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Global Warming

11 am

Tom Brake (Carshalton and Wallington): I start with a small apology. It appears that the purpose of the debate was not made entirely clear, and there have been discussions among Departments about which of them should respond. If it is not possible for the Minister to answer some of my questions directly himself, I hope that he will at least seek responses from the Department of Trade and Industry.

My first point concerns transparency. One of the major issues that I came across in my research is the lack of easily available statistical data about the sustainable nature, or otherwise, of the projects that are supported by the Export Credits Guarantee Department, and their impact on global warming. That lack of transparency and readily available information is a problem that we cannot ignore. The discussions and outcomes of negotiations on projects are kept confidential: there is almost an institutional paranoia about the public disclosure of any information about their impacts.

Most export credit agencies—I shall refer briefly to others, not only our own—do not conduct environmental impact assessments that are publicly disclosed in accordance with international norms. Most do not disclose the name, nature or location of projects that they back until they are well under way. In some respects, export credit agencies are the most opaque of any Government agencies, placing the needs of private corporations above the rights of citizens to protect their lives and environments and to ensure that their Government's objectives are being applied in countries abroad that are receiving financial support from that Government.

In the UK, the public have no idea whether the screening process for new projects that is used by the ECGD follows the guidelines or objectives that the Government have set in relation to sustainability and tackling climate change. As with any public body, citizens have a fundamental right to scrutinise the activities of the ECGD. Not only should the Government be notified about those activities, and the information be made publicly available, but other organisations, such as the Environment Agency, may have a role to play in advising on the effects of such projects. How do the Minister and his colleagues in other Departments propose to combat that lack of transparency?

What is the reasoning behind the reluctance to release relevant environmental and developmental documents to associated agencies for review? Does the Minister believe that the UK should issue a public international strategy on sustainability and climate change, similar to that which was issued on conflict prevention, to ensure that our international partners, business and non-governmental organisations precisely understand the UK's stance?

The lack of accountability is reinforced by the lack of expertise in the ECGD's council. It has ties with many Departments, and it is clear that cross-departmental activity is needed. It should not only be down to the new Department for Environment, Food and Rural Affairs to ensure that sustainability issues are reflected in other Departments, and in particular the Department

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responsible for the ECGD. I hope that the Minister can clarify which cross-departmental activity considers not only the foreign and trade effects of the ECGD's activities, but their environmental and sustainability impact. With the coming G8 conference this is a good time for the Government to clarify their views on the issue so that the role of export credit agencies can be discussed in those negotiations, with the UK Government having a clear internal position on what the ECGD should be promoting.

I hope that the Minister will be able either to say something today or to write to me about the progress that has been made among the Organisation for Economic Co-operation and Development countries on drawing up common standards for export credit agencies on the way in which they seek to promote sustainability in developing countries. When will such standards be in force? Will progress on those common standards be reported at the Johannesburg conference, which would be an excellent opportunity to make such a report? Furthermore, is he willing to work with his departmental colleagues to give the ECGD an explicit requirement to promote sustainability? It should be not only in the business of screening, but in the business of promoting the UK's policy agenda on sustainability, climate change and preventing global warming.

Export credit agencies such as the ECGD that are funded by Governments carry many responsibilities. The ECGD is in place to further British exports and businesses, and because of its nature as a public body it must take into account the Government's policies and goals. It must promote the human rights and social issues that surround the projects that it is undertaking while considering the sustainability implications of its actions. Greening of government, which is part of any modern institution, is something that we would all support, but it must be carried through in all Departments. The ECGD's mission and strategy should be convergent with the Government's aims in relation to debt relief, poverty alleviation, ethical foreign policy, compliance with multinational environmental agreements and sustainable development.

The ECGD should be supporting productive investments focused on the development of sustainable energy in the way in which the American export credit agency promotes projects that contain sustainable measures. There is a further conference—the G8 conference—at which there will be an opportunity, of which I hope that the Government will make good use, to raise these issues.

I shall highlight an area of perverse policy: if we scrutinise ECA-funded projects across the globe, we discover that many of them are unsustainable and have serious effects on climate change and global warming. From 1994 to 1999, $216 billion out of $376 billion of global expenditure by ECAs was spent on supporting energy-intensive projects, which included financing more oil and gas development and fossil-fuelled power generation. If that process continues, during the next 30 to 50 years the developing countries' annual and total contributions to CO2 emissions will achieve parity with those of industrialised countries. The top destinations for these projects include leading sources of CO2 emissions such as Indonesia, China, India, Mexico and Brazil. It would be better if the work were done now—as the Americans are doing—in terms of

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promoting sustainable projects through the ECGD as opposed to promoting projects that are heavily dependent on fossil-fuelled power generation, for example. Such projects, as part of a discussion subsequent to Kyoto, will inevitably be revisited. We may find that, within a matter of years, they must be re-examined and less energy-intensive projects substituted. What activities have been undertaken by the Minister's or other Departments to ensure that, here and abroad, there is a stricter policy of environmental reform for the export credit agencies?

On the recognition of the importance of the Kyoto agreement and of helping developing countries grow while minimising the emissions that they release, it will not be the OECD countries that will have the most effect on climate change in the foreseeable future, but many of the countries in which the United Kingdom is providing support. Given the size of the sums involved, if we can shift even a small proportion of that financing toward more environmentally friendly technologies, that could have a significant impact on the economies of developing countries and their carbon dioxide emissions.

Will the Minister confirm that the Government recognise that the ECGD can have a heavy impact on the environment and play a positive role in helping both the United Kingdom and developing countries achieve globally the targets that we must achieve in relation to carbon dioxide emissions? I support the Government's manifesto pledge to reduce such emissions by 20 per cent. Would the Minister like to see that reflected in the policies adopted by the ECGD? Is there not a case for ensuring that, over a period, the projects that are supported and funded seek to achieve the targets that we have set? Perhaps we could ensure that for each kilowatt of power that is generated, there is a similar reduction. I would like to see the Government act on that.

Should the ECGD have a role in promoting sustainability? Should it switch focus to take a more proactive role in so doing?

