CITY HALL — The federal government on Friday settled a lawsuit in which City Hall and environmental watchdog groups accused two U.S. agencies of financing energy projects overseas without considering impacts on global warming.

The Export-Import Bank of the United States (Ex-Im) and the Overseas Private Investment Corp. (OPIC) agreed to provide a combined $500 million in financing for renewable energy projects and take into account greenhouse gas emissions associated with projects each company supports.

Environmentalists said the lawsuit set a precedent by allowing those injured by climate change to sue under the National Environmental Policy Act (NEPA), which was approved in 1970.

The lawsuit was originally filed in San Francisco federal court in 2002 by Friends of the Earth, Greenpeace and the city of Boulder, Colo. Santa Monica later joined the suit, along with California cities Arcata and Oakland, claiming that fossil fuel projects financed by loans from the Ex-Im and OPIC produced emissions equivalent to nearly eight percent of the world’s annual carbon dioxide emissions, or nearly one third of annual U.S. emissions in 2003.

Deputy City Attorney Adam Radinsky of the Consumer Protection Unit argued that Santa Monica is being disproportionately affected by climate change because it is a popular tourist destination that relies heavily on a stable environment.

Radinsky referenced studies showing sea levels rising in the Los Angeles area by as much as three inches, threatening the coastline.

“Combine higher tides with extreme weather events, and that will have a great impact on our local economy,” Radinsky said.

Oakland argued its airport next to San Francisco Bay could be damaged by sea-level rise associated with global warming, while Boulder claimed warmer temperatures could affect the snowpack it relies on for its water.

The Bush administration had argued that the "alleged impacts of global climate change are too remote and speculative" to require the environmental reviews sought by the plaintiffs. It also argued that the two agencies are exempt from NEPA.

The settlement filed Friday was reached after a federal judge rejected those arguments and ordered the parties to negotiate an agreement.

“Santa Monica has a strong commitment to protecting our environment,” Mayor Ken Genser said. “Our participation in this case and the important settlement that was achieved results from our continuing advocacy of sound environmental stewardship.”

Under the settlement, the Export-Import Bank, which provides loan guarantees and other financing for overseas projects by U.S. companies, agreed to develop a greenhouse gas policy and start considering carbon dioxide emissions when evaluating fossil fuel projects for investment.

The Overseas Private Investment Corp., which supports American investment in developing countries, agreed to set a goal of reducing by 20 percent the greenhouse gas emissions associated with projects it supports over the next 10 years.

The projects at the center of the lawsuit included a coal-fired power plant in China; a pipeline from Chad to Cameroon; and oil and natural gas projects in Russia, Mexico, Venezuela and Indonesia. Many of the projects are well under way or already completed and provided oil to the U.S.

Michelle Chan, a senior policy analyst for Friends of the Earth, said the settlement will make it easier for environmental watchdogs to keep tabs on what taxpayer money is being used for when it comes to financing projects overseas and believes this will move the country towards energy independence.

“It will force federal agencies to move away from fossil fuel projects and account for the climate impacts of their lending,” Chan said.

Phil Cogan, a spokesman for Ex-Im, said the bank has historically taken a leadership role with respect to evaluating the environmental consequences of projects supported and instituted environmental procedures in 1993. It was Ex-Im that lobbied members of the Organisation for Economic Co-Operation and Development to adopt a common approach to financing projects. Cogan also said Ex-Im has been tracking and reporting Co2 emissions since 1998.

“I think it is safe to say that we have had an interest in helping our export finance activities protect the environment for a long time and with the participation of the plaintiffs in this settlement, we expect that working with them we will be able to enhance what we’ve done in the past,” Cogan said.

The Ex-Im bank over the last 15 years has returned to the taxpayers a profit of $4 billion, Cogan said, and has a default rate of about 1 to 2 percent.

Ex-Im Bank has long supported renewable energy. Between 1994 and 2008, Ex-Im Bank financed over renewable energy 70 projects totaling over $1.4 billion in U.S. renewable energy exports, according to Ex-Im’s Web site.

In just the past year alone, Ex-Im provided Working Capital and Long-term loan guarantees and insurance to Southwest Windpower, Sunwize Technologies, Uni-Solar, and Power Engineers that supported a total export value of $100 million in renewable energy equipment and services.

kevinh@smdp.com

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