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Room Document No.

1C&R


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ECA SUPPORT FOR HIGH CARBON
INTENSITY POWER PLANTS


U Un ni it te ed d K Ki in ng gd do om m a an nd d U Un ni it te ed d S St ta at te es s






1 12 2 ( (p p. .m m. .) ) 1 13 3 ( (a a. .m m. .) ) M Ma ar rc ch h 2 20 01 14 4
O OE EC CD D C Co on nf fe er re en nc ce e C Ce en nt tr re e, , P Pa ar ri is s

Confidential

1

March 11, 2014

U.S./UK Proposal to the OECD Working Party on Export Credits and Credit Guarantees

ECA SUPPORT FOR HIGH CARBON INTENSITY POWER PLANTS

Context

The OECD Recommendation on Common Approaches for Officially Supported Export Credits
and Environmental and Social Due Diligence (the Common Approaches), adopted in 2012,
recognizes the responsibility of Members to implement the commitments undertaken by the
Parties to the United Nations Framework Convention on Climate Change. The UNFCCC has
repeatedly stressed the need for the widest possible cooperation by all countries in addressing
global climate change. Achieving the ultimate objective of the UNFCCC will require, among
other measures, a substantial shift toward cleaner energy sources across the global energy
economy.

Governments have an essential role to play in promoting this shift through the various policy
instruments at their disposal, including, broadly speaking, incentives to scale up clean energy
deployment along with measures to limit support for high carbon intensity power generation.
We note that OECD governments have committed billions of dollars to help developing
countries reduce their emissions and build clean and renewable energy plants, as well as to fund
climate change adaptation projects. The United States and United Kingdom believe that a
consistent and comprehensive approach to addressing climate change also requires Export Credit
Group (ECG) Members to reconcile these efforts with their continued support for high carbon
intensity power plants in developing countries and throughout the world.

We note that OECD Secretary General Angel Gurra has urged governments to adopt measures
that set out a pathway to achieve zero net carbon emissions from the combustion of fossil fuels in
the second half of this century. ECAs account for the bulk of public financing by OECD
countries for high carbon intensity power plants, particularly in developing countries. Therefore,
limits on this financing can have a critical impact on reducing global greenhouse gas emissions.
Such limits also make particular sense when applied to wealthier developing countries that have
access to other sources of financing for conventional, high carbon intensity power plants.

For the poorest countries, exceptions to any limits should be considered alongside measures to
reduce emissions from such plants, with the recognition that energy access imperatives and the
lack of private sector financed alternatives may make it appropriate to continue supporting high
carbon options in these countries for a defined period of time.


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Individual OECD governments, as well as major multilateral financing institutions, are taking
strong actions to address these issues. As part of his Climate Action Plan launched in June 2013,
President Obama called for an end to U.S. government support for public financing of new
conventional coal fired power plants overseas, except in the poorest countries in cases where no
viable alternative exists. The United Kingdom and a number of other countries have recently
announced similar policies. Additionally, multilateral financial institutions, including the World
Bank, the European Bank for Reconstruction and Development and the European Investment
Bank, have also adopted policies that significantly limit their support for high carbon intensity
power plants.

At the 133
rd
Meeting of the ECG, held in November 2013, the United States and Denmark tabled
a joint proposal that drew attention to the increasing international action aimed at limiting public
support for high carbon intensity power plants.

The changing international landscape and clear role for export credit policy in addressing climate
change has motivated the United States and United Kingdom to develop and introduce the
following conceptual-framework proposal to the ECG. The ultimate goal of this policy proposal
is to arrive at a change in the Common Approaches that establishes uniform international
environmental standards that would apply to ECA-supported high carbon intensity power plants.
In sum, the United States and United Kingdom are calling on the ECG to be among the leaders
within the growing international movement to limit support for high carbon intensity power
plants by introducing guidelines for such support that are akin to the relevant standards and
policies applied by multilateral development banks.

U.S./UK Proposal

The United States and United Kingdom believe it is time for ECG members to consider
adopting a technology-neutral, quantitative carbon intensity threshold to limit their export
credit support for high carbon intensity power plants. The United States and United
Kingdom therefore propose that the ECG initiate a work program to consider and discuss the
policy and technical issues that must be addressed in order to achieve this goal, and that would
form the basis for the incorporation of a carbon emissions performance standard (EPS) into the
Common Approaches.

The United States and United Kingdom believe that ECG consideration of a carbon EPS should
be guided by the following principles:

(1) Technology Neutral: The EPS would apply to high carbon intensity power plants based
on any technology, which could be defined as plants having a carbon intensity of 700

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grams of CO
2
/kWh or more, and seeks to introduce conditions for support that would be
associated with such plants.

(2) Objective Standards: The EPS would seek to reduce emissions from ECA-supported
new high carbon intensity power plants to a level of 500 grams of CO
2
/kWh, which is a
level comparable to carbon intensities of power plants fueled by natural gas.

(3) Defined Exceptions: Circumstances that could result in ECA support for high carbon
intensity power plants (e.g., for countries below a certain income level and where there is
limited access to feasible alternative energy sources) would be explicitly specified.

The United States and United Kingdom propose that the aforementioned work program
commence with a special session of the ECG. This special session would cover the following
topics:

(1) Criteria for High Carbon Intensity Power Plants: These could be power plants having
a carbon intensity of 700 grams of CO
2
/kWh or more.

(2) Methods Available to Achieve the Carbon EPS: These could include such methods as:
(1) the use of carbon capture and storage (CCS) to reduce CO
2
emissions from new high
carbon intensity power plants to a level of 500 grams of CO
2
/kWh, a level roughly
commensurate with the carbon intensity of a natural gas-fired power plant, or (2) other
technologies, including those employing auxiliary thermal solar systems or hybrid plant
systems, that could mitigate the overall level of CO
2
emissions from power plants.

(3) Consideration of Exceptions to the Application of the Carbon EPS: For example,
there could be an exception for countries below a certain income level (e.g., based on a
per capita gross national income threshold). For this subset of countries, consideration
could be given to how to evaluate the best-appropriate technology for plant efficiency
and the availability of economically feasible alternatives to high-carbon power generation
technologies.

(4) Future Work: The ECG would need to develop a formal plan for further meetings and
workshops on a carbon EPS, leading to a revision of the Common Approaches. These
additional meetings and workshops could address other topics identified by Members.

The United States and United Kingdom envision that the end result of this work program would
be the timely incorporation of a new provision into the Common Approaches in which Members
agree to an EPS with which high carbon intensity power plants must comply in order to be
eligible for export credit support. This provision would be accompanied by an annex that would

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establish criteria for identifying high carbon intensity power plants, describe the mitigation
measures needed to achieve a maximum carbon intensity that would allow for export credit
support, and define specific circumstances in which the EPS would not apply.

Draft text for this provision that could be inserted into the Common Approaches is provided
below for illustrative purposes, with details to be set forth in an annex to the Common
Approaches:

Members will only provide export credit support for high carbon intensity power plants
[such as those having a carbon intensity of [700] grams of carbon dioxide per kilowatt
hour or more] in cases where those plants deploy mitigating technology that reduces
their maximum carbon intensity to [500] grams of carbon dioxide per kilowatt hour,
except in [defined circumstances].