiency (half-circle).
Remaining environmentally beneficial, such as water treatment and
pollution abatement (circle).
The financing included within the heavy line would count toward the 10
percent financing target in Ex-Im’s fiscal year 2009 and its fiscal
year 2010 appropriations legislation.
Note: The size of the circles does not reflect the size or value of
the exports or market.
Renewable energy exports:
Exports of goods and services related to deriving and producing energy
from renewable or essentially inexhaustible sources, including:
* direct sunlight (photovoltaic, passive solar heating for buildings,
and solar thermal);
* wind;
* water (hydropower);
* geothermal energy;
* ocean thermal energy, and;
* bioenergy (all sustainable biomass, land-fill gas, sewage treatment
plant gas, and biogas energy installations.)
Energy efficiency exports:
Exports of goods, services, and projects that result in lower energy
consumption for the same or improved service through:
A. Energy efficient end-use technologies: End-use technologies that
consume less energy, or result in a direct replacement of energy drawn
from the grid with end-user-installed, non-carbon-based technology,
such as:
* efficiency improvements to commercial and residential buildings;
* solar panels for residential use (could qualify as both renewable
energy and energy efficient end-use);
* electric automotive vehicles;
* geothermal heat pumps (could not qualify as renewable energy);
* high-efficiency, all-electric manufacturing, and;
* low energy cooling system.
B. Other energy efficiency technologies: Includes technologies that
produce electricity more efficiently, such as:
* technologies to improve plant efficiency or reduce the carbon
dioxide emissions of existing plants, and;
* coal gasification technologies.
Remaining environmentally beneficial exports:
Exports of goods and services related to improving the environment and
mitigating various types of pollution, which may or may not be
directly related to carbon emissions or energy efficiency, such as:
* potable water production and distribution projects;
* projects or products for the collection, treatment, or recycling of
waste;
* equipment for monitoring and reducing pollution; and;
* carbon capture and sequestration technologies.
Source: GAO analysis of Ex-Im documents and discussions with Ex-Im
officials.
[End of figure]
"Energy efficiency" is challenging to define, according to Ex-Im and
other agency officials and experts we spoke with, because it requires
a comparison with an often-improving conventional product or method.
The threshold for what is an efficient product continually changes and
there are no standard criteria for how much of an efficiency
improvement is necessary. This issue is reflected in ongoing
discussions concerning applying enhanced export credits terms to
certain climate change technologies being carried out within the OECD.
According to Ex-Im, one question the OECD is addressing is what
technical standards could be used to determine energy efficiency
technologies against a backdrop of multiple baselines that could be
used to calculate efficiency gains.[Footnote 23]
Identifying energy efficient end-use technologies can involve
particular challenges. According to Ex-Im, technologies that improve
energy efficiency in the construction and other infrastructure sectors
are difficult to identify and the end-use efficiency of a product can
depend on how it is used. For example, Ex-Im said that the replacement
of outdated thermostats in existing buildings with more efficient U.S.-
manufactured thermostats would be considered an energy efficient end-
use project, but if the developer's purpose was simply to replace
outdated thermostats, the transaction would not qualify. Ex-Im told us
that, in certain cases, the determinations could appear to be
inconsistent.
Ex-Im Has Not Clearly Communicated What It Considers to Be Energy
Efficient End-Use Technologies:
At its annual conference in March 2010, Ex-Im released a list of
product and project examples that it labeled energy efficiency
technologies and services. The list includes products and projects Ex-
Im considers to be energy efficient end-use technologies, as well as
other energy efficiency products and projects. However, Ex-Im's
original list did not distinguish between examples representing energy
efficient end-use technologies and services and examples representing
other energy efficiency technologies and services.
Although defining energy efficiency can be challenging, a clearer
indication of what Ex-Im considers to be energy efficient end-use
technologies is important because that subcategory, along with
renewable energy, constitutes one of the two areas specified in the
current congressional 10 percent financing target. In addition, as
noted above, the conference report on Ex-Im's 2010 appropriation also
directs Ex-Im to define energy efficient end-use technologies and to
track its financing in that area.
Ex-Im identified for us the items on its list of energy efficiency
examples that represent (1) energy efficient end-use technologies and
services, (2) other energy efficiency technologies and services, and
(3) technologies and services that could be either depending on the
context of the transaction. We have reproduced Ex-Im's list below,
formatted to show Ex-Im's identification of these items.
Examples of energy efficient end-use items are set in bold.
Examples of other energy efficiency items are italicized.
Examples that, according to Ex-Im, could be either energy efficient
end-use items or other energy-efficiency items, depending on the
specifics of a transaction, are left as regular text.
* Buildings: design, engineering, or architectural services for new
and existing buildings; energy audits; energy efficient insulation;
building envelopes; solar-radiant barriers; advanced windows; energy
efficient lighting; water heating; refrigeration technologies; and
smart meters.
* Industries: improvements in industrial design or process to reduce
energy utilization, including combined heating, cooling, and power
(CHP); waste-heat recovery; preheating and efficient drives (motor,
pump, compressors); and other technologies designed to reduce energy
intensity.
* Power generation facilities: refurbishment and repowering (including
hydropower), improved operations and maintenance practices, and better
resource utilization (higher plant load factors and availability).
* Reduced transmission and distribution losses: high-voltage power
lines, better-insulated conductors, capacitors, efficient and low-loss
transformers, and improved metering systems and instrumentation.
* Smart grid technologies: smart meters, remote sensors, energy-
management systems, and energy storage devices.
* Transportation: hybrid and electric vehicles; high miles-per-gallon
vehicles; compressed natural-gas vehicles; and public transportation
projects, including urban mass-transport systems, modal shifts to
intercity and intracity rail and water transport, and improved fleet
usage.
Ex-Im Recently Began Tracking Its Energy Efficient End-Use Financing
and Has Not Publicly Reported That Information:
Ex-Im began tracking its financing of energy efficient end-use
technologies in April 2010. Before 2010, Ex-Im did not track or report
its level of financing for energy efficient end-use technology
exports. Annual reports through 2009 list financing for
environmentally beneficial exports and the subcategory of exports that
support renewable energy. Within Ex-Im's transaction data, there has
not previously been a way to identify the total financing for other
subcategories of environmentally beneficial exports, particularly
energy efficient end-use technologies.
Definitions of Terms Used for Certain Categories of Environmental
Goods and Services Vary across U.S. Agencies:
U.S. agencies use a range of terms, sometimes differently, with
respect to environmental goods and services, which makes it important
for Ex-Im to clearly define the terms it uses. While Ex-Im uses the
terms environmentally beneficial, renewable energy, and energy
efficient, other agencies may use those as well as other terms to
refer to environmental goods and services, including clean energy and
climate-friendly. Agencies use and define these terms in certain ways
that depend in part on their organizational needs and goals. For
example, the Commerce Department is concerned with tracking the export
of environmental goods, and the U.S. Trade Representative uses and
defines terms as part of trade liberalization negotiations. Because
U.S. agencies use a range of terms, sometimes differently, with
respect to environmental goods and services, it is important that Ex-
Im be as clear as it can in its own definitions so that Congress can
understand the information Ex-Im reports relative to congressional
financing targets.
Ex-Im Could Benefit from Greater Use of Strategic Planning Key
Practices in Its Environmentally Beneficial Financing Efforts:
While Ex-Im has taken steps to increase financing for environmentally
beneficial exports, it could benefit from more consistently following
strategic planning practices such as involving stakeholders, assessing
the internal and external environments, and realigning resources. Ex-
Im routinely shares information with stakeholders, but has not
generally involved them in communicating goals or discussing
strategies for achieving them. On the other hand, Ex-Im has taken some
steps to assess factors that affect its financing of environmentally
beneficial exports such as conducting analysis of the renewable energy
market to identify the best sectoral and geographic opportunities for
Ex-Im financing. Ex-Im has also considered reorganizing some staff
into more focused teams to target priority industries and countries,
but this effort has not included an analysis of the resources required
to accomplish the goal of increasing certain types of environmentally
beneficial exports.
Strategic Planning:
GAO has identified a set of key steps for effectively managing for
results.[Footnote 24] There are three key steps: defining clear
missions and desired outcomes, measuring performance to gauge
progress, and using performance information as a basis for decision
making. Within the first step, "define clear missions and desired
outcomes," there are three recommended practices:
* involving stakeholders in clarifying mission, priorities, and
desired outcomes;
* assessing the external and internal environment; and:
* realigning staff and resources to correspond with agency priorities.
These key practices can be applied to an organization's strategic
planning efforts and activities, as well as the process of creating a
strategic plan.
Ex-Im has developed planning documents for its environmental exports
activities, and has been engaged in a broader agencywide planning
effort. Ex-Im presented a strategic plan for environmentally
beneficial exports to Congress in April 2008. According to Ex-Im, this
plan had been created using its annual business development plan for
these exports, which is developed by Ex-Im's Office of Renewable
Energy and Environmental Exports and functions as a strategic plan for
that office. Beginning in August 2009, Ex-Im has engaged in an
agencywide strategic planning exercise, resulting in the creation of
vision statements, strategic goals, and linked initiatives. Ex-Im
provided these statements, goals, and initiatives, as well as a draft
agencywide strategic plan to GAO.
Ex-Im Has Not Clearly Conveyed Its Goal of Substantially Increasing
Environmentally Beneficial Financing to Stakeholders:
While Ex-Im coordinates activities and shares information with
stakeholders to some extent, it has not consistently worked with
stakeholders to explain its goals, set priorities, and discuss
strategies for increasing environmentally beneficial exports
financing. Involving stakeholders effectively entails communicating
with them about goals and soliciting their input when determining
priorities and strategies. Ex-Im's stakeholders for environmentally
beneficial exports financing include other U.S. government agencies,
state-level trade promotion offices, members of the environmental
industry, and lenders. Ex-Im shares information with these
stakeholders but has not consistently communicated goals or discussed
strategies with them for increasing environmentally beneficial exports
financing. In addition, Ex-Im has also not involved stakeholders in
the creation of strategic planning documents related to its
environmentally beneficial exports financing. In general, stakeholders
can be influential in whether programs succeed or fail, and their
involvement is important to help agencies ensure that efforts are
targeted at the highest priorities. For example, according to Ex-Im,
Ex-Im's lenders play an important role in bringing Ex-Im's financing
options to the attention of potential exporters who are not familiar
with Ex-Im or with particular incentives the bank may offer.
Ex-Im officials working on environmentally beneficial export financing
routinely share information with stakeholders about specific trade
promotion activities and Ex-Im's incentives under the Environmental
Exports Program. For example, Ex-Im coordinates with the Trade
Promotion Coordinating Committee secretariat, Commerce Department, and
the Small Business Administration to present information to potential
exporters at conferences and seminars. These agencies also share
information on trade opportunities. Ex-Im shares general information
about its financing incentives with state-level trade promotion
officials and other stakeholders by attending seminars, giving
interviews to business publications, and working with these officials
to provide information to industries and manufacturers in their
states. Ex-Im conducts training sessions across the country with
community bankers and larger lenders to discuss how Ex-Im financing
can support exports.