With regard to United Kingdom objectives being reflected abroad, what steps are the Government taking to ensure that our target for renewable energy generation of 10 per cent. by 2010 will be reflected in a similar target being set for the ECGD? That would make sense in developing countries where there is often enormous potential for renewable energy. In many cases, such countries do not have a grid and self-supporting renewable energy projects such as solar power can be competitive with traditional forms of power generation. The review of the ECGD issued by the Government concluded that

The Government have also agreed that the ECGD should aim to promote their wider objectives, which could and should include sustainable development. What concrete steps have been made to follow through on them since the report? There has been additional support for activity on sustainability from the Trade and Industry Select Committee's 10th special report, with which the Minister may be familiar. The report recommended that the ECGD reassess the weak stance that was taken by the environmental questionnaire used

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to determine whether a project was sustainable. Some projects spring to mind where a tougher policy might have stopped them from coming forward.

The ECGD has stated that

Mr. Simon Thomas (Ceredigion): In the United States, the Export-Import bank has a different approach to renewable energy projects and gives out loans at a preferential rate. As a result, environmental industries, which are creating jobs in the United States, benefit to the tune of exports worth about £1 billion whereas the figures in the United Kingdom are so negligible that we do not even know them. Does the hon. Gentleman agree that manufacturers in the UK would benefit if we took advantage of selling our renewables technology resources and technology to developing countries?

Tom Brake : I thank the hon. Gentleman for his intervention and agree entirely with his point. The work of the US export credit agency on renewable energy is a welcome initiative and goes some way towards offsetting President Bush's activities in pulling out of the Kyoto protocol.

The ECGD states that it has an obligation to compare the projects against international standards such as those of the World Bank, which has much stronger investment safety clauses on renewable energy. If such comparison or benchmarking takes place, where is the evidence that the ECGD has revised its procedure to remain comparable with large organisations such as the World Bank?

I have raised many questions, to which I hope that the Minister will respond. As I said at the beginning, it is possible that some are not his responsibility and I hope that other Departments follow the debate closely and will respond to some of them.

11.18 am

Mr. Tony Colman (Putney): I congratulate the hon. Member for Carshalton and Wallington (Tom Brake) on securing this timely debate and on his exposition of the key concerns. I congratulate also the Minister on his outstanding support for all methods of tackling global warming. His presence is an example of joined-up government and the links that the debate has between the Department for Environment, Food and Rural Affairs and the Department of Trade and Industry.

I should declare a constituency interest. The World Coal Institute and the IEA Coal Research centre for clean coal technology are both based in Putney. I should also add that my hot interest in the subject comes from attending a GLOBE International conference in New

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York last month. I have consulted the Parliamentary Commissioner for Standards and believe that it does not need to be registered.

The conference, which was on export credit agencies and global warming, brought together parliamentarians from Europe and the United States, non-governmental organisations such as World Wildlife Fund Belgium, Friends of the Earth from Japan and the United States, Pacific Environment, Environmental Defense and the World Resources Institute. There were representatives of the Export-Import Bank of the United States and the Japan Bank for International Co-operation. Also present were private sector representatives from GE Capital and from Green Mountain Energy. The conference was a good example of GLOBE at work, and I urge all UK parliamentarians to join GLOBE UK and to use its facilities to learn about the issues and campaign for a better future.

The New York conference was timed to predate the 7 July deadline, which has now passed, for signing revision 6 of the Organisation for Economic Co-operation and Development draft recommendation on common approaches to the environment and officially supported export credits. That, in turn, is due to go to the G7/G8 Genoa summit later this month. I understand that, as of yesterday, the UK had not signed; I hope that the Minister will explain the UK's position on the document. The OECD approach was supported by about 300 NGOs that met in May 2000 in Jakarta at an international export credit agency reform strategy session. The Jakarta declaration for the reform of official export credit and investment insurance agencies was a global call for reform that included: first, transparency—the hon. Member for Carshalton and Wallington mentioned that—public access to information and consultation by ECAs and the OECD ECA working party; secondly, binding common environmental and social guidelines and standards that are no lower and less rigorous than the existing international procedures and standards for public international finance, such as those of the World Bank group and the OECD development assistance committee; thirdly, the adoption of explicit human rights criteria to guide the operations of ECAs; fourthly, the adoption of binding criteria and guidelines to end ECA abetting of corruption; fifthly, the adoption of a commitment to finance only economically productive investments; and lastly, the adoption of comprehensive relief for developing countries for ECA debt.

I am concerned that the latest consensus draft, which is potentially revision 7, does not contain credible commitments of ECAs to two key points. The first, which was mentioned by the hon. Gentleman, is to disclose to interested parties the environmental impact assessments for review and comment prior to the finalising of the decision on financing—that is, transparency of decision making at all times. The second is to apply World Bank standards to all the projects that ECAs support. The draft is discretionary rather than mandatory on those two points. That is worrying, as these loopholes are possibly large enough to destroy the reasoning behind the document as a whole. I noted that a further review is due in 2003, but these points could be nailed down now.

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What was interesting at the New York conference was the perception that, in its commitment to high environmental impact assessments, the United States was ahead of the rest of the world, including the UK. I was interested to see that the ECGD environmental impact assessment report on the Ilisu dam, which was published this week, made the point in its executive summary that

I congratulate the Government on the moves that they have made so far in changing the ECGD work programme and culture. The reports from the Trade and Industry and International Development Select Committees informed the decisions last July of the then Secretary of State for Trade and Industry, my right hon. Friend the Member for Tyneside, North (Mr. Byers). The January 2001 ECGD impact screening and analysis procedures are a great improvement on the past, and I congratulate David Allwood of the ECGD and his team on their work on the new environmental guidelines. The impact questionnaire asks for specific information about a project's potential impact on the global climate, including quantification of carbon dioxide emissions and other greenhouse gases from projects involving power generation from fossil fuels, and details of use of ozone depleting substances. The ECGD states:

The Genoa G8 summit will receive reports not only on OECD recommendations on common approaches to the environment and officially supported export credits, but from the task force set up at Okinawa last year on the development of renewable energy sources, which is, of course, headed up by the chief executive officer of Shell UK. The use of ECAs to provide finance to developing countries for renewable power will enable a billion people who are currently unable to access power to do so in future. Power markets fall into three broad categories: first, on-grid in OECD countries; secondly, on-grid in developing countries; and, thirdly, as the hon. Gentleman said, off-grid in developing countries. It is difficult for renewables to compete with conventional fossil fuels in on-grid markets. Capital costs are higher and the payback period is longer, and the per unit costs of power are therefore generally greater. Their output is dependent on variable or seasonal environmental conditions. Much greater potential exists for renewables to serve off-grid markets to reach 2 billion people in rural or isolated areas who cannot currently access power. Lower population densities and higher per unit

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costs mean that renewables are much more competitive versus conventional power sources. Renewable power sources tend to offer lower long-term costs.

