On June 14, the Overseas Private Investment Corporation
(OPIC) announced a Greenhouse Gas Initiative
. OPIC is an agency of the U.S. government that helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, seeks to complement the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. OPIC’s announcement comes in the context of their Congressional reauthorization.
In May 24th testimony before the House Foreign Affairs Committee, WRI called for a Climate Change Action Plan at OPIC. It is imperative that Congress employ every U.S. Government tool to tackle the climate change challenge and realize the global business opportunities that are emerging in clean technology. OPIC should be a more significant part of the solution as a condition of its reauthorization by Congress.
The overarching goal of the Greenhouse Gas Initiative, according to OPIC, is to cap greenhouse gas emissions on new projects and shift agency emphasis towards financing renewable energy projects. Key elements of the announced initiative include:
- A goal to reduce emissions in OPIC’s overall lending portfolio by 20% over the next 10 years. OPIC indicates it will achieve this reduction target by establishing an annual emissions cap for all new ghg emissions in OPIC supported projects based on a 2007 baseline.
- A goal to increase investment in renewable energy and energy efficiency projects through the application of market-based incentives.
- Project by project emission reduction alternatives analysis.
- “Enhanced” accounting and reporting on greenhouse gas emissions. OPIC will report annual emissions of each carbon intensive project in its active portfolio and those receiving initial commitments.
OPIC’s announcement also comes in the context of a lawsuit filed by environmental organizations and several cities
in California and Colorado under the National Environmental Policy Act
Many key issues need to be clarified by OPIC to understand how effective this announcement will be in actually shifting the focus of the institution’s portfolio towards low carbon technology and greenhouse gas emission reductions. Two key issues that remain to be addressed are:
- A clear and binding target for a percentage of OPIC’s portfolio to support renewable energy and energy efficiency. By way of example, a 10% target for renewable energy and environmentally beneficial projects just passed the House Foreign Operations Appropriations Committee for OPIC’s sister agency, the U.S. Export-Import Bank. No less than 10% of ExIm’s entire portfolio is the proposed target goal of the Committee.
- Enhanced methodologies for a) determining the full scope of OPIC investments that should be included in the GHG cap and b) determining appropriate accounting procedures for greenhouse gas emissions attributable to OPIC.
Continued Congressional oversight and legislative action will be necessary in the coming months to ensure that OPIC’s initiative is underpinned with long-term transparency, accountability and ultimately successful delivery of cleaner energy to developing countries. Acknowledging a need to set a cap on greenhouse gas emissions is an important step forward in efforts to address climate change by this government agency.
WRI’s Financial Flows Objective engages financial institutions to shift investment to sustainable companies and projects. Our innovative research informs banks and investors about the value of taking action on the most pressing environmental and social challenges.