At a regular meeting of its board last week, Ex-Im refused to provide guarantees worth up to $600 million to support the export of coal-mining equipment made by US firm Bucyrus, to be used in the $450 billion Sasan Power Project, developed by Reliance Power in India. The project includes a coal mine and a coal-fired power plant with a capacity of nearly 4,000MW and annual emissions of 26.4 million tonnes of carbon dioxide equivalent.

However, Fred Hochberg, president and chairman of the export-credit agency, has written to Reliance chairman Anil Ambani proposing that the firm re-submit the project, to “take into account Reliance’s expressed commitment to invest in the renewable energy sector”.

“It’s an astounding development,” said Doug Norlen of the NGO Pacific Environment. “It’s apparent that the Ex-Im board of directors caved in and will allow a project to go forward that is damaging to the climate. [The project developers’] pledge to possibly consider a renewable project in the future doesn’t detract from the damage this project will do.”

While Reliance was not immediately available for comment, the letter seen by Environmental Finance states that Ex-Im Bank “is willing to enter into a memorandum of understanding [MOU] to encourage Reliance’s purchase of US renewable energy technology. This MOU would relate to the construction of renewable energy power plants, producing at least 250MW of power, which are expected to produce no carbon emissions.”

Hochberg said that the agency “is prepared to consider this proposal in light of the new information and Reliance’s ongoing commitment to renewable energy. I look forward to working with you on these projects with the intent to finance the sale of Bucyrus-made mining equipment and support US jobs.”

Hochberg said in a statement: “The Export-Import Bank works to strike a balance between its twin Congressional mandates of supporting US jobs through exports and contemplating the environmental impact of the projects it supports. These goals are not mutually exclusive, and Reliance’s commitment to work with the bank is an important step in the right direction for both the environment and US workers.”

Ex-Im’s three-person Board last week voted two to one against providing support to the project, the first time the agency had rejected a project on grounds relating to climate change.

Reliance Power said work is still going ahead on the 3,960MW project near Sasan village in the Madhya Pradesh province of India. The project is already under construction and completion is expected in December 2013.

This follows on from a statement by the US Treasury in April, saying it abstained from a World Bank vote on supporting another controversial coal project in South Africa, because of concerns about the climate impact of the Eskom project.

Attention has also stepped up relating to the greenhouse gas emissions associated with projects backed by Ex-Im and the Overseas Private Investment Corporation, the two government agencies offering financial backing to US exporters.

NGOs reacted with scepticism to Ex-Im’s detailed carbon policy, released in March, suggesting that the plan could pave the way for the export credit agency to begin financing coal.

Jess McCabe