To make renewables attractive to commercial funding, concessional and non-concessional funding need to be blended in a way that does not distort funding overall. At the same time, we must increase the market share of renewables to reduce their long-term financing costs. In short, ECAs can put in place—or, in the case of the US and UK, improve on—regular greenhouse gas accounting for all projects, financed or co-financed. ECAs should ensure that their staff understand renewable technologies to facilitate project assessment and underwriting. ECAs could put greater investment in business development to support renewables, working especially with small and medium-sized enterprises, which are often best placed for such projects. How many SMEs, which form the bulk of the companies in the "Guide to UK Renewable Energy Companies 2001" have been contacted by the ECGD? I fear that not many have. Could they be contacted in the next 12 months?

In the longer term, ECAs should develop a greenhouse gas accounting standard that facilitates the development of carbon markets. They should assess the feasibility of developing financial services tailored to small-scale renewable projects. Opportunities also exist for ECAs to explore non-energy projects in developing countries, with high potential to contribute to greenhouse gas reductions. These could include carbon sink or land use projects, transportation, infrastructure and equipment, and improvements in efficiency.

Given the few UK companies specialising in renewable energy technologies so far, the impact of the ECGD taking a strong line and supporting such technologies is hypothetical. Let me therefore propose actions for the UK Government to make the hypothetical real in export potential for the UK renewables industry. First, I sounded out senior management at BP Solar as to the impact of such support through the ECGD. BP Solar has factories in the United States, Germany and Spain. Last week, it announced an expansion of the existing 15 MW production factory in Spain by a further 60 MW—the biggest in Europe. I understand that Sir John Brown met the Secretary of State for Trade and Industry last night, at the latter's request, to discuss the establishment of similar manufacturing facilities for solar power equipment here. Given the weather conditions in the UK, as in Germany, the vast majority of the output of such a UK factory would be for exports to developing countries—countries dependent on ECGD ECA cover.

Has the Secretary of State offered preferential ECGD cover rates for such exports if a solar power factory was built here? Will the same apply to the product of the Vesta wind power factory that is shortly to open in the United Kingdom, and to all other solar and wind power factories in this country? I am sure that hon. Members would support such preferential cover. Such support is needed not only for the basic technology but to cover the set-up on the ground and enable it to continue to deliver for some years. The long repayment period available for thermal energy—that is, fossil-fuel power stations—should be available for renewable energy installations too.

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The IEA Coal Research centre for clean-coal technology, which is based in my constituency, has put forward proposals for what it calls zero-emission coal-fired stations. They would produce zero emissions in that the excess CO2 above the 70 per cent. efficiency levels achievable in clean-coal technology power stations would be injected into carbon sinks, perhaps using the depleted geological seams for gas and oil in the north sea and elsewhere. Could the ECGD provide concessional finance over and above that available for non-zero emission thermal power stations? Will the Minister confirm that he is talking to his colleagues within the G7-G8 about such an approach for thermal power stations?

Will the Minister phase out support for ECGD cover for thermal power stations that do not seek to achieve zero emissions? The argument may be given that it is inappropriate for the ECGD to seek such an approach. I understand that the French and German governments, while espousing the Kyoto protocol, are opposed to the US proposals for concessional finance and to a playing field tipped in favour of renewal energy. As a business man—that was my profession before entering the House—the only role that I see for government as opposed to commercial finance is to provide such a rigging of the market. Indeed, the study by National Economic Research Associates on the ECGD, published last July, was entitled "The Economic Rationale for the Public Provision of Export Credit Insurance by ECGD". Clearly a choice must be made of projects that are soundly financeable, and I do not suggest that the ECGD should back power projects that are not sound. However, it should not finance projects that have a greater CO2 greenhouse gas impact than those that do not.

So far, I have covered only the role of the ECA in encouraging sustainable energy technologies. Almost as important is the measurement of reduction in greenhouse gas and CO2 emissions resulting from all other ECA capital financing, which was touched upon by the hon. Member for Carshalton and Wallington. Two separate cases should be mentioned in that respect: high-energy consumption industries and aircraft emissions.

In the former case, investments determine emission trajectories over a long period—25 to 50 years. ECAs are big investors in oil and gas development, transport equipment and manufacturing industries such as chemicals, cement, pulp and paper. There must be a veto within ECA procedures to ensure minimising of CO2 emissions. We must not export old technology high carbon burn techniques. The latest technology, with maximum combined heat and power for manufacturing processes, must be the norm.

In the latter case, aircraft emissions appear to have been omitted from the OECD agreement. The Americans will not accept ECA aircraft financing as needing to come within the new proposed restrictions. However, aircraft emissions represent 5 per cent. of greenhouse gases, and many are worried that their impact may be the equivalent of 15 to 20 per cent. of greenhouse gas emissions. Aircraft emissions are of course increasing with the growth of air traffic. Our gift to the world through Airbus would be a low or zero-emission aircraft. Boeing in the US would have to follow suit. Will the Minister talk to his colleagues in the

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Department of Trade and Industry on the specification of the new Airbus? The Government have provided over £400 million in launch aid and the ECGD will be used to help to sell the new planes around the world.

What is the Minister able to do to ensure that those two areas—high-energy consumption industries and aircraft emissions—are dealt with by the OECD ECA agreement and by the taskforce on renewable energy at the G7-G8 Genoa summit?