However, while Ex-Im shares information with these stakeholders, it
has not clearly and consistently communicated its strategic goal of
substantially increasing financing for environmentally beneficial
exports, including information on the target. While some U.S.
government stakeholders were aware of Ex-Im's goals and target in this
area, many were not aware of both. None of the state-level trade
promotion agency officials we spoke with were aware that Ex-Im had a
target that would require a substantial increase in financing for
environmentally beneficial exports, although a prominent renewable
energy association told us that Ex-Im does the best job among
government agencies of outreach to the renewable energy industry
through its organization. Ex-Im officials told us that the bank's
designated lenders have been informed of the goal of increasing
financing for environmentally beneficial exports. Of the members of
the Ex-Im Advisory Committee with whom we spoke, most told us that
they were aware that Ex-Im was focused on increasing environmentally
beneficial exports but not all were aware of Ex-Im's target.
Ex-Im has not routinely discussed priorities, opportunities, or
strategies for increasing financing for environmentally beneficial
exports with stakeholders, including government agencies, state-level
trade promotion agencies, members of the environmental industry, or
lenders. Further, Ex-Im has not consulted these stakeholders in
formulating strategic planning documents, such as its Office of
Renewable Energy and Environmentally Beneficial Exports' Business
Development Plans. Some U.S. government officials noted that these
types of discussions have occurred between other trade promotion
agencies, and one official in particular noted that this type of
consultation would be helpful. Other government and industry
stakeholders noted that their organizations could have market
information or trade leads that would help Ex-Im to identify new
customers.
Ex-Im Has Partially Assessed Factors Affecting Its Financing of
Renewable Energy and Energy Efficient End-Use Technology Exports:
Recognizing that achievement of an agency's goals can be affected by
forces both outside and inside the agency, another best practice for
strategic planning is for agencies to systematically assess the
external and internal environments for their programs.
* Relevant external factors may include the following:
1. sector and country market conditions for environmentally beneficial
exports,
2. firm conditions for producing those exports,
3. capital market conditions for export financing, and:
4. international trade practices and regulations that govern foreign
sales.
An example of an external factor would be that, while Ex-Im has some
discretion in the financing terms it offers and in how it assesses
risk for specific transactions, international agreements through the
export credit group of the OECD, and the Department of the Treasury's
(Treasury) role in implementing those agreements, can constrain its
ability to offer more favorable terms unilaterally for certain types
of products.
* Relevant internal factors may include the following:
1. the degree to which Ex-Im's application and approval process is
user-friendly,
2. agency organization,
3. the number of Ex-Im's staff promoting specific exports,
4. the appropriateness of staff expertise,
5. Ex-Im's risk tolerance, and:
6. Ex-Im's financing terms.
Ex-Im's strategic planning documents, some of which are being
finalized, now contain some information on environmentally beneficial
sector and country markets, capital and firm conditions, and policy
considerations. Ex-Im's November 2009 business development plan for
environmentally beneficial exports addresses market conditions and
other external factors affecting its renewable energy export
financing. Examples of specific findings from the plan on areas of
growth and potential markets for U.S. exporters include the following:
* The best near-term opportunities for Ex-Im financing of renewable
energy exports are in solar and wind, though the geothermal, small
hydro, and biomass sectors may offer country-specific opportunities.
* The best country-specific opportunities are in those countries that
have cost incentives based on feed-in tariffs,[Footnote 25] or where
ongoing capital constraints in the private sector limit activity, with
specific mention of the European Union, Canada, and South Korea.
* Renewable energy export growth has been driven by new firms and
small businesses, which often require additional assistance in
structuring their financing.
(For more information on estimates of global markets for environmental
goods and services, see appendix VII.)
Ex-Im also cites other exporting countries' use of tied aid as an
external factor that strongly affects market opportunities for
renewable energy financing. Tied aid--government-to-government
concessional financing of projects in developing countries linked to
the procurement of goods and services from the donor country--is a
tool that several countries have used to expand their renewable energy
exports. Ex-Im concludes in the business development plan that despite
opportunities for renewable energy exports to developing countries,
without the availability of tied aid, U.S. exporters are unlikely to
compete effectively with exporters from countries that provide it.
[Footnote 26]
On the basis of this assessment, Ex-Im's planning documents identify
several actions for promoting renewable energy export financing. The
actions include, for example, more outreach to environmental exporters
already using Ex-Im financing. They also include streamlined
processing and greater risk tolerance for renewable energy
transactions below $10 million, such as through the Solar Fast Track
initiative announced in March 2010.
Finally, Ex-Im's strategic planning for environmental exports could
benefit from assessments of internal factors such as the adequacy of
staff and resources to achieve its goals. Such assessments can provide
a basis for taking steps to realign resources if needed, as discussed
below. According to GAO's analysis, the strategy for environmentally
beneficial exports presented to Congress in April 2008 did not provide
enough direction and priority to be able to realign staff and
resources. Similarly, the draft strategic plan being developed since
October 2009 does not discuss staff and other resources required to
promote growth in environmentally beneficial export financing. The
2010 business plan for environmentally beneficial exports states that,
on the basis of relationships staff have developed with industry
associations, firms, and foreign buyers, Ex-Im has the necessary
components in-house to successfully support renewable energy
transactions. However, Ex-Im staff acknowledged that additional
expertise and staff time may be required to provide counseling needed
to support small business renewable energy exports. In addition,
members of Ex-Im's advisory board told us that there are areas for
potential improvement in the availability of resources to assist some
renewable energy exporters with Ex-Im's application process.
Ex-Im Has Taken Some Internal Steps, but It Has Not Clearly Addressed
the Resource Needs or Realignments for Increasing Environmental
Exports Financing:
Ex-Im has increased staff working directly on environmental exports
and formed a new internal working group, but it has not fully
identified resource realignments that may be needed. After assessing
the internal organizational factors as part of a strategic planning
effort, leading organizations then realign their resources, staff, and
budget to match the priorities detailed within the strategic planning
effort. On the basis of available information, Ex-Im's ongoing
strategic planning initiative does not provide enough information to
realign staff and resources to meet its current goals, including the
10 percent financing target for certain types of environmentally
beneficial exports.
Following congressional direction, Ex-Im established the Office of
Renewable Energy and Environmental Exports at the end of fiscal year
2007 with one staff person. After the target was established for
fiscal year 2008, Ex-Im increased the number of officials working on
renewable energy and environmental exports from one to three. These
staff identify U.S. producers of environmentally beneficial goods and
services, inform them of Ex-Im export financing assistance, encourage
them to use Ex-Im financing, and help customers work through the
bank's systems to obtain financing.
In addition, Ex-Im has convened a new Working Group on the Environment
as an element of the November 2009 carbon policy. Although this
working group is to focus on implementing the carbon policy, Ex-Im
told us it also has some role, which is not yet clearly defined, in
increasing financing for environmentally beneficial exports. This new
working group is different from the defunct Environmental Exports Team
and tasked primarily to examine issues such as updating and
reconciling the bank's environmental regulations and policies with the
new carbon policy and the strategic planning initiative.[Footnote 27]
The Working Group on the Environment has eight staff from various
offices specifically assigned to it, including staff from the offices
of General Counsel, Policy and Planning, Congressional Affairs,
Engineering and Environment, Structured Trade Finance, and Renewable
Energy and Environmental Exports.
A senior Ex-Im official told us that organization charts do not
effectively show the extent of Ex-Im's resource commitment to
environmentally beneficial exports, and said that Ex-Im has sufficient
staff assigned throughout the bank for environmental exports. In
addition to the Office of Renewable Energy and Environmental Exports
staff, the other staff members include attorneys, engineers, policy
specialists, structured finance specialists, and others. However,
their primary duties do not involve market development or looking for
U.S. manufacturers who could export an environmentally beneficial
product.
Ex-Im's response to a congressional financing mandate that is not
directly related to environmental exports demonstrates that expansion
of exports in a sector may involve the commitment of substantial
resources within the bank. Ex-Im is mandated by Congress to make
available not less than 20 percent of financing annually for the
direct support of small business.[Footnote 28] Ex-Im has generally
achieved the 20 percent small business mandate in recent years, and
has allocated substantial resources to that effort. In addition to the
20 percent mandate, Congress, in Ex-Im's 2006 reauthorization, created
a Small Business Division within Ex-Im. About 27 Ex-Im staff work
directly to increase small business exports, most of them in Ex-Im
regional offices.
Ex-Im's 2011 budget submission requests a funding increase for
administrative expenses and additional staff positions, but does not
specify where those positions would be added or whether any would be
allocated specifically to environmental efforts. For fiscal year 2011,
Ex-Im is requesting a 26 percent increase in its administrative
budget, including staff, to $105.6 million from $83.9 million provided
for fiscal year 2010. According to Ex-Im budget estimates, bank staff
levels have decreased over 10 percent since fiscal year 2002 from some
401 full-time-equivalent staff to 358. The fiscal year 2011
administrative expense request includes $5.2 million to address
increased demand from U.S. exporters for Ex-Im financing by rebuilding
staff levels, but does not specify the positions of the additional
staff requested.
Conclusions:
An increased focus on Ex-Im's financing of environmentally beneficial
exports is reflected in recent congressional targets, beginning with
the fiscal year 2008 target of 10 percent. Achieving that level of
financing for environmentally beneficial exports overall could mean a
more than fivefold increase by Ex-Im in such exports, since
environmental goods and services represented just 1.3 percent of its
overall financing in fiscal years 2003-2009. Moreover, Congress raised
the bar for Ex-Im in its fiscal year 2009 appropriations when in it
modified the statutory target to focus more narrowly on financing of
renewable energy technologies or energy efficient end-use technologies.
As Ex-Im seeks to achieve its environmental financing goal, it will
likely face many challenges. Some may be to a large extent outside its
control, such as financing incentives offered by other countries.
Others are within the bank's control, including clearly communicating
that its financing targets require substantial increases in certain
areas, and determining how any additional resources could best be used
to support potential exporters in this area. Ex-Im needs a clear
strategy for meeting these challenges that is integrated into a
broader strategy of the bank. We found that while Ex-Im has taken
steps toward an environmental exports strategy, there are several ways
in which its tracking, reporting, and planning could be improved.
By more clearly communicating what Ex-Im includes in its definition of
certain environmentally beneficial exports--especially energy
efficient end-use technologies--the bank could improve its ability to
track and report on those exports and to provide information on its
activities and goals, both within the bank and to other U.S. agencies,
potential exporters, and Congress. Some terms are inherently difficult
to define and have been used differently across U.S. government
agencies. While Ex-Im has recently begun to track its energy efficient
end-use financing internally, the energy efficiency technology
examples it distributed publicly do not fully reflect the information
that the bank uses in categorizing different types of energy
efficiency exports. Congressional interest in this financing, along
with terms that do not have consistent usage in general, make it
important for Ex-Im to be clear with its own use of these terms.
