Lawsuit Forces U.S. Financing Agencies to Account for Climate

After more than six years of litigation, the first case of its kind established important legal precedents related to global warming.

Friends of the Earth, Greenpeace and the city of Boulder, Colorado, filed the lawsuit in August 2002 and were later joined by the California cities of Arcata, Santa Monica and Oakland.

The suit alleges that Export-Import Bank of the United States and the Overseas Private Investment Corporation illegally provided over $32 billion in financing and insurance for oil fields, pipelines and coal-fired power plants over 10 years without assessing their contribution to global warming, or their impact on the U.S. environment as required under the National Environmental Policy Act.

Fossil fuel projects financed by the two agencies from 1990 to 2003 produced cumulative emissions that were equivalent to nearly eight percent of the world's annual carbon dioxide emissions, or nearly one third of annual U.S. emissions in 2003.

Under the settlement, the Export-Import Bank, the official export-credit agency of the United States, will begin taking carbon dioxide emissions into account in evaluating fossil fuel projects and create an organization-wide carbon policy.

The Overseas Private Investment Corporation will establish a goal of reducing greenhouse gas emissions associated with projects by 20 percent over the next 10 years. OPIC helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, and complements the private sector in managing risks.

Both agencies will commit to increasing financing for renewable energy.

Refinery owned and operated by Reliance Industries Ltd. in Jamnagar, Gujarat, India will be part of the worlds' largest refining complex after the $6 billion facility being built next to it is complete. Reliance Petroleum Ltd. is using a $500 million loan guarantee from the Export-Import Bank to buy U.S. equipment, technology and services. (Photo courtesy Reliance Industries Ltd.)

Oakland City Attorney John Russo said, "For far too long, American tax dollars have funded highly irresponsible and damaging fossil fuel projects in countries where environmental laws simply don't exist. These projects have not only hurt people in those countries, they have also contributed significantly to global climate change, and in doing so, pose a direct threat to the American people, the U.S. economy and the residents of Oakland."

Boulder City Manager Jane Brautigam said, "The city of Boulder is pleased with the outcome of this lawsuit. As the first city to enact a carbon tax to address climate change, the Boulder community is committed to the principles of environmental sustainability and this result will further that impact."

"This case was one of the very first climate change lawsuits and established the framework for other climate change cases," said Ron Shems, lead counsel for the plaintiff groups and cities.

In a landmark August 2005 court decision, the plaintiffs were granted legal standing to proceed with the case. A federal judge found that the U.S. cities suffering economic and other damages from climate change had standing to sue under NEPA, opening the courts for the first time to those injured by climate change.

Testimony from the case, which successfully asserted that climate change is real and caused by human activities, later informed the Mass. v EPA decision, in which the U.S. Supreme Court held that carbon dioxide and other greenhouse gases are pollutants that can be regulated under the Clean Air Act.

"The claims here are no longer considered novel," said Shems. "The settlement reached today will help ensure that the federal government takes a close look at its contributions to climate change and that the courts are available if the government fails in this critical obligation."

"This settlement is a substantial victory for our climate," said Michelle Chan, senior policy analyst, Friends of the Earth. "As President Obama said in his inaugural address, 'We can no longer consume the world's resources without regard to effect.' The settlement agreed to today is a first step toward making Obama's vision a reality for these institutions."

"When we launched this lawsuit in 2002, we were deep in the Bush global warming dark ages," said Kert Davies, research director, Greenpeace USA. "We were able to prove that climate change harms American cities and citizens and we forced these agencies to change their behavior. Now that we have entered the brighter Obama age, Greenpeace hopes that sweeping reform of global warming policy will reach every corner of the government."

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