So far, I have not mentioned the need for ECA countries—the G8 countries, one might say—to adapt their economies to avoid global warming. I am glad to say that the UK is committed to the Kyoto protocol. Last week, two books were published on the issue: "The UK Transition to a Low Carbon Economy" by Paul Ekins of Forum for the Future and "At the Energy Crossroads: Polices for a Low Carbon Economy" by Steward Boyle and my hon. Friend the Member for Harrow, West (Mr. Thomas). They provide a blueprint for the review by the Minister for Industry and Energy of UK energy needs for the next 50 years and a basis for the UK's 60 per cent. reduction in greenhouse gases.

From our commitment, there comes a new industry that will be producing renewable energy for export. That will, I hope, be based on the environmentally friendly ECA policies that will be ushered in at the Genoa summit.

I hope that the United States will still commit itself to the Kyoto protocol. In early-day motion 94, on global warming, I publicised the 43rd President's reconfirmation of the 42nd President's executive order of 3 June 1999. Independent advice leads me to believe that the United States could, by at least 2010, reduce its greenhouse gas total by 5 per cent. on 1990 levels. I hope that that American commitment can be used at the seventh conference of the contracting parties—COP7—in Bonn later this month to reopen the way to American ratification. United States support for dealing with global warming through changed ECA methods is also on the record.

American legislators believe that the Kyoto protocol is fundamentally anti-American and that there is little commitment to change on the part of EU industries. The American proposals for the use of the Ex-Im bank and the Overseas Private Investment Corporation—the United States Government reinsurance company—to deliver renewable energy to developing countries and the President's recommitment to his predecessor's executive order clearly show that there is a wish, certainly in Congress, to do a deal that is not anti-American.

I hope that Japan will reconsider its position, too. It could sign with the EU. The position of the Japanese Government and the Japan Bank for International Cooperation—Japan's ECA bank—on the use of ECAs to combat global warming has changed significantly in the past few weeks.

To summarise, in 1998, all 36 OECD Governments agreed to negotiate common environmental approaches for their ECAs. At the 1999 G8 summit in Cologne, the leading industrial countries went a step further and agreed to adopt common environmental guidelines by 2001. That was confirmed at Okinawa by the addition of the sustainable energy task force.

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This July, in Genoa, the UK can work with the United States to persuade their G8 partners that ECAs can be a key weapon in dealing with global warming through sustainable energy technology transfer across the world. There can be a step change in thinking about what goods developed and developing countries want for their common future.

All the G8 countries still need to sign the Kyoto protocol. Alongside it, however, OECD recommendations can reinforce the message that global warming must be stopped and can be with the will of the world.

Several hon. Members rose—

Mrs. Marion Roe (in the Chair): Order. I remind hon. Members that the winding-up speeches are due to begin at 12 noon.

11.38 am

Mr. Simon Thomas (Ceredigion): Although this seems to be an extremely esoteric subject, there could be no better day on which to have this debate. Today is "Stop Exxon Day", which is better known as "Stop Esso Day" in this country. The debate gives us a way of underlining the responsibility of international corporations on global climate change. We know that Exxon unfortunately joined the Global Climate Coalition in America, was a key funder of President Bush's campaign and has ended up as the bad boy of global warming. If we as parliamentarians can put pressure on Exxon/Esso to change its attitude, we might be able to approach President Bush, too.

The hon. Member for Putney (Mr. Colman) made it clear in his comprehensive remarks that, although this is a complex and esoteric subject, it has a real impact on the way in which we do business in the United Kingdom. He also made it clear that we can support measures to mitigate climate change through the actions of our own Export Credits Guarantee Department. I want to concentrate my remarks on our ECA.

The Environmental Audit Committee recognised the importance of the issue when it began an investigation into the Export Credits Guarantee Department and its relationship with sustainable development in the last Session of Parliament. Unfortunately, the small matter of the general election cut across what the Environmental Audit Committee was undertaking at that stage, but some of the initial information that came out of it underlined the evidence that has been given by the hon. Members for Carshalton and Wallington (Tom Brake) and for Putney.

There are difficulties with export credit agencies. The first, as the hon. Member for Carshalton and Wallington made clear, is transparency. The second concerns what an ECGD supports. Does it, for example, support effective protection of the environment? We should look at projects such as the Sual plant in the Philippines—a coal power plant, and not a clean one—or the Mossel Bay gas fields development in South Africa, and we should consider the prudent use of natural resources. For example, the Alumbrera copper and gold mine project in Argentina contributes to the global over-supply of that metal; that is not a prudent use of natural resources. Historically, our export credit

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agency has supported the accelerated use of fossil fuels, flying in the face of what we say we want to achieve in the Kyoto protocol.

It is a matter of concern that our ECGD does not commit to international best practice. As the hon. Member for Putney has pointed out, the United States has higher standards in this area. They might not be as high as the World Bank group or non-governmental organisations would like, but they are higher than ours. Is it not a paradox that we support Kyoto—we shall be in negotiations with Japan next week in Bonn about saving it, and about ensuring that America somehow comes into the Kyoto fold—yet in daily dealings the United States has higher environmental standards? I hope that the Minister, whom I welcome to his well-deserved continuation in the post, will want to get rid of that anomaly, perhaps through the Green Ministers Committee.

The ECGD says that it wants to meet the Government's environmental objectives; it says that it works with other Departments; it says that it is part of the greening government initiative—in particular, it has put sustainable development in its guidelines. For example, it says that it provides credit support for the most heavily indebted countries only if it will benefit the country's economic and social development. It also says that its criteria for granting export credit to the 63 poorest countries are those that assist social and economic development, that give maximum benefit to areas most in poverty, that tackle problem areas where private investment is not available, and that encourage viable self-financing projects. Those are important principles, but there is no reference to environmental benefit in the guidelines.

Historically, export credit agencies have been concerned about environmental impact locally, but not about the global situation. That is why this debate, concentrating on global warming and export credit agencies, is valuable. It focuses our scrutiny on what is being done in the name of greening government and I hope that it will help Ministers to think again about how we might achieve the objectives that we have set out for ourselves as a nation.