With respect to the strategy itself, better communication of Ex-Im's
environmental financing goals to the bank's stakeholders could enhance
Ex-Im's efforts to achieve them. In addition, a full assessment of the
adequacy of the bank's resources with respect to substantially
increasing financing in this area is important for identifying gaps
and moving to fill them. Ex-Im has not shown whether the increase in
dedicated staff from one person to three since 2008 is sufficient for
greatly expanded financing, or where current constraints or
bottlenecks, if any, exist. The bank's fiscal year 2011 budget request
asks for approval for an increased administrative budget to fund more
staff positions. To effectively prioritize resources to increase
certain environmentally beneficial exports requires a clear assessment
of needs.
Increasing the share of Ex-Im's financing for renewable energy and
energy efficient end-use exports to congressionally established target
levels would represent a substantial increase in the bank's funding
for those areas. How difficult it will be for Ex-Im to meet
congressional targets with the resources within its control remains to
be seen. However, by planning and using resources as effectively as it
can to meet this challenge, Ex-Im can provide valuable information for
this discussion with Congress and key stakeholders.
Recommendations for Executive Action:
To improve the planning and reporting of its activities related to
environmental exports, we recommend that the Chairman of the Export-
Import Bank take the following steps:
* Develop and provide clear definitions for its subcategories of
environmentally beneficial exports--especially energy efficient end-
use technologies--and report annually on the level of financing for
each of the subcategories. These definitions should be developed in
conjunction with other agencies as appropriate.
* Consistently implement key practices for effective strategic
planning, including the following:
- clearly communicating the bank's priorities for increasing financing
of renewable energy and energy efficient end-use technologies to both
internal and external stakeholders, and soliciting input on how to do
so;
- demonstrating in the bank's strategic planning documents a more
complete and systematic assessment of external and internal factors
affecting environmentally beneficial exports financing, such as market
information for energy efficiency exports and the availability of
needed Ex-Im services for exporters; and:
- using these assessments to determine the resources required and
realign resources if needed.
Agency Comments and Our Evaluation:
We provided a copy of this report to the Export-Import Bank. The bank
provided written comments, agreeing with our findings and stating it
will strive to implement our recommendations promptly. The bank also
provided technical comments, which we included as appropriate.
We will send copies of this report to the appropriate congressional
committees as well as the Chairman of the Export-Import Bank; the
Secretaries of Agriculture, Commerce, Energy, and State; the Chairman
of the U.S. International Trade Commission; the Office of the U.S.
Trade Representative; and the Administrator of the Small Business
Administration. If you or your staff have any questions about this
report or need additional information, please contact me at (202) 512-
4347 or yagerl@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix IX.
Signed by:
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendix I: Objective, Scope, and Methodology:
The objectives of this review were to examine (1) the extent of Ex-
Im's financing in recent years of renewable energy, energy efficient
end-use technologies, and other environmentally beneficial exports;
(2) Ex-Im's definitions for, and its reporting on, renewable energy,
energy efficient end-use technologies, and other environmentally
beneficial exports; and (3) the extent to which Ex-Im has followed
strategic planning key practices in its planning efforts in these
areas.
To determine the extent of Ex-Im's recent financing for
environmentally beneficial exports, including renewable energy and
energy efficient end-use technology exports, we obtained financing and
transaction data for fiscal year 2003 through fiscal year 2009 from Ex-
Im. We used data from this period because significant changes to Ex-
Im's data collection systems were introduced in 2003. We assessed the
reliability of these data by comparing the data with Ex-Im's reported
annual financing, examining individual transactions for consistency,
reviewing data documentation, and interviewing officials responsible
for collecting and analyzing the data. We found the data to be
sufficiently reliable to report Ex-Im's total annual financing, and
financing by instrument, for environmentally beneficial and renewable
energy exports for fiscal years 2003 through 2009. To update financing
information for the first two quarters of fiscal year 2010, we
obtained transaction-level data for environmentally beneficial
financing for these two quarters. In addition to the renewable energy
subcategory information, these data included information on which
exports were energy efficient end-use. We found these fiscal year 2010
financing data to be sufficiently reliable to report total annual
financing, and financing by instrument, for environmentally
beneficial, renewable energy, and energy efficient end-use exports.
For background and contextual purposes, we reported on Ex-Im's
financing through the Environmental Exports Program (Appendix V) and
the level and composition of Ex-Im's energy sector financing (Appendix
II). To determine the extent of Ex-Im's financing under the enhanced
incentives of Ex-Im's Environmental Exports Program, we obtained
annual financing data for fiscal years 2003 through 2009 for
environmentally beneficial exports and renewable energy exports that
took advantage of the Environmental Exports Program. For the first
half of 2010, the transaction-level environmentally beneficial
financing data identified which transactions used the Environmental
Exports Program enhancements. We assessed the reliability of this data
by interviewing officials responsible for collecting and analyzing the
data. To determine the level and composition of Ex-Im's energy
financing, we obtained annual financing amounts for fiscal years 2003
through second quarter 2010 for (1) fossil fuel extraction, transport
and processing, (2) nuclear power production; and (3) fossil fuel
production. We assessed the reliability of this data by performing
consistency checks and comparing data to Ex-Im's reported annual
financing. We found the above data to be sufficiently reliable to
report Ex-Im's total annual financing through the Environmental
Exports Program (appendix V) and Ex-Im's total annual energy financing
(appendix II).
To determine how Ex-Im defines environmentally beneficial exports,
renewable energy exports, and energy efficient end-use technology
exports, we examined Ex-Im documents that demonstrate the types of
exports that qualify as environmentally beneficial exports, renewable
energy exports, or energy efficient end-use technology exports. We
interviewed Ex-Im engineers and other officials involved with
identifying and reporting the bank's environmentally beneficial export
financing. We also interviewed officials from other U.S. government
agencies, including the Departments of Agriculture, Commerce, Energy,
State, and the Treasury; the International Trade Commission; the
Overseas Private Investment Corporation; the Small Business
Administration; the U.S. Trade and Development Agency; and the U.S.
Trade Representative, to determine which terms they used to refer to
environmental goods and services and how they defined those terms. In
addition, we reviewed relevant legislation concerning climate change
and U.S. energy policy which contained definitions or examples of
terms for various environmental technologies.
To determine the extent to which Ex-Im followed strategic planning key
practices, we consulted GAO work related to the Government Performance
and Results Act (GPRA) of 1993, to identify strategic planning key
practices.[Footnote 29] This work identifies three steps for
effectively managing for results: (1) defining clear missions and
desired outcomes, (2) measuring performance to gauge progress, and (3)
using performance information as a basis for decision making. We
focused on the first step, defining clear missions and desired
outcomes, because completion of this step is a prerequisite for
completing the subsequent steps. There are three recommended key
practices associated with the first step:
* Involving stakeholders in clarifying mission, priorities, and
desired outcomes;
* Assessing the external and internal environment; and:
* Realigning staff and resources to correspond with agency priorities.
We evaluated Ex-Im's strategic planning efforts and activities,
including strategic planning documents such as the 2008 strategy for
environmentally beneficial exports submitted to Congress, the Ex-Im
fiscal years 2009 and 2010 Business Development Plans, and materials
related to the draft 2010 Strategic Plan of the Export-Import Bank, to
determine the extent to which they reflected these three key practices.
To determine the extent to which Ex-Im involved stakeholders in
clarifying mission, priorities and desired outcomes, we first
identified stakeholders such as other U.S. government agencies, state-
level trade promotion offices, members of the environmental industry,
and lenders. We selected specific stakeholders to interview based on
the following criteria. For U.S. government agencies, we interviewed
agencies that were either key members of the Trade Promotion
Coordinating Committee (TPCC), had specific programs or initiatives
related to renewable energy or energy efficiency, or had export-
financing functions similar to those of Ex-Im. These government
agencies included the Departments of Agriculture, Commerce, Energy and
State; the Office of the U. S. Trade Representative; the Trade and
Development Agency; the Overseas Private Investment Corporation; the
Small Business Administration; and the International Trade Commission.
We also spoke with the TPCC Secretariat. For state-level trade
promotion offices, we interviewed several states, which we identified
through discussion with the State International Development
Organizations (SIDO), based, in part, on whether environmental exports
were part of a state's export strategy. For environmental industry
perspectives, we interviewed industry associations, as well as past
and current members of the Ex-Im Advisory Committee who represented
the environmental industry. For lenders, we interviewed current
members of the Ex-Im Advisory Committee that represent the financial
industry.
To determine the extent to which Ex-Im assessed the external and
internal environment, we reviewed the 2008 strategy for
environmentally beneficial exports submitted to Congress, the Ex-Im
fiscal years 2009 and 2010 Business Development Plans, and materials
related to the draft 2010 Strategic Plan of the Export-Import Bank to
determine whether they included (1) assessments of environmentally
beneficial sector and country markets, capital and firm conditions,
and policy considerations, and (2) internal organizational factors
affecting overall financing. We also interviewed Ex-Im officials to
determine the extent to which they conducted such assessments or
obtained such assessments from other organizations. To assess the
accuracy and completeness of information used by Ex-Im for strategic
planning purposes, we interviewed several industry experts and private
sector representatives; attended industry conferences, such as RETECH
2010 and the Environmental Industry Summit 2010; and reviewed key
industry studies and data from, among others, the Department of
Commerce and U.S. International Trade Commission; the Organisation for
Economic Cooperation and Development; the World Bank; Environmental
Business International, Inc.; and the American Council on Renewable
Energy.
For contextual information on broad trends in production and trade in
relevant industries and markets, we provided information in appendix
VII and referred to it in the objective on assessing the internal and
external environment. We obtained the production data from
Environmental Business International, Inc. (EBI), which compiles the
data through surveys of companies, models, and interviews. We
discussed these data with EBI and Commerce and reviewed relevant
documents describing the data. According to a Commerce official, the
EBI production data is considered the most reliable available and
Commerce uses it to indicate broad trends. However, due in part to
challenges in industry and trade data classifications, the information
should be considered estimates, indicative of broad themes and trends.
To determine the extent to which Ex-Im realigned staff and resources
to correspond with agency priorities, we interviewed Ex-Im officials
to determine the level of resources devoted to finding and processing
transactions related to environmentally beneficial exports and how
these resources have changed over time. We analyzed Ex-Im strategic
planning documents, including the 2008 strategy for environmentally
beneficial exports submitted to Congress, the Ex-Im fiscal year 2010
Business Development Plans, and materials related to the draft 2010
Strategic Plan of the Export-Import Bank, to determine the extent to
which Ex-Im discussed realigning resources to respond to
environmentally beneficial financing resource needs. We also reviewed
Ex-Im's fiscal year 2011 budget request to assess whether Ex-Im was
requesting new resources and whether it provided information on how
the new resources would be utilized.
