Exim Bank and Sasan Power: Is the fix on for dirty energy?
The Sierra Club is getting after the U.S. Export-Import Bank for subsidizing fossil fuel projects around the world at the expense of clean energy projects as part of its huge portfolio of loans and loan guarantee programs. Ex-Im Bank’s activity comes despite pledges from the Obama Administration to phase out financial support for polluting projects.
A recent flashpoint for the club’s ire occurred last month when the Ex-Im Bank’s board of directors, in a reversal of a previous decision, approved a “preliminary review” of Reliance Power’s export financing application for India’s Sasan “ultra-megawatt” coal-fired plant project. The move, while not a final approval of the application, essentially paves the way for that to happen.
On June 24th, the board had voted not to proceed with further review of the application for the Sasan project based on environmental concerns. After an intense lobbying campaign Reliance Power entered into a memorandum of understanding with Ex-Im “indicating Reliance’s intent to develop a new 250 megawatt renewable energy facility, which when built will rank among the largest renewable energy projects in India,” Ex-Im asserted.
With that somewhat vague assurance, it looks like the fix is on for the proposed $600 million Ex-Im loan guarantee for the Sasan Power Ltd. coal-fired plant. Sasan, by the way, is a fully-owned subsidiary of Reliance Power.
The proposed loan guarantee will support the sale and export by Bucyrus International Inc., of Milwaukee, WI, of mining equipment to Sasan for the 3,960 MW power plant in Madhya Pradesh, India. “This proposed transaction for the Sasan project would support hundreds of jobs at Bucyrus and its sub-suppliers,” Ex-Im says.
Also under the MOU, Reliance agreed to cap the Sasan project’s CO2 emissions at 850 grams per kilowatt hour.
This means that a full financial, technical and environmental due diligence process will occur, according to Ex-Im. Following that, the bank will vote on whether to approve the application.
“We are pleased that Reliance is making this commitment to renewable energy, which allows us to sustain U.S. jobs and promote both conventional and renewable energy exports,” said Ex-Im Bank Chairman and President Fred P. Hochberg.
Sierra Club is not buying that however, calling the deal, and similar activities by the bank, a “notable example of flawed priorities,” and an example of the bank’s “overwhelming bias towards fossil fuel financing.”
The club notes that Ex-Im provides billions of dollars in public financing every year for “destructive fossil fuel projects abroad.” Last December Ex-Im approved a record $3 billion in financing for ExxonMobil’s Papua New Guinea Liquid Natural Gas project. That was done the same week that nations met in Copenhagen to work on a global climate change agreement.
In addition to the pending Sasan project in India, Ex-Im Bank support could go to the Kusile coal power project in South Africa. “If constructed, Sasan and Kusile would be among the world’s largest coal power projects with combined 56.9 million tons of annual CO2 emissions, plus extensive pollution to local water and air, causing community dislocation and health problems including increased rates of cardiopulmonary diseases and cancer deaths.”
Sierra Club adds that this apparent bias is “egregious given that fact that clean energy exports can produce roughly three times the number of American jobs in comparison with fossil fuel related project job generation per $1 million in investment.”
There are tough choices and trade-offs that must be made between boosting needed export activity, which helps the economy and creates jobs, and the need to curb CO2 emissions while switching to clean energy plants. In the Sasan case, 250 MW (renewable) vs. 3,960 MW (coal-fired) is not nearly the balanced win for the environment that Ex-Im trumpets. It takes money away from potential clean energy projects and jobs while supporting dirty energy.