We are missing a trick. Through different use of our export credit agency, we could support our indigenous businesses. A memorandum from the Environmental Industries Commission, which was submitted to the Environmental Audit Committee, made clear how great the gap is at the moment. The ECGD focuses so much on the defence, aerospace and power industries that in 1997 less than 1 per cent. of its £3.7 billion business related to the export of environmental protection technologies. In fact, the level of support was so small that the ECGD did not keep figures on it. Yet that is a massive opportunity. The worldwide market is worth something like £330 billion a year and is set to go up to £600 billion by 2010. It would be the same size as the aeronautical industry, and the Government have accepted that. In 1999, the Department of Trade and Industry stated that

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In October 2000, the then Secretary of State for Trade and Industry called for a 20 per cent. increase in our world market share of these technologies. One of the key reasons why we have not been able to achieve that is that our own package of export support measures such as export credit does not match those of our competitor countries in America and in the European Union. For example, the USA is the world's largest exporter of environmental technologies, to the value of $14 billion a year. More than $1 billion of that sum is supported through its export credit agency. In this country, we do not know the figures—they are negligible—but in the USA they are $1 billion and $14 billion. We are wasting our huge potential, as well as failing to get the best deal for developing countries.

There is a way forward, because the international discussions to which the hon. Member for Putney referred have involved these issues, and there are key ways in which we can advance matters. In June 1999, the G8 countries met in Cologne to discuss the environmental guidelines for ECAs. The communiqué from the summit mentioned climate change but did not include it in the environmental guidelines. Until comparatively recently, environmental issues were approached through export credit agencies by considering carefully the local, but not the global, impact. That is reflected in the current guidelines, but I understand that doors are opening and that some time this year—the hon. Gentleman referred to it—there will be an opportunity to consider how we might strengthen the guidelines.

We should ensure that export credit agencies encourage investment in energy efficiency, shifts to less energy-intensive products and switches in fuel. Our export credit agency is undermining our Government's climate commitments. An example of that is the global environment facility, where we have gone in with other countries to help transfer technologies to assess climate risks in developing countries, and to remove barriers to the development of renewable energy. That is not growing in the way that it should be.

How have we avoided this for so long? Why has it not been a feature of the debate on climate change? One of the reasons is the lack of public scrutiny. For example, in February 2000—these are the latest figures that I could get—only four out of 12 of the leading OECD countries' export credit agencies actually published their environmental guidelines. That is transparency gone mad—if we cannot even get the figures, how can the debate advance? Of those four countries, only two routinely shared the figures, solicited public comment and reported CO2 emissions. That is the key. If we can get our export credit agency to report on its effect on global CO2 emissions, we will have taken a great step forward and so will the Government.

Environmental guidelines do not consider climate change, but I hope that the G8 countries will re-examine that in their meeting this year. I understand that there is a working party on export credits and credit guarantees. We need to institutionalise consultation and information disclosure within our export credit agencies. We need to get them to report on greenhouse gas emissions and open up their decision-making processes. That could eventually become part of common environmental guidelines.

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Adoption of export credit agency environmental guidelines that conform to international best practice for environmental assessment and evaluate potential climate impact will not be an easy task because, as we saw in the case of the Ilisu dam, these matters are very complicated. That dam might, for example, pass one threshold—it could be said to be environmentally beneficial as it is hydro-electric and a positive step forward. However, in terms of the wider social and environmental impact and of sustainable development, perhaps the dam will not be seen as so positive.

Although I recently read the report, I did not pick up on what the hon. Member for Putney pointed out about the guidelines used for the analysis of the Ilisu dam being not our own, but those of the Ex-Im bank in America. Why do we not have our own export credit agency, with sufficient guidelines for us to deal with complex matters such as the Ilisu dam? Why do we use environmental guidelines from America? Have we not done enough in this country to develop our own environmental standards for our own export credit agency? Until we do so, we are not putting our export money where our mouth is.

11.50 am

Malcolm Bruce (Gordon): I congratulate my hon. Friend the Member for Carshalton and Wallington (Tom Brake) on securing the debate. It may be esoteric and it has not packed the Chamber, but it is pretty central to our survival as a trading nation and as a planet. I appreciate the fact that the Minister has responsibility for the environment, and that the Export Credits Guarantee Department effectively comes under the auspices of the Department of Trade and Industry. Nevertheless, we must examine the ECGD's impact on the environment, and I hope that there is enough joined-up government to recognise that.

Although we welcome the fact that the ECGD's mission statement has been specifically revised to accord with the Government's objectives on sustainability, we need to monitor what the ECGD does to determine whether that makes any difference. Perhaps the mission statement should be more proactive. The agency underwrites in excess of £3 billion of business a year, and its fundamental aim remains the promotion of British trade rather than the promotion of sustainability.

The American credit agency appears to have a more proactive environmental stance, which is interesting. One only hopes that it will survive the current Administration far. President Bush is passing through the country and meeting Ministers next week. The Minister may not be able to suggest it, so we can suggest to him that it would be surprising if, at the heart of their discussions, there was not pressure to rethink the inconsistencies in American policy. If America benefits substantially from exporting sustainable trade and products, why is it not in America's interests to encourage more of that by signing up to the Kyoto protocol or some development of it? I do not have a problem with the Americans arguing that what they have been presented with is unsuitable, but we all have a problem with them walking away from the process. The British Government have a responsibility to try to persuade them to recognise the inconsistency.

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Let us think in terms of pure economics. The oil price is approximately $25 a barrel. Compared with previous cheaper prices, is it sensible for America to concentrate on increasing oil and gas production in its environmentally volatile backyard, rather than to reduce wasteful energy use, promote alternative energy and develop or strengthen its export business on the back of that? The rationale is to persuade President Bush or his advisers that they are mistaken in their analysis of American self-interest. I hope that there will be some discussion with Mr. Bush when he is here next year to persuade him in that direction.

I am grateful to the Library for a useful note that it provided to me before the debate. It contains some basic facts that are worth recording about the importance of export credit agencies to world trade, and their potential for good or evil. For instance, 8 per cent. of world trade is underwritten by export credit agencies—that is $400 billion of trade a year. Of that, $50 billion goes into infrastructure developments, many of which have been rejected by international environment agencies.