We conducted our audit work from August 2009 to July 2010 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe the
evidence obtained provides a reasonable basis for our findings,
conclusions and recommendations.
[End of section]
Appendix II: Ex-Im Energy Financing Levels and Composition:
The level and composition of Ex-Im's overall energy financing,
including the portion of the financing for renewable energy, has
varied in recent years. The figure below shows the level of annual Ex-
Im financing for energy exports, as well as the relative shares of
fossil fuel production; fossil fuel extraction, transport, and
processing; nuclear; and renewable energy in energy financing. In
terms of total financing, fossil fuel-related exports averaged 13.0
percent of total Ex-Im financing for 2003-2009.
Figure 4: Ex-Im's Annual Energy Financing and Shares by Energy Type,
Fiscal Year 2003 through the Second Quarter of Fiscal Year 2010:
[Refer to PDF for image: 2 stacked vertical bar graphs]
Annual financing for all energy exports:
Fiscal year: 2003;
Fossil fuel extraction, transport, and processing: $777 million;
Fossil fuel production: $348 million;
Renewable energy: $4 million;
Nuclear power production: $5 million.
Fiscal year: 2004;
Fossil fuel extraction, transport, and processing: $1,285 million;
Fossil fuel production: $515 million;
Renewable energy: $10 million;
Nuclear power production: $1 million.
Fiscal year: 2005;
Fossil fuel extraction, transport, and processing: $1,462 million;
Fossil fuel production: $100 million;
Renewable energy: $4 million;
Nuclear power production: $7 million.
Fiscal year: 2006;
Fossil fuel extraction, transport, and processing: $1,640 million;
Fossil fuel production: $117 million;
Renewable energy: $10 million;
Nuclear power production: $1 million.
Fiscal year: 2007;
Fossil fuel extraction, transport, and processing: $958 million;
Fossil fuel production: $51 million;
Renewable energy: $3 million;
Nuclear power production: $7 million.
Fiscal year: 2008;
Fossil fuel extraction, transport, and processing: $2,184 million;
Fossil fuel production: $191 million;
Renewable energy: $31 million;
Nuclear power production: $4 million.
Fiscal year: 2009;
Fossil fuel extraction, transport, and processing: $1,522 million;
Fossil fuel production: $1,326 million;
Renewable energy: $96 million;
Nuclear power production: $0.
Fiscal year: Q1-Q2 2010;
Fossil fuel extraction, transport, and processing: $3,695 million;
Fossil fuel production: $109 million;
Renewable energy: $103 million;
Nuclear power production: $0.
Relative shares of energy financing:
Fiscal year: 2003;
Fossil fuel extraction, transport, and processing: 68.5%;
Fossil fuel production: 30.7%;
Renewable energy: 0.3%;
Nuclear power production: 0.5%.
Fiscal year: 2004;
Fossil fuel extraction, transport, and processing: 71%;
Fossil fuel production: 28.4%;
Renewable energy: 0.6%;
Nuclear power production: 0.1%.
Fiscal year: 2005;
Fossil fuel extraction, transport, and processing: 92.9%;
Fossil fuel production: 6.4%;
Renewable energy: 0.3%;
Nuclear power production: 0.5%.
Fiscal year: 2006;
Fossil fuel extraction, transport, and processing: 92.8%;
Fossil fuel production: 6.6%;
Renewable energy: 0.6%;
Nuclear power production: 0.04%.
Fiscal year: 2007;
Fossil fuel extraction, transport, and processing: 94.0%;
Fossil fuel production: 5.1%;
Renewable energy: 0.3%;
Nuclear power production: 0.7%.
Fiscal year: 2008;
Fossil fuel extraction, transport, and processing: 90.7%;
Fossil fuel production: 7.9%;
Renewable energy: 1.3%;
Nuclear power production: 0.2%.
Fiscal year: 2009;
Fossil fuel extraction, transport, and processing: 51.7%;
Fossil fuel production: 45.3.3%; $96
Nuclear power production: 0.01%.
Fiscal year: Q1-Q2 2010;
Fossil fuel extraction, transport, and processing: 94.6%;
Fossil fuel production: 2.8%;
Renewable energy: 2.6%;
Nuclear power production: 0.
Source: GAO analysis of Ex-Im data.
[End of figure]
[End of section]
Appendix III: Ex-Im's Description of Its Enhanced Due Diligence
Process for High Carbon Intensity Projects:
Ex-Im's Carbon Policy Implementation Plan includes a description of
its enhanced due diligence process: The description is reproduced
below. This appendix also includes information, provided by Ex-Im, on
typical carbon dioxide emissions from thermal power plants.
Enhanced Due Diligence Process for High Carbon Intensity Projects:
Ex-Im Bank will adopt a rigorous Enhanced Due Diligence Process to
evaluate the environmental and climate change issues raised by high
carbon intensity projects. The Bank recognizes that some projects may
not be able to meet the environmental requirements set forth below and
would be declined. Ex-Im Bank will approve an addendum to its
Environmental Procedures and Guidelines setting forth the technical
requirements for the Enhanced Due Diligence Process for all high
carbon intensity projects. The Enhanced Due Diligence Process
described below will apply to applications received after, or pending
as of, March 9, 2010.
7. Fossil Fuel Projects Grouped by Carbon Intensity.
Ex-Im Bank's Engineering and Environment Division will calculate the
estimated carbon intensity of all pending fossil fuel projects.
Projects will be categorized based on their carbon intensity levels:
Low, High, and Highest. The Bank will treat projects in each of the
three categories differently.
Table 1: Ex-Im's Categories for Carbon Intensity and Bank Treatment:
Category: Group 1: Low;
Less than ~700 grams of CO2/kWh[A];
Applicable Technologies:
* IGCC (coal gasification) and IGCC-equipped as CCS-ready (Carbon
Capture and Sequestration);
* Gas-fired power plants (simple cycle and combined cycle);
* Most oil-fueled power plants;
Ex-Im Bank Treatment: Standard review (e.g., no additional
requirements).
Category: Group 2: High;
Between ~700 and ~850 grams of CO2/kWh[A];
Applicable Technologies:
* Most coal and some inefficient oil-fueled power plants;
* This includes some subcritical and most supercritical coal-fired
power plants;
* It also includes some less efficient IGCC (coal gasification) power
plants;
Ex-Im Bank Treatment: Enhanced Due Diligence Process:
* Early Board review of CO2 issues Alternatives Analysis;
* Project must use the Best Appropriate Technology;
* Project must fit within the country's approved Carbon Growth
Strategy;
* Discretionary imposition of additional requirements;
* Preliminary environmental review fee assessed.
Category: Group 3: Highest;
More than ~850 grams of CO2/kWh[A];
Applicable Technologies: Includes the most inefficient coal-fired
power plants (e.g., subcritical boiler plants);
Ex-Im Bank Treatment: Ex-Im Bank will require verifiable offsets
reduce the project's CO2 intensity to a level that would fit within
Group 2.
Source: Ex-Im Bank.
[A] These are representative benchmarks for fossil fuel power plants
based on data from the Environmental Protection Agency and other
sources. Emissions from most other industrial sectors fall below the
carbon intensity limits for power production and are therefore not
affected. Certain intensity benchmarks for other sectors such as
cement plants will be developed within 6 months.
CO2 is carbon dioxide. kWh is kilowatt hour. IGCC is integrated
gasification combined cycle.
[End of table]
8. Enhanced Due Diligence Process for all High Carbon Intensity
Projects:
A. Early Board Review of Climate Issues:
As detailed below, staff will prepare an Enhanced Due Diligence
Memorandum to the Board of Directors regarding a project's carbon
dioxide intensity and issues related to climate change and the
environment. Consistent with Section 11 of the Bank's Charter, the
Board will either direct staff to proceed with processing the
transaction or decline it for environmental considerations. This
approach provides the Bank with a flexible, transparent process to
review the environmental issues associated with high carbon intensity
projects and, if appropriate, decline a transaction at an early stage
due to its detrimental environmental effects. This process will
commence after receipt of an application and all necessary information
set forth in Annex G of the Environmental Procedures and Guidelines.
This review would precede the standard credit, legal and environmental
reviews.
B. Requirements:
At a minimum, to be recommended to the Board of Directors, a high
carbon intensity project must satisfactorily address the following
requirements set forth in Annex G of the Environmental Procedures and
Guidelines:
* Alternatives Analysis. The project must provide a satisfactory
analysis of alternatives showing that the buyer considered a range of
alternatives and chose the proposed project technology and fuel as the
least cost alternative available.
* Best Appropriate Technology. The project must employ the best
appropriate technology, taking into account the buyer and the country.
[Footnote 30] This analysis will include comparisons to other sources
of power production in the country/region and the relative efficiency
of selected technology.
* Low Carbon Growth Strategy. The host country shall have developed a
Low Carbon Growth Strategy and the project must be consistent with the
results and objectives of that strategy.[Footnote 31]
C. Due Diligence Memorandum:
In addition to an analysis of the above requirements, the Enhanced Due
Diligence Memorandum will include the following:
* Other Relevant Factors: An analysis of the following: the project's
CO2 intensity as well as its annual and lifecycle CO2 emissions;
discussion of CO2 and climate change issues relevant to the project;
the existence of any carbon mitigation plan to reduce or offset
emissions; evaluation of possible mitigation actions or offsets, and
their costs; the potential impact for the exporter if the transaction
is declined; financial considerations such as projections about
regulation and compliance costs that could affect the project's
profitability; estimates of the social cost of carbon (using the U.S.
government standards); brief overview of Ex-Im Bank portfolio of
projects that emit CO2; and other factors that would argue in favor of
the project or against the project. It would also summarize any
comments received from outside stakeholders, including non-
governmental organizations.
* Options to Impose Additional Requirements. As part of the early
Board review process, the Board will have the discretion to impose as
a condition of its environmental approval (a) a fee increase or term
reduction to increase the cost of Bank financing for the project, or
(b) some degree of widely-accepted offset or mitigation measures to
reduce the carbon intensity of the project. The Enhanced Due Diligence
Memorandum will outline those options, and include an estimate of
costs and other relevant factors.
* Staff Recommendations. The Due Diligence Memorandum will conclude
with staff recommendations to the Board of Directors. This will
include the Engineering and Environment Division's technical
evaluation of the degree to which the project met the requirements set
forth in Annex G of the Environmental Procedures and Guidelines and
any additional requirements staff recommends the Board impose on the
project as a condition of its approval.
D. Environmental Review Fee of 0.1%:
All high intensity carbon projects would be charged a preliminary
environmental review fee of 0.1 %, up to $25,000, to cover the cost
associated with the Enhanced Due Diligence Process. If the Board
directs staff to proceed with the transaction and later issues a final
approval, the fee would be rebated. The amount of the fee and its
treatment would be identical to those presently used for preliminary
commitments.
