US export funding agencies settle carbon test case

A coalition of environmental groups has settled a landmark lawsuit against two US government funding agencies that will force them to impose stricter controls on projects' carbon emissions when awarding loans. The settlement could open the door for more legal action against businesses and government departments that fail to address their contribution to climate change.

Friends of the Earth, Greenpeace, and three US cities sued the Export-Import Bank (Ex-Im) and the Oversees Private Investment Corporation (OPIC) for funding $32bn (£22bn) in fossil fuel projects over 10 years without considering the global warming implications, as they are required to do under the National Environmental Policy Act (NEPA).

The parties have now reached a settlement that will require the two agencies to establish a carbon emissions policy and provide greater transparency on the carbon emission implications of the projects they review and fund.

Under the terms of the Export-Import Bank settlement, which lasts for five years, the agency must report the carbon emission implications for funding proposals on its web site for a 30-day comment period, and deliver comments from the public to the board before it votes on a transaction. It will also establish a $250m fund for renewable energy projects, and propose longer funding terms to projects that display restrictions on carbon emissions.

The 10-year OPIC settlement requires the agency to report project carbon emission of more than 100,000 tonnes on its web site, and to reduce the carbon emissions from those projects by 20 per cent over the next 10 years. The agency will also encourage renewable energy, either with a $250m fund or preferential funding for renewable projects.

"Perhaps one of the biggest implications of this suit is that the courthouse doors are now open for plaintiffs who have been economically and environmentally harmed by climate change," said Michelle Chan, programme director for green investments at Friends of the Earth US. "Under NEPA, the federal government needs to consider the climate impacts of its actions, and the courts are available to ensure that this occurs."

OPIC refused to comment, but Jim Mahoney, vice president of engineering and development for Ex-Im, said that the agency had already taken steps to be more environmentally friendly. It published environmental guidelines in 1995, he said, and has been reporting carbon emissions for its funded projects since 1998.

"The settlement is asking us to go further and put these estimates in context," he said, explaining that estimates of CO2 emissions should be cast in real-world terms, perhaps as a percentage of total greenhouse gas emissions. " Carbon emissions on our projects have decreased remarkably, because the demand for coal-fired power plants, which produce most of the CO2, has gone down significantly among US exporters," he said, adding that exporters increasingly favour gas-fired plants with lower emissions.

The US cities involved in the suit were Boulder, Colorado; Arcata, Santa Monica and Oakland, California.

Both agencies must also pay $100,000 in legal fees to the plaintiffs.