I am pleased to say that in most cases Britain has not been party to that rather disgraceful scramble. However, it underlines the need for international agreement on the operation of export credit agencies, which the OECD has been trying to achieve, to ensure that international environmental objectives are not undermined or destroyed by Government agencies. Nevertheless, it is clearly happening. The Three Gorges dam and the Ilisu dam are two classic projects that either should not have gone ahead—if the ECAs not been prepared to underwrite them, they may not have been built—or they should not have been guaranteed and underwritten in such a way.

We have some reason to be satisfied that the mission statement and the Government's review of the ECGD has moved the organisation at least to acknowledge its role in considering the sustainability of the projects that it supports. However, I suggest that it should have a more proactive role, making a detailed analysis to ascertain the extent to which the balance is shifting. Given the hot competition for trade, many of us feel that the tendency is to think first of jobs, and Britain's balance of payments. The sustainability criteria come under severe pressure when such choices have to be made.

To use a mixed metaphor, we cannot be fair-weather environmentalists. If the clear objective is to ensure that sustainability is at the heart of the policy, we cannot bury it just because times are hard, even though we may need the exports and the jobs. Principles are principles, and they have to withstand the fluctuations of the trade cycle and must not be knocked off course.

It is useful, courtesy of the Library, to see the ebb and flow of this debate. We in the Chamber are expressing our desire for environmental criteria to be central to the operation of organisations such as the ECGD, whereas businesses seeking trade complain that the parameters have been drawn in a way that could compromise potential exports. That difference can be resolved by making a clear public statement of the policy objectives. Some businesses obviously think that the objective of the ECGD is to underwrite what they regard as risky exports because it is in the British national interest to secure business that might otherwise not be secured.

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That is the simple economic case; that is why the ECGD and all other ECAs exist. Businesses must understand that we have an ethical foreign policy, and that an increasingly important environmental strategy lies at the heart of it. They must be part of it, and should not waste their time chasing business that does not meet those criteria. The EGCD can do still more to explain that.

In one or two recent newspaper articles, some business men have complained that they do not understand the rules. They feel that the rules are working against them. To be fair, the previous Minister for Trade said that he thinks that the new strategy is clear and that it will not lead to a loss of business, but there is clearly a difference of view between the Department and those businesses that are actively seeking trade. If they understood our objectives, it would save everyone a lot of time and heartache.

The United Kingdom cannot yet claim to be anywhere near the sharp end of the green revolution. Many of our continental partners are way ahead of us in several ways. The Americans seem to be far ahead of us in technology and their awareness of it, even if they remain the world's greatest polluters and reluctant to apply joined-up thinking.

We have four or five years of this Parliament in which to look to the Government to raise our environmental standards. I accord with the hon. Member for Putney (Mr. Colman) in welcoming the Minister back to his post. He knows how widely welcomed his reinstatement was among many of the organisations that deal with environmental issues, because they recognise his commitment. A Minister with his sort of commitment is extremely important for the new Department, and the appointment sends a positive signal, which I welcome. I am sure, nevertheless, that he will not mind my saying that we need to move forward.

A new super-Department, which is what I hope we have, brings the need to review all our targets. The Minister could, if that were done, relate to the Department of Trade and Industry and the ECGD in a way that would make sustainability more than something to take on board from their mission statements—it could be made a key objective for them to market proactively. It could be viewed as a development export opportunity on the back of a much invigorated environmental policy, from which British companies at the front end of environmental development could benefit. That would give us both an environmental and a business objective. The United Kingdom would be determined to secure its own place in the world in establishing improved environmental targets, and the place of its businesses in helping other countries to act accordingly. The right role for the ECGD would be providing guarantees for the countries that really needed the technology, to ensure that the business could be done.

If that is the outcome of debates such as this one, I hope that the participants will agree that my hon. Friend the Member for Carshalton and Wallington has put down a timely marker. I hope also that the Minister's reply will reveal a positive dynamic behind the policy, not just a statement of good intent.

12.2 pm

Mr. Damian Green (Ashford): I also congratulate the hon. Member for Carshalton and Wallington (Tom Brake) on securing the debate, and I thank his office for

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explaining to me what he was driving at. The title was sufficiently opaque to leave ambiguities, which his office cleared up. I was relieved to hear from his opening remarks that those ambiguities affected the Government as well, when they were deciding which Minister should respond.

I add my congratulations to the Minister for the Environment on retaining his position while moving sideways to a new Department. I am sure that he welcomes the opportunity to reply this morning, not least because, given that the issue falls neatly into two halves—the environmental issues and the performance of the Export Credits Guarantee Department—he will show himself to be better than anyone at replying on the former aspect, while happily referring all the difficult questions about the ECGD's performance to his colleagues at the Department of Trade and Industry.

Most of what I say will take the form of probing questions. Given the current excitement in my party it would clearly be foolish to propagate any detailed policy. The policy—and, even more likely, its propagator—might prove temporary. I shall concentrate on asking the Minister to clarify the many ambiguities that have been pointed out by hon. Members. Those ambiguities fall into two broad sections: first, what the ECGD's strategy should be in this important area and secondly, how practical it is to move towards the changes that hon. Members have suggested in this debate.

I start with what the strategy should be, perhaps for export credit agencies generally. The debate raises a wider point about the usefulness of Westminster Hall and where it should concentrate its fire. The hon. Member for Carshalton and Wallington said that he wished to improve standards across the export credit agencies of all OECD countries, but concentrated most of his fire on our own ECGD's performance. That was sensible, because I suspect that the extent to which debates such as this are useful is in direct proportion to how narrowly focused they are. If they explore part of the Government's performance, they can be useful, but the more they become simple, moral lectures to the world at large and to other Governments about how they should perform, the less useful they are. The more we stick to our domestic performance, the greater service we give to the Government and to Parliament's reputation.