E. Additional Mandatory Offset Requirement for Group III (Highest
Carbon Intensity Projects):
The Bank will require verifiable offsets satisfactory to Ex-1m Bank of
sufficient impact to reduce the C02 intensity of the transaction to a
level that would fit within Group II. Ex-Im Bank will provide guidance
on the scope of acceptable offsets, which could include retrofitting
inefficient boilers, efficiency improvements, and renewable energy
projects. The Enhanced Due Diligence Memorandum will include the
Engineering and Environment Division's determination as to whether the
buyer meets the offset requirement.
Ex-Im provided us a graphical depiction of the intensity of carbon
dioxide emissions for different types of thermal power plants relative
to the benchmarks in the Carbon Policy Implementation Plan. See figure
5.
Figure 5: Typical Carbon Dioxide Emissions from Thermal Power Plants
with Proposed Benchmarks for Carbon Dioxide Intensity:
[Refer to PDF for image: horizontal bar graph]
This graph depicts grams CO2 per kWh generated for each of the
following:
Coal-—subcritical boiler: approximately 1000 gm.
Coal—-supercritical boiler: approximately 900 gm.
Coal—-ultrasupercritical boiler: approximately 780 gm.
Coal—-IGCC: approximately 720 gm.
Coal Boiler or IGCC using CCS: approximately 90 gm.
Oil—-simple cycle CT: approximately 880 gm.
Oil-—supercritical boiler: approximately 720 gm.
Oil-—combined cycle: approximately 560 gm.
Gas-—simple cycle CT: approximately 650 gm.
Gas-—combined cycle: approximately 380 gm.
Gas with CCS: approximately 50 gm.
Source: Ex-Im’s Engineering and Environment Division estimates
compiled from World Bank, U.S. Environmental Protection Agency,and
supplier data.
Note: CO2 is carbon dioxide. kWh is kilowatt hour. IGCC is integrated
gasification combined cycle. CCS is carbon capture and storage. CT is
combustion turbine.
[End of figure]
[End of section]
Appendix IV: Ex-Im Bank Incentives for Environmental Exports:
Under its Environmental Exports Program, Ex-Im offers enhanced
financing terms for environmentally beneficial goods and services. The
specific elements of the enhanced terms under the Environmental
Exports Program reflect in part international negotiations on terms
for export credits, carried out in the OECD. For example, renewable
energy and water treatment exports are eligible for up to 18-year
repayment terms, in contrast to the maximum 10-12 years available for
standard equipment sales or non-nuclear power plants, respectively,
under normal Ex-Im financing. Renewable energy and water exports had
been eligible for up to 15-year repayment terms since July 2005. In
July 2009, the OECD approved extending terms for these exports to up
to 18 years, in an effort to increase the utility of the enhanced
financing. Further, negotiations are underway to apply the enhanced
terms to a group of exports characterized as "climate change
technologies."
According to U.S. officials, the OECD is currently working to resolve
(1) which technologies warrant enhanced terms-both from a political
and from a technical perspective-and (2) what standards could be used
to determine eligibility. On-going discussions are addressing: (1)
whether such support should be offered to technologies that are being
developed to reduce carbon emissions, such as two technologies related
to coal: integrated gasified combined cycle, and carbon capture and
storage and (2) what technical standards could be used to determine
energy efficient technologies against a backdrop of multiple baselines
that could be used to calculate efficiency gains.
In March 2010, Ex-Im announced three additional incentives for
renewable energy exports as part of its Carbon Policy Implementation
Plan (see below).
* A "Solar Express" program to provide special, expedited
consideration and approval to small solar export deals that are valued
between $3 million and $10 million. Ex-Im is implementing the program
in response to increased application volume for these small solar
export projects.
* The option to pay exposure fees over time, as part of the interest
margin paid on the loan, instead of up front, for renewable energy
projects.[Footnote 32] According to Ex-Im, this option will reduce the
financing burden for exporters taking advantage of long loan terms.
This will help their ability to compete in markets with high exposure
fee rates. Typically, exposure fees are collected by Ex-Im up front
and can subsequently be folded into the financing amount of the loan.
For long-term loans in high-risk markets, these exposure fees can
become prohibitively costly, so borrowers would see a very high fee to
be paid up front. According to Ex-Im, most other export credit
agencies already allow buyers to pay the fee as part of the interest
margin and avoid the sticker shock of having to pay the fee up front.
* Allow qualifying renewable energy exporters flexibility to lock the
Commercial Interest Reference Rates (CIRR) at the time of Ex-Im Board
approval, rather than disbursement.[Footnote 33] According to Ex-Im,
locking the rate at approval rather than the time of disbursement will
increase exporter certainty regarding the financing cost of the
transaction.
See table 2 below.
Table 2: Environmental Exports Program Enhancements of the Standard Ex-
Im Financing Options:
Ex-Im financial product: Loan and Guarantee Program; Maximum repayment
terms;
Standard: Depends on size of the transaction (dollar value) and nature
of export, with maximum of:
* 10 years for all technologies;
* 12 years for energy producing;
Environmental Exports Program: Up to 18 years for potable water and
renewable energy; Standard terms for all other categories of
environmentally beneficial exports.
Ex-Im financial product: Loan and Guarantee Program; Special features;
Standard: Not available;
Environmental Exports Program: For renewable energy transactions
(introduced as part of the Carbon Policy Implementation Plan);
Option for exposure fee to be paid over the entire repayment period
(e.g., as part of the interest margin); For direct loans, option to
fix CIRR rate at approval; "Solar Express" program for small
structured photovoltaic deals (lowers transaction costs as compared
with standard project finance).
Ex-Im financial product: Local cost coverage;
Standard: Thirty percent of the U.S. contract price (automatic for
medical equipment, products related to U.S. transportation security or
foreign transportation security projects and project finance
transactions; but any project can apply). There are eligibility
criteria that must be met;
Environmental Exports Program: Thirty percent of the US contract price
(automatic).
Ex-Im financial product: Capitalization of interest during
construction;
Standard: Yes, but not automatic unless project finance;
Environmental Exports Program: Yes (automatic).
Ex-Im financial product: Working Capital Guarantee;
Standard: Working Capital Guarantee loans are commercial bank loans to
allow U.S. exporters to purchase finished products for export; pay for
raw materials, equipment, supplies, labor, and overhead to produce
goods and/or provide services for export; cover standby letters of
credit serving as bid bonds, performance bonds, or payment guarantees;
or finance foreign receivables. Coverage: typically 90 percent. Terms:
from 1 up to 3 years. Collateral: export-related accounts receivable
and inventory (including work-in-process) tied to an export order;
Environmental Exports Program: Working Capital Guarantee loans are
commercial bank loans to allow U.S. exporters to purchase finished
products for export; pay for raw materials, equipment, supplies,
labor, and overhead to produce goods and/or provide services for
export; cover standby letters of credit serving as bid bonds,
performance bonds, or payment guarantees; or finance foreign
receivables. Coverage: typically 90 percent. Terms: from 1 up to 3
years. Collateral: export-related accounts receivable and inventory
(including work-in-process) tied to an export order.
Ex-Im financial product: Short-Term Insurance; Coverage;
Standard: Typically 95% of principal;
Environmental Exports Program: Typically 95% of principal.
Ex-Im financial product: Short-term Insurance; Special features;
Standard: Standard Short-Term Multi-Buyer Policy: Not available;
Environmental Exports Program: Environmental Small Business (ENV)
Short-Term Multi-Buyer Policy: No deductible; Enhanced assignment of
receivables; ENV policyholders do not "graduate" from the program even
if their export credit sales exceed $7.5 million.
Ex-Im financial product: Medium-Term Insurance; Coverage;
Standard: 100 percent of principal for political and commercial risk;
Environmental Exports Program: 100 percent of principal for political
and commercial risk; Can offer extended insurance tenors (in theory,
up to 18 years) that are not available under the standard programs.
(Ex-Im Bank does not offer a long-term insurance program.)
Source: GAO analysis of Ex-Im documents and discussions.
[End of table]
[End of section]
Appendix V: Data on Usage of Ex-Im's Financing under Its Environmental
Exports Program:
According to Ex-Im data, 39 percent of financing that it classified as
environmentally beneficial from fiscal year 2003 through the second
quarter of fiscal year 2010 used incentives under Ex-Im's
Environmental Exports Program. Ex-Im's Environmental Exports Program
includes a number of enhanced incentives depending on the financing
instruments.
The enhancements under the program are not all applicable across all
types of Ex-Im financing instruments. For example, the enhancements
apply only to loans and guarantees for international buyers, and to
insurance for small businesses. Beyond the special features for
renewable energy in Ex-Im's 2010 Carbon Implementation plan, there are
no enhancements for working capital, or insurance to medium and large
exporters.
For exports that qualify for enhanced incentives, the individual
exporter decides whether to accept the Environmental Exports Program
enhanced financing terms. Some customers choose not to take advantage
of the Environmental Exports Program enhancements. This could be the
case, for example, with exports to some developing countries, because
the longer financing terms that the program offers would result in
higher exposure fees, under Ex-Im's risk-based exposure fee system.
According to Ex-Im, recent enhancements that can delay the payment of
fees may mitigate these higher exposure fees in some cases. Figure 6
shows the share of the financing that Ex-Im has classified as
environmentally beneficial that has made use of the enhanced financing
terms under Ex-Im's Environmental Exports Program.
Figure 6: Annual Financing under Ex-Im's Environmental Exports Program
as a Share of Ex-Im's Total Annual Environmentally Beneficial
Financing, Fiscal Year 2003-Second Quarter Fiscal Year 2010:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year: 2003;
Financing using the Environmental Exports Program: $124 million;
Environmentally beneficial financing not using the Environmental
Exports Program: $88 million.
Fiscal year: 2004;
Financing using the Environmental Exports Program: $127 million;
Environmentally beneficial financing not using the Environmental
Exports Program: $39 million.
Fiscal year: 2005;
Financing using the Environmental Exports Program: $19 million;
Environmentally beneficial financing not using the Environmental
Exports Program: $57 million.
Fiscal year: 2006;
Financing using the Environmental Exports Program: $23 million;
Environmentally beneficial financing not using the Environmental
Exports Program: $107 million.
Fiscal year: 2007;
Financing using the Environmental Exports Program: $19 million;
Environmentally beneficial financing not using the Environmental
Exports Program: $64 million.
Fiscal year: 2008;
Financing using the Environmental Exports Program: $15 million;
Environmentally beneficial financing not using the Environmental
Exports Program: $212 million.
Fiscal year: 2009;
Financing using the Environmental Exports Program: $202 million;
Environmentally beneficial financing not using the Environmental
Exports Program: $174 million.
Fiscal year: Q1-Q2 2010;
Financing using the Environmental Exports Program: $24 million;
Environmentally beneficial financing not using the Environmental
Exports Program: $135 million.
Source: GAO analysis of Ex-Im Bank data.
[End of figure]
[End of section]
Appendix VI: Additional Detail on Financing Instruments Used for Ex-
Im's Environmentally Beneficial Exports:
Ex-Im uses three financial instruments to finance environmentally
beneficial and renewable energy exports: loan guarantees, insurance,
and working capital. The relative size and volume of transactions that
Ex-Im completes vary by instrument. While Ex-Im has authorized 41 loan
guarantees between 2003 and the second quarter of 2010, these
transactions represent 45 percent of Ex-Im's environmentally
beneficial financing. Over the same period, Ex-Im financed 100 working
capital guarantees, representing 33 percent of environmentally
beneficial export financing. The average size of an export insurance
transaction is relatively small. Insurance represents 22 percent of
financing in the case of both the environmentally beneficial category
and the renewable energy subcategory, but over half of Ex-Im's
financing transactions for each group. (See figure 7.)
Figure 7: Ex-Im Environmentally Beneficial Financing and Renewable
Energy Financing by Instrument, Fiscal Year 2003-Second Quarter,
Fiscal Year 2010:
[Refer to PDF for image: 4 pie-charts]
Environmentally beneficial exports:
Total financing:
Insurance transaction ($311.3 million): 22%;
Working capital guarantee ($475.9 million): 33%;
Loan or loan guarantee ($642.5 million) 45%.
Environmentally beneficial exports transaction count:
Working capital guarantee: 100 (count) $4.8 million (average financing
per transaction): 32%;
Insurance transaction: 172 (count) $1.8 million (average financing per
transaction): 55%;
Loan or loan guarantee: 41 (count) $15.7 million (average financing
per transaction): 13%.
Renewable energy exports:
Total financing:
Insurance transaction ($56.3 million) 22%;
Working capital guarantee ($41.4 million) 16%;
Loan or loan guarantee ($162.0 million) 62%.
Environmentally beneficial exports transaction count:
Working capital guarantee: 9 (count) $4.6 million (average financing
per transaction): 22%;
Insurance transaction: 22 (count) $2.6 million (average financing per
transaction): 54%;
Loan or loan guarantee: 10 (count) $16.2 million (average financing
per transaction): 24%.
Source: GAO analysis of Ex-Im Bank data.
[End of figure]
[End of section]
Appendix VII: Additional Market Information on Environmentally
Beneficial Production and Trade:
Analyses of global markets indicate that production and trade in
environmentally beneficial goods and services are growing worldwide.
Increasing global energy demand is an important driver of this growth.
According to estimates from the International Energy Agency, an
additional $26 trillion in new global investment will be needed to
meet current energy demand until 2030, of which a rising portion will
likely be in renewable energy and energy efficient products and
services. Export opportunities may grow further as a result of
liberalization of trade through bilateral and regional free trade
agreements.
Measurements of production and trade trends in environmentally
beneficial goods and services depend on what products are included.
One market estimate of production and trade that has been used by the
Department of Commerce is the estimate of "environmental technologies"
based on data from Environmental Business International, Inc. (EBI).
EBI measures the size of the environmental industry as all revenues
earned from the sale of equipment, services, and resources associated
with environmental protection assessment, compliance with
environmental regulations, pollution control, waste management,
remediation of contaminated property, and the provision and delivery
of environmental resources.[Footnote 34] A few studies have also
referred to market estimates of "environmental goods," based on
efforts within the World Trade Organization to reach consensus on a
list of environmental products.[Footnote 35] Such consensus has not
yet been reached. In April 2007, a group of member countries submitted
a list of 153 environmental goods for discussion, and in December
2007, the United States and the European Union proposed a smaller list
of 43 products that had been identified by the World Bank as climate
friendly. More recently, the Department of Commerce has published a
study estimating the value of the U.S. green economy based on 2007
census data, with a product or service considered green if it
conserves energy or natural resources or reduces pollution. Given the
lack of consensus on the definition of environmental goods and the
availability of multiyear environmental data, the information that
follows is based on Commerce's definition of environmental
technologies using data from EBI. However, given definitional
uncertainties discussed in the body of this report, and resulting
limitations with industry and trade data classifications, the
information in this appendix should be considered as estimates that
can be indicative of broad trends. Additional data and greater
understanding of the definitions of environmentally beneficial exports
would be helpful not only for Ex-Im and the banks that are conducting
outreach to industry, but also to Congress and other policy makers who
may be considering other actions to encourage U.S. production or
exports of these products and services.
U.S. Production of Environmental Technologies Is Estimated at about
$290 Billion:
According to EBI industry data, global production of environmental
technologies in 2008 was estimated at around $780 billion. The United
States was estimated to be the largest producer worldwide, with
production in 2008 at around $290 billion. While Western Europe and
Japan were also large producers, the fastest growing regions for
production were in the rest of Asia, Latin America, and the Middle
East. (See figure 8):
Figure 8: Estimated Environmental Technology Production by Country and
Region, 2003-2008:
[Refer to PDF for image: multiple line graph]
Countries and regions, including 5-year average annual growth rate:
Fiscal year: 2003;
United States (4%): $232v;
Western Europe (5%): $174 billion;
Japan (1%): $93 billion;
Rest of Asia (14%): $34v;
Rest of World (7%): $44 billion;
Latin America: (13): $18 billion;
Middle East (14%): $8 billion.
Fiscal year: 2004;
United States (4%): $245 billion;
Western Europe (5%): $182 billion;
Japan (1%): $95 billion;
Rest of Asia (14%): $40v;
Rest of World (7%): $47v;
Latin America: (13): $20 billion;
Middle East (14%): $10 billion.
Fiscal year: 2005;
United States (4%): $256 billion;
Western Europe (5%): $190 billion;
Japan (1%): $96 billion;
Rest of Asia (14%): $45 billion;
Rest of World (7%): $50 billion;
Latin America: (13): $23 billion;
Middle East (14%): $11 billion.
Fiscal year: 2006;
United States (4%): $271 billion;
Western Europe (5%): $200 billion;
Japan (1%): $98 billion;
Rest of Asia (14%): $52 billion;
Rest of World (7%): $54 billion;
Latin America: (13): $26 billion;
Middle East (14%): $12 billion.
Fiscal year: 2007;
United States (4%): $290 billion;
Western Europe (5%): $210 billion;
Japan (1%): $100 billion;
Rest of Asia (14%): $59 billion;
Rest of World (7%): $58 billion;
Latin America: (13): $29 billion;
Middle East (14%): $13 billion.
Fiscal year: 2008;
United States (4%): $289 billion;
Western Europe (5%): $218 billion;
Japan (1%): $99 billion;
Rest of Asia (14%): $67 billion;
Rest of World (7%): $62 billion;
Latin America: (13): $33 billion;
Middle East (14%): $15 billion.
Source: GAO analysis of environmental industry data from Environmental
Business International, Inc.
Note: Production estimates are based on industry revenues associated
with environmental protection, assessment, compliance with
environmental regulations, pollution control, waste management,
remediation of contaminated property, and the provision and delivery
of environmental resources.
[End of figure]
Production differences across countries are widely considered to
reflect in part effects of national incentives promoting environmental
technologies. For example, the presence of environmental regulations
that require investments in goods and services that prevent,
remediate, or alleviate environmental degradation encourage
environmental technology production. According to Commerce, the United
States has a relatively strong regulatory environmental regime with
domestic laws that include, for example, the Clean Air Act and the
Clean Water Act. Commerce notes, however, that there has been some
weakening of these two acts over the past few years. Another key
factor is the existence of renewable energy incentives such as feed-in
tariffs and renewable portfolio standards.[Footnote 36] In the United
States, GAO has found that production incentives and tax credits for
renewable energy have been instituted at the state and federal levels,
but their impact has varied depending on the amount and certainty of
initiatives. Lack of consistency and stability in U.S. renewable
energy incentives required for long-term investment is a constraint
that has been commonly identified by experts and industry studies.
Experts have also observed that, compared with those in the United
States, foreign country incentives targeting renewable energy may
often be more robust. For example, the European Union has mandated
that utilities source 20 percent of their energy from renewable
sources by the year 2020, and the Chinese government has spent an
estimated $1.5 billion promoting the competitiveness of its solar
industry.
U.S. Water and Waste Sector Production Accounts for over 60 Percent of
Estimated U.S. Environmental Production:
According to EBI industry data, the largest sources of U.S. production
of environmental technologies in 2008 were goods and services for
water utilities, treatment, and equipment and for solid and hazardous
waste management and equipment. At a value of over $180 billion,
production in these two areas accounts for over 60 percent of total
U.S. output of estimated environmental technology goods and services.
(See figure 9.) Renewable energy and energy efficient goods production
estimates are included within the slice entitled "Clean energy systems
and power." At a value of $22 billion, these products and services
account for about 7 percent of total U.S. production.[Footnote 37]
Figure 9: Estimated U.S. Environmental Technology Production, 2008:
[Refer to PDF for image: pie-chart]
Clean energy systems and power ($22 billion) 7%;
Air pollution control and other equipment ($26 billion) 9%;
Resource recovery ($28 billion) 10%;
Other services ($42 billion) 14%;
Water utilities, treatment, and equipment ($108 billion) 25%;
Solid and hazardous waste management and equipment ($74 billion) 35%.
Source: GAO analysis of environmental industry data from Environmental
Business International, Inc.
Note: U.S. production estimates are derived from revenues generated by
U.S. companies worldwide. Resource recovery is defined as selling
materials recovered and converted from industrial byproducts or
postconsumer waste. Clean energy systems and power is defined as
selling power and systems in solar, wind, geothermal, small-scale
hydro, energy efficiency, demand response, and smart-grid systems.
[End of figure]
U.S. Environmental Technology Exports Are Growing, Particularly to
Markets in Asia and Latin America:
Official U.S. data suggest that the United States exported just over
$40 billion in environmental technologies in 2008, a value equal to
about 14 percent of total U.S. environmental technology production. In
2008, the largest country markets by share of U.S. exports were Canada
(19 percent), Mexico (12 percent), China (8 percent) and Germany (7
percent). Regionally, two of the larger and faster emerging growing
market areas are Asia (outside of Japan) and Latin America. Over a 5-
year period, for example, export growth was estimated to be 23 percent
to China, 29 percent to India, 25 percent to Brazil, and 40 percent to
Venezuela. Other large and fast-growing markets include those in
Australia, Russia, Saudi Arabia, and the United Arab Emirates. (See
figure 10.)