Following my rubric, I will stick to the ECGD's performance in this part of my speech. I echo comments made by several hon. Members about the ambiguity and opaqueness of the guidelines in the environmental sector of the ECGD's performance. Its objectives put sustainable development up front, stating:

Such policies are laudable, but will the Minister address what they mean in practice? We have heard specific examples of projects that have been environmentally controversial. The very good point has been made that while local environmental impact is

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often studied carefully, there is much less assessment of wider environmental impact. Are the ECGD's current objectives effective in their own terms?

Does the Minister wish to extend the ECGD in a more proactive direction as advocated by the hon. Member for Gordon (Malcolm Bruce), who spoke for the Liberal Democrats? Should the ECGD actively seek out environmentally beneficial projects, rather than simply not supporting, as I hope is the case at present, those that are environmentally damaging? There are two separate questions on that topic for the Government to address: first, whether it is desirable for the ECGD to move in that more proactive direction and secondly, whether it is practical for it to do so.

Last year's review of the ECGD's mission and status, which has been mentioned, sought to delve into that matter. It said:

The Minister is aware, as I am, that the environmental industries in the UK sometimes feel that they are treated too much as the Cinderella sector, when in fact they are one of the growth industries of the 21st century. They feel that Britain is not punching its national weight in their field compared with other sectors. In the long term, moving the ECGD further in that direction may be beneficial. In the short term, however, it would be likely to cut out some projects that would be otherwise approved and cause damage to existing British companies that provide jobs. That would be a bad thing.

I have been unable to find some hard numbers, which would enable us to make the assessment of the balance—from contributions to the debate, it is clear that other Members have had the same problem. I will be interested to hear whether the Minister can provide those numbers. In practice, would there be an increase in exports of renewable energy projects, and in the promotion of such projects, and would that compensate, or more than compensate, for the existing projects that would presumably be excluded?

The second broad area that raises questions relates to practicality. The hon. Member for Carshalton and Wallington raised issues about energy-intensive projects. Besides anything that the Government may be doing to change the ECGD's focus, what are they doing to change the focus of exports? I was fascinated to hear the hon. Member for Putney (Mr. Colman) refer to

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clean coal technology, as based in his constituency, because one of our leading renewable energy companies told me of its despair when, during a delegation to China a few years ago—they were a mixed crew of businesses and officials—the Chinese asked, "What do you do in the renewable field?" The Chinese were clearly interested in renewable technology, but the only thing that the official element of the British delegation wanted to talk about was clean coal technology. That may be gratifying to hear for the hon. Member for Putney. No, he is shaking his head, so even he, as the constituency representative of the clean coal industry, feels that that was too narrow a focus.

Clean coal technology is better than dirty coal technology. However, if Government delegations abroad are referring only to clean coal technology, we have some way to go. The Minister also has some way to go to influence his colleagues and promote joined-up green government in this area. Perhaps he will tell us what are the limits of his ambition. Does he think that he is having an impact on his colleagues and does he think that it is right and practical to use the ECGD as a moral example to other countries? He knows that Britain's record in renewable energy is generally not the best—we are behind other European countries. Does he agree that until we show a better national performance, attempting to use the ECGD as a stick—or perhaps rather as a carrot—to give as an example to other countries will be impractical? It cannot be a battering ram that gets us through to countries, the performance of which we wish to improve.

Another specific question is where does nuclear technology fit in? The Government have announced their review, which has not come up in this debate, but it does have a wider impact. It would be helpful if the Minister clarifies whether the Government regard nuclear technology as having anything to do with this debate.

I suspect that it is not a matter of dispute in the Chamber that we want this country to have a better national performance in terms of the percentage of renewable energy that we produce. If we could create prosperous industries that, with the backing of the ECGD, could become world leaders that promote projects around the world, it would be hugely desirable as both an economic and environmental objective. I am aware that the ECGD is not the Minister's direct responsibility, but he is aware that important issues are at stake. I hope that he will use this morning to clear up some of the many ambiguities.

12.15 pm

The Minister for the Environment (Mr. Michael Meacher) : It is, of course, protocol on these occasions to congratulate the opening speaker on his or her choice of debate. I do so with real sincerity and feeling because far from regarding this matter as esoteric, which it may be to some, I regard it as essential. If we are looking for drivers to push forward sustainable development and environmental considerations in both this country and abroad, export credit agencies have some of the most important roles to play. Until recently we have underplayed the issue but that is changing dramatically.

I am grateful that the hon. Member for Carshalton and Wallington (Tom Brake) referred to the Department of Trade and Industry. I shall try to answer

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all the questions that I possibly can, but it is important that all Departments take the message on board and reflect it in their policies. This is not only a matter for my Ministry, regardless of which Department it may happen to be in. I take the view that was put forward by all hon. Members that the ECGD needs to be more proactive. I am sure that the DTI and my hon. Friend the Member for Welwyn Hatfield (Miss Johnson), who is the Minister responsible for these matters, will take that on board. I also take the point, which was made in a rather nice phrase by the hon. Member for Gordon (Malcolm Bruce), that we want to see a positive dynamic, not merely a mission statement. That is what the Government are trying to do, but it is fair that hon. Members are looking for that to be fully reflected in policy.

Export credit agencies play a significant environmental role by ensuring that the exports that they support do not make unacceptable contributions to global warming and by actively promoting the use of sustainable technology. The OECD agreement on common approaches to the environment that my hon. Friend the Member for Putney (Mr. Colman) discussed at length will be a big step towards ensuring that all ECAs take account of the environmental impacts of the projects that they support, thereby contributing to a reduction in the rate of increase in greenhouse gas emissions.

Export credit agencies' attitude to the environment has tended primarily to focus on trade promotion objectives. The hon. Member for Ashford (Mr. Green) is right to say that we shall not abandon those, but it is a question of better integration. Until the last few years, the main consideration was whether the financial risk was acceptable. Much less emphasis was given to the nature of the export, the project to which the export was destined or the impact that it may have on the environment. Thankfully, all that is changing. All OECD country ECAs now recognise the need to consider the environmental impacts of the exports that they are supporting, and they are working to promote environmental sustainability. That is demonstrated by the fact that in the past couple of years many OECD country ECAs have recruited professional environmental advisers. The majority of them now have systems in place to determine the environmental impact of the projects that they are supporting.