Figure 10: Estimated U.S. Environmental Technology Exports by Country
and Region, 2003-2008:
[Refer to PDF for image: multiple line graph]
Countries and regions, including 5-year average annual growth rate:
Fiscal year: 2003;
Western Europe (9%): $6.0 billion;
Rest of Asia (12%): $5.5 billion;
Canada (5%): $6.0 billion;
Latin America (9%): $4.8 billion;
Rest of World (19%): $1.2 billion;
Japan (2%): $2.0 billion;
Middle East: (22%): $0.8 billion.
Fiscal year: 2004;
Western Europe (9%): $6.7 billion;
Rest of Asia (12%): $7.1 billion;
Canada (5%): $6.3 billion;
Latin America (9%): $5.3 billion;
Rest of World (19%): $1.5 billion;
Japan (2%): $2.2 billion;
Middle East: (22%): $0.9 billion.
Fiscal year: 2005;
Western Europe (9%): $7.4 billion;
Rest of Asia (12%): $7.5 billion;
Canada (5%): $6.7 billion;
Latin America (9%): $5.7 billion;
Rest of World (19%): $1.6 billion;
Japan (2%): $2.2 billion;
Middle East: (22%): $1.0 billion.
Fiscal year: 2006;
Western Europe (9%): $8.3 billion;
Rest of Asia (12%): $8.5 billion;
Canada (5%): $7.4 billion;
Latin America (9%): $6.3 billion;
Rest of World (19%): $2.0 billion;
Japan (2%): $2.7 billion;
Middle East: (22%): $1.3 billion.
Fiscal year: 2007;
Western Europe (9%): $8.9 billion;
Rest of Asia (12%): $9.3 billion;
Canada (5%): $7.5 billion;
Latin America (9%): $6.7 billion;
Rest of World (19%): $2.4 billion;
Japan (2%): $2.3 billion;
Middle East: (22%): $1.9 billion.
Fiscal year: 2008;
Western Europe (9%): $9.5 billion;
Rest of Asia (12%): $9.3 billion;
Canada (5%): $7.7 billion;
Latin America (9%): $7.5 billion;
Rest of World (19%): $2.8 billion;
Japan (2%): $2.1 billion;
Middle East: (22%): $2.0 billion.
Sources: GAO analysis of data from the U.S. Department of Commerce and
the United States International Trade Commission.
[End of figure]
Compared with the United States, several foreign competitors export a
larger share of their environmental technology production. For
example, estimated exports as a share of production exceed 20 percent
for each of Japan, Germany, France, and the United Kingdom. While
Commerce officials emphasize that opportunities for growth in U.S.
exports exist, particularly to developing countries, several
challenges persist:
* Trade tariffs: Trade in environmental technologies is governed by
relatively high trade tariffs--averaging 15 percent to 20 percent--in
some major emerging markets. In some key markets, trade tariffs can be
as high as 40 percent.
* Nontariff barriers: Trade in environmental technologies is also
governed by numerous nontariff barriers, including restrictive
technical standards, packaging, and documentation requirements;
nontransparent government procurement; and restrictions on investment
and ownership. China, for example, requires that wind and other energy
efficient projects use 80 percent locally produced content.
* Tied aid: Trade in environmental technologies often occurs under
tied-aid arrangements, which are government-to-government concessional
financing of projects in developing countries that are linked to the
procurement of goods and services from donor countries. Commerce
officials report that the United States has had a disadvantage
competing with member states of the European Union, Japan, and
Australia, for example, which provide significant tied aid in
environmental technologies. The OECD reports that from July 2005 to
June 2008, there was a total of $2.15 billion in tied aid provided for
renewable energy projects.
U.S. Climate Change Production Is Estimated at About $170 Billion:
In addition to providing data on the environmental industry, EBI has
recently issued an estimate of the 2008 value of U.S. climate change
production. EBI defines climate change industry as products and
services for green building design and development, energy efficient
products and services, low-carbon power and equipment, consulting,
engineering and other services, and other products supporting carbon
capture and storage, energy storage, and adaptation. According to EBI,
the United States produced $170 billion worth of goods and services,
primarily in the green buildings sector, energy efficiency, and
transportation vehicles and fuels. Renewable energies would be
included within the segment entitled "Low-carbon power and equipment,"
with a total estimated value of around $21 billion in 2008. (See
figure 11.)
Figure 11: Estimated U.S. Climate Change Industry Production by
Sector, 2008:
[Refer to PDF for image: pie-chart]
Green buildings ($54 billion) 32%:
Energy efficient products and services ($50 billion) 29%;
Transportation vehicles and fuels ($43 billion) 25%;
Low-carbon power and equipment ($21 billion) 12%
Other ($3 billion) 2%.
Source: GAO analysis of data from Environmental Business
International, Inc.
Note: Green buildings includes building design, construction and
contracting, development and materials, as well as devices for energy
efficiency and water conservation. Energy efficient products and
services includes systems, equipment and appliances, and energy audits
and studies to support energy efficiency and demand response. Low
carbon power and equipment includes renewable and conventional
equipment and power sales, project design, and project development.
Other includes carbon capture and storage, energy storage, adaptation,
carbon market services, and other consulting, engineering, and
research services.
[End of figure]
Sector Example: Solar Photovoltaics:
Global solar energy production is a fast-growing sector that is
expected to continue to expand into the future. Two solar power
technologies widely employed today include solar photovoltaic (PV) and
solar thermal.[Footnote 38] In its latest environmental business
development plan, Ex-Im emphasizes that solar PV, in particular, is
the world's fastest-growing energy source and that PV panel production
has been doubling every 2 years from 2002 to 2008. According to a
recent industry estimate for 2009, the solar PV industry generated an
estimated $38 billion in global revenues and PV cell production
reached 9.34 gigawatts, a 36 percent increase over the 6.85 gigawatts
produced in 2008. Of that amount, 18 percent was for thin-film cell
production, a new generation of potentially lower-cost technologies.
According to Ex-Im's business development plan and industry sources,
China was the largest producer of solar PV cells in 2008, followed by
Germany, Japan, Taiwan, and the United States. China and Taiwan
continued to build market share and now account for nearly half of
global PV cell production. China also now exports about 98 percent of
what it produces.
Although U.S. production of all solar PV cells ranked fifth overall,
its production of thin-film solar cells was the largest, and thin-film
technologies are beginning to meet a greater share of global demand.
According to industry estimates, while the United States currently
accounts for about 10 percent of world PV cell production, this share
could reach 20 percent to 25 percent by 2013 in part because of the
employment of new PV technologies.
As with other renewable energy technologies, PV cell production trends
in part reflect the presence of strong production incentives. Industry
estimates suggest that 60 percent to 70 percent of world PV cell
production is expected to occur in China, in part because of
significant domestic incentives that are part of a "comprehensive"
policy of tax rebates, financial incentives, and strong targets.
Experts estimate that the Chinese government has spent $1.5 billion to
promote the competitiveness of its solar industry. In the United
States, incentives at the state level have also been important for
encouraging production. Commerce also notes the potential for clean
energy cooperation between the United States and China, with efforts
in the area of training and capacity building.
[End of section]
Appendix VIII: Comments from the Export-Import Bank:
Export-Import Bank Of The United States:
Fred P. Hochberg, Chairman & President:
811 Vermont Avenue, N.W.
Washington, D.C. 20571:
Phone (202) 565-3500:
Email: fred.hochberg@exim.gov:
June 11, 2010:
Loren Yager:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Yager:
Thank you for providing the Export-Import Bank of the United States
("Ex-Im Bank") with the opportunity to comment on GAO's June 2010
draft report entitled "Export-Import Bank: Reaching New Targets for
Environmentally Beneficial Exports Presents Clear Challenges for
Bank." I appreciate the time and effort GAO put into developing the
report, and the Bank will strive to implement GAO's recommendations
promptly.
Ex-Im Bank is committed to promoting the export of renewable energy
and energy efficiency end-use technologies, as well as other
environmentally beneficial goods and services, thereby growing and
sustaining green jobs in the U.S.
The Bank's efforts to promote renewable energy exports produced more
than $100 million in support for renewable energy exports in FY2009,
more than triple the amount authorized in FY2008 for this sector.
During FY2010, Ex-Im Bank has already approved $82 million for wind
and solar power exports, and is currently reviewing twelve renewable
energy transactions with export values ranging from $280,000 to $195
million.
Ex-Im Bank is also proud to be the first export credit agency to
approve a Carbon Policy addressing global climate change. The policy
establishes financial incentives for renewable energy transactions,
aims to reduce CO2 emissions by encouraging energy efficiency exports,
and requires enhanced due diligence for high carbon intensity
projects. Ex-Im Bank was the first — and remains the only — export
credit agency to track and publicly report the CO2 emissions
associated with the projects it supports. In March 2010, Ex-Im Bank
launched the Solar Express program to expedite solar-power
transactions valued between $3-$10 million.
As the report makes clear, external factors pose a significant
challenge to U.S. exporters of environmentally beneficial goods and
services, which affects Ex-Im Bank's ability to meet its 10% goal for
renewable energy and energy efficiency end-use technology
authorizations. Ex-Im Bank is a demand-driven institution, and demand
for U.S. exports and Ex-lm Bank financing is primarily a function of
cost. As noted in the report, many countries protect their markets
through tariff and non-tariff barriers and provide incentives and
subsidies to domestic industries; an imbalance which cannot be
addressed by Ex-Im Bank. Ex-Im Bank is also at a disadvantage with
respect to competing against countries offering concessional or
subsidized financing for renewable energy exports (also known as "tied
aid"). Lastly, renewable energy technologies continue to have an
inherent disadvantage compared to fossil fuel-based projects based on
the cost of power production.
Nonetheless, Ex-lm Bank is confident that its efforts to increase
support for renewable energy and energy efficiency end-use technology
exports will result in a corresponding increase in FY2010, moving
closer to the 10% target. Ex-Im Bank commits to expanding its efforts
through developing and implementing operational efficiencies to better
focus on the needs of the renewable energy sector. The Bank will
continue to improve its outreach to renewable energy and energy
efficiency exporters, buyers and lenders; increase its coordination
with other trade promotion agencies at both the national and state
level, including the Trade Promotion Coordination Committee's Clean
Energy Working Group; expand its engagement with stakeholders,
including environmental non-governmental organizations; develop new
programs and incentives for renewable energy and energy efficiency
exports; and increase Ex-Im Bank's resources dedicated to these
efforts.
Sincerely,
Signed by:
Fred P. Hochberg:
President and Chairman
[End of section]
Appendix IX: GAO Contact and Staff Acknowledgments:
GAO Contact:
Loren Yager (202) 512-4347 or yagerl@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Celia Thomas (Assistant
Director), Eugene Beye, Adam Cowles, David Dornisch, Kendall Helm,
Ernie Jackson, Giulia McHenry, and Jennifer Young made key
contributions, and Karen Deans, Etana Finkler, and Armetha Liles
provided technical support.
[End of section]
Footnotes:
[1] Committee Print of the House Appropriations Committee, p. 1925.
(Omnibus Appropriations Act, 2009; Pub. Law 111-8.)