I am slightly surprised that no one has mentioned the Ilisu dam—

Mr. Colman : I did.

Mr. Meacher : I failed to take account of that. Of course, this provision is one of the ways in which that contentious project is being professionally and formally assessed.

Several hon. Members referred to US standards and performance, and it is certainly true that the US wants a common standard. The Export-Import Bank of the United States and domestic companies have a competitive disadvantage, in that they must meet America's own environmental test before lending can proceed. The US wants other countries to fall into line, but in that regard I rather take the view of the hon. Member for Gordon. We fully expect America to take

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account of its own interests, but it would help if it took on board that other countries want it to fall into line with our views on the Kyoto protocol. A massive internal expansion of oil and gas production is understandable, given that the lights keep on going out in California, but it must be reconciled with attitudes to the Kyoto protocol.

I accept that the Export-Import Bank of the United States has high standards, but they apply only to large projects. Only about10 per cent. of exports are supported by those standards, whereas the ECGD's environmental assessment applies to all civil exports. The ECGD can, and does, offer the same terms to renewable energy exports as the Export-Import Bank of the United States; better still, it offers them to all exporters. That is an important consideration.

Several hon. Members mentioned transparency, and my hon. Friend the Member for Putney talked about better disclosure of the environmental impact assessment in particular. An important point is that it is now ECGD policy to make publicly available what information it can—subject to issues of commercial confidentiality and ownership—and that ought to include the environmental impact assessment. The Department is looking to expand the information provided on its website, and will provide briefings on issues of public concern relating to export credit guarantees. We are trying to be transparent.

The Export Guarantees Advisory Council is now responsible for ensuring that the ECGD complies with its business principles. To reflect that broadened remit, the council's membership has recently been extended. Seven new appointments reflect expertise in small and medium-sized enterprises, corporate responsibility, the environment and sustainable development.

The hon. Members for Carshalton and Wallington, for Gordon and for Ashford—indeed, probably everyone—mentioned proactive measures. So far, I have talked about systems that the ECGD has put in place to ensure that it does not support exports that damage the environment. At the same time, it is attempting to be more proactive, particularly in its support of SMEs, including manufacturers of environmentally beneficial equipment. Several regional presentations have been made to SME audiences this year, and more are planned for the autumn.

As part of that initiative, ECGD officials have already met representatives of the Environment Industries Commission, as have I on several occasions. They made presentations at last month's environment technology 2001 exhibition. As well as making available to UK manufacturers of renewable energy equipment its normal range of assistance, the ECGD is trying to identify some targeted measures—within the scope of the OECD arrangement, it must be said—that will meet the needs of SMEs.

Several points were made about that. The hon. Member for Ceredigion (Mr. Thomas) cited several power projects that were supported by the ECGD. Let me mention four that come into that category: the Oman liquefied natural gas plant, 1997; Shandong coal-fired power station in China, 1998; Manjung power station in Malaysia, 1999; and the Ho Ping coal-fired power plant in Taiwan, 1999. The point about those projects is that they predate the introduction of the

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ECGD's environmental assessment system. Although I am not prejudging what would have happened under the new system, they would have been assessed on entirely different criteria, and I suspect that in several instances there would have been a different result.

The hon. Member for Carshalton and Wallington referred to support for the 10 per cent. renewable energy target and asked whether the ECGD could be more helpful in trying to promote it. The Government are trying to promote it most of all through the clean development mechanism of the Kyoto protocol, specifically to favour smaller-scale renewable energy projects. Many countries are seeking to exclude larger-scale hydro projects, and especially nuclear projects—a highly contentious issue to which the hon. Member for Ashford referred. In our opinion, it is all very well for the exporting countries to take a view on such matters, but we must take account also of what the developing countries want within their own territories. That is a significant factor. As those countries have been the first to tell us in the course of many negotiations—no doubt they will do so in Bonn next week—they have a right to decide what they want to take. Nevertheless, I take the point, and the ECGD is actively seeking to promote its facilities to manufacturers of environmentally sustainable equipment.

Mr. Colman : Will my right hon. Friend give way?

Mr. Meacher : I am reluctant to do so. I was about to mention my hon. Friend, who asked about preferential financing for renewable energy exports.

The OECD rules that allow a maximum of 12 years' repayment terms for conventional energy projects apply also to renewable energy projects. The OECD consensus arrangement would prevent the ECGD offering preferential rates to BP or to any other exporter of renewable energy technology. Unless the arrangement rules are changed, it has to be done in that way. The alternative that my hon. Friend proposed—refusing ECGD support for low-efficiency fossil fuel technology—would be contrary to the ECGD's current

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mission of supporting the UK economy by supporting UK exporters. That leads to the conflict that the hon. Member for Ashford mentioned. His principle of promoting the UK economy is perfectly proper, but it is a question of finding a way that can reconcile the two objectives.

Mr. Colman : Is my right hon. Friend able to comment on the signing of the OECD consensus guidelines, which will go before the Genoa summit later this month?

Mr. Meacher : My hon. Friend is telepathic, because I was about to come to that.

The change in attitude that I have been talking about can be most clearly seen in the OECD negotiations on common approaches to the environment and officially supported export credits. Over the past few years, the OECD's export credit group has been working towards an agreed system for assessing and controlling environmental impacts of the exports that all ECAs support. We are not in a position to sign anything, because the negotiations are still going on, but we hope that they will be concluded by the end of this year. That should provide a unified framework that ensures that all ECAs take proper account of environmental impacts, resettlement, other effects on vulnerable groups and cultural heritage—all of which are important in the case of the Ilisu dam—and supports exports to projects that comply with acceptable standards.

I have one minute to explain the problem that we are encountering. The United States rejected the OECD agreement because it does not commit to the use of a single set of World Bank standards that projects should adhere to and does not require, as opposed to encourage, the publication of the environmental impact assessments and standards to which my hon. Friend referred.

We sympathise with the position of the USA. We would also like the agreement strengthened but with this, as in regard to Kyoto, the USA is alone in arguing that all projects should meet the standards of the World Bank. The problem is that if one insists on that, it is more likely to provoke a negative reaction from other OECD and G8 members.

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