[2] House Report 110-197, p. 46.
[3] These documents included a strategic plan for environmentally
beneficial exports submitted to Congress in April 2008, a series of
business development plans for environmentally beneficial exports, and
documents related to an agencywide strategic planning effort, which
began in August 2009. This effort produced planning documents, and a
draft written strategic plan in April 2010 that is not publicly
available. We refer to all of these documents as strategic planning
documents or initiatives.
[4] Countries' export credit agencies provide export credits in
support of their exporters competing for overseas sales. They provide
credits to foreign buyers either directly or via private financial
institutions. Export credit agencies can be government institutions or
private companies operating on behalf of the government.
[5] Ex-Im loan guarantees cover the repayment risks on the foreign
buyer's debt obligations incurred to purchase U.S. exports,
guaranteeing a lender that, in the event of a payment default by the
borrower, Ex-Im will pay the outstanding principal and interest. Ex-Im
Bank's export credit insurance policies help U.S. exporters sell their
goods overseas by protecting them against the risk of foreign buyer or
other foreign debtor default for political or commercial reasons,
allowing them to extend credit to their international customers for
short-term or medium-term sales. Under its working capital guarantee
program, Ex-Im provides repayment guarantees to lenders on secured,
short-term working capital loans made to qualified exporters.
[6] Ex-Im's budget includes its program subsidy and its administrative
expenses. Program subsidy is budgetary resources that must be
allocated annually to reserve against any estimated cost of credit
programs not covered by fees (on a present value basis). Congress
retains oversight of Ex-Im's budget by setting annual limits on Ex-
Im's use of funds for the program subsidy and administrative expenses.
Each year Ex-Im submits budget estimates to the Office of Management
and Budget for inclusion in the President's annual budget proposal to
Congress.
[7] Pub. L. No. 101-167, Sec. 534(d).
[8] Pub. L. No. 107-189, Sec. 13.
[9] Pub. L. No.110-161.
[10] Pub. L. No. 111-8 (123 Stat. 524 at 858) ("energy efficient end-
use technologies").
[11] Pub. L. No. 111-117 (123 Stat. 3034 at 3341) ("end-use energy
efficiency technologies").
[12] H. Report No. 110-197, p. 46.
[13] Committee Print of the House Appropriations Committee, pp. 1924-
25 (Omnibus Appropriations Act, 2009; Pub. L. No. 111-8).
[14] H. Conf. Report No. 111-366, pp. 1493-4.
[15] In determining the sectors eligible for renewable energy
financing incentives, Ex-Im Bank adheres to Annex 4 to the OECD
Arrangement on Officially Supported Export Credits. Annex 4 defines
bio energy as all sustainable biomass, landfill gas, sewage treatment
plant gas and biogas energy installations. 'Biomass' is defined as the
biodegradable fraction of products, waste and residues from
agriculture (including vegetal and animal substances), forestry and
related industries, as well as the biodegradable fraction of
industrial and municipal waste. Ex-Im Bank does not consider the
production of bio fuel from corn or other agricultural products to
constitute renewable bioenergy.
[16] Friends of the Earth, Inc., et al. v. Spinelli, et al. (Civ. No.
02-4106, N.D. Cal.) The lawsuit asserted that Ex-Im and the Overseas
Private Investment Corporation (OPIC) provided assistance for fossil
fuel projects that caused greenhouse gas emissions without complying
with provisions of the National Environmental Policy Act requiring
assessments of their projects' impacts on the U.S. environment
resulting from their emissions. According to Ex-Im, it began in 1999
to track the annual estimated amount of carbon dioxide emissions
produced by projects that the Bank supports through its export
financing. These projects include fossil fuel power plants and
projects in the oil and gas and petrochemical sectors financed by Ex-
Im. This information is published in Ex-Im's annual report.
[17] The carbon policy contains the following elements, among others:
incentives for projects that reduce or mitigate carbon emissions,
creation of a renewable energy loan guarantee facility of $250
million, and affirmation of Ex-Im's encouragement of financing for
products and projects related to energy efficiency. The policy does
not prevent the board from approving coal projects. It provides for
the board to have information about high carbon emission projects
earlier in the application process and the board would have the option
to decline a transaction at an early stage because of detrimental
environmental effects. The due diligence process for high carbon
intensity projects is described in appendix III. The plan also
requires that any projects with carbon emissions greater than 850
grams of carbon dioxide/kilowatt hour have verifiable offsets to
reduce the project's carbon dioxide intensity to below that level. Ex-
Im's Environmental Guidelines require that environmental impact
assessments be conducted for certain international projects. See
[hyperlink,
http:www.exim.gov/products/policies/environment/envproc.cfm] and GAO,
Export Credit Agencies: Movement Toward Common Environmental
Guidelines but National Differences Remain, [hyperlink,
http://www.gao.gov/products/GAO-03-1093] (Washington, D.C.: Sept. 10,
2003).
[18] Ex-Im financing data in this report are based on Ex-Im's current
data collection and tracking system. Ex-Im used a different reporting
system prior to 2003.
[19] According to Ex-Im data, one transaction authorized in November
2009, a wind power facility in Mexico, accounted for 79 percent of
renewable energy financing in the first half of fiscal year 2010.
[20] As is discussed below, there is some overlap between two of Ex-
Im's subcategories: renewable energy technologies and energy efficient
end-use technologies. Thus, some exports that were categorized as
renewable energy could have also been energy efficient end-use
technologies. However, those would not increase Ex-Im's financing that
would count toward meeting the fiscal year 2009 target.
[21] Information on Ex-Im financing for energy efficient end-use
technologies is not available for data prior to fiscal year 2010.
[22] These include, for example, solar panels on commercial buildings
or systems for agricultural use.
[23] As a part of this process, the OECD is also discussing whether--
from both a technical and political perspective--enhanced terms should
be offered to technologies that are being developed and could foster
or result in carbon dioxide emissions reduction, including certain
clean coal technologies.
This evolution of technology can apply to other types of
environmentally beneficial exports as well as energy efficiency. For
example, Ex-Im stated that from 1997 to 2008, the bank considered
certain combustion turbine power plants equipped with special burners
that reduce the plants' nitrous oxide emissions to specified low
levels to be environmentally beneficial. (Such projects would be in
the "remaining" category shown above). Ex-Im said that such burners
are now required for virtually all combustion turbine power plants, so
the projects would no longer be considered environmentally beneficial.
[24] For example, see GAO, Executive Guide: Effectively Implementing
the Government Performance and Results Act, [hyperlink,
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June
1996).
[25] Feed-in tariffs require utilities to purchase renewable energy at
a set price for a set term. The European Union (EU), for example, has
mandated a 20 percent share of renewable energies in EU energy
consumption by 2020.
[26] An OECD agreement among member export credit agencies governs the
use of tied aid. The rules do not allow tied aid for projects in
higher-income countries or for projects that are commercially viable.
Renewable energy projects have typically been considered eligible for
tied aid under OECD rules and have received foreign tied aid support.
In addition to the OECD rules, the U.S. government has long held a "no
initiation policy" with respect to tied aid, and Ex-Im tied aid
financing has been limited to matching foreign tied aid offers of
other countries--rather than initiating tied aid for U.S. exports.
Through the Tied Aid Credit Fund, Ex-Im may provide tied aid financing
primarily to (1) support the negotiations and policing of OECD tied
aid rules and (2) match foreign tied aid offers to level the playing
field for U.S. exporters. Congress requires Ex-Im to comply with
principles, processes and standards developed jointly by the
Department of the Treasury and Ex-Im for approving the use of tied aid
for specific projects, and Treasury can appeal a decision of the Ex-Im
board to use tied aid to the President of the United States.
[27] Ex-Im's charter requires the bank's board of directors to appoint
a bank officer to promote renewable energy exports. The most recent
board member in that role organized an intra-office group of Ex-Im
officials, involved in and with some expertise in environmental export
financing, called the Environmental Exports Team. The staff of the
Office of Renewable Energy and Environmental Exports were part of this
group as well as Ex-Im attorneys, engineers, project finance staff,
policy planners, and credit and insurance underwriters. Most officials
participating worked as needed on environmental exports transactions.
The group met mainly to be briefed by staff on efforts to promote
financing deals for renewable energy and environmentally beneficial
exports. According to Ex-Im, the main achievement of the working group
was to identify those in the bank with expertise on specific aspects
of environmentally beneficial export transactions. When the board
member left the bank in spring of 2009, the Environmental Exports Team
ceased to meet regularly. The board position has been vacant since
that time.
[28] Related to Ex-Im's small business financing mandates are specific
congressional directives concerning outreach activities to small
businesses owned by socially and economically disadvantaged
individuals and by women. In addition, there are mandates in other
areas; for example, Ex-Im has been directed to take steps to expand
its financial commitments in Sub-Saharan Africa. The Sub-Saharan
Africa mandate does not have a specific financing goal. It has been
assigned two staff.
[29] GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, [hyperlink,
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June
1996).
[30] This standard is more flexible than "best available technology,"
which may not be feasible from an economic, resource, or technological
perspective in developing countries.
[31] This requirement relates to the World Bank initiative to assist
countries in developing a framework for strategic, sustainable, and
cost-effective low carbon growth the limits climate impacts.
[32] The exposure fee is Ex-Im's charge for a transaction that covers
the risk associated with financing. It varies by, among other factors,
the importing country, the length of the repayment terms, and the loan
coverage.
[33] The CIRR is the official lending interest rate for export credit
agencies. For the United States, the CIRR is based on the treasury
bond rate.
[34] EBI generates its estimates by adding revenues generated by
entities within 14 segments of the environmental industry that it has
identified. EBI relies on information from company databases it has
constructed, proprietary survey instruments, market models, and
editorial research. EBI's categorizations and market estimates of the
environmental industry are used by the Department of Commerce and,
according to EBI officials, have been used or adapted by the
Organisation for Economic Cooperation and Development, the European
Union, and numerous other government and private sector sources.
[35] One example is the U.S. Senate Special Report, "Major
Opportunities and Challenges to U.S. Exports of Environmental Goods,"
Senator Ron Wyden, Washington, D.C.: December 9, 2009.
[36] Feed-in tariffs allow owners of renewable energy technologies to
sign long-term contracts for the sale of the power they produce back
to utilities.
[37] Ex-Im's 2010 Business Development Plan for Environmentally
Beneficial Exports indicates that global renewable energy production
grew significantly from 2005 to 2008, with grid-connected solar
photovoltaic capacity increasing by 600 percent to 13 gigawatts and
wind power capacity increasing 250 percent to 121 gigawatts.
[38] Solar photovoltaic technologies convert sunlight into electricity
through arrays of semiconductor devices called solar cells. Solar
thermal technologies (concentrated solar power systems) use highly
reflective sun tracking mirrors to produce high-temperature thermal
energy.
[End of section]
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Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548: