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Why The U.S. Just Invested $500 Million Into A Foreign Country’s Oil Company
The controversial Bahrain deal pits the Biden administration's foreign diplomacy needs against its climate goals, advocates say.
The United States is pumping $500 million into Bahrain’s oil and gas fields, in what analysts call an “unusual” but clearly “geopolitical” investment that pits the Biden administration’s climate goals against its need to shore up a key ally in a region where war is increasingly straining Washington’s relations.
The Export-Import Bank, the U.S. federal government’s official export credit agency, said Thursday in a press release that the financing would fund energy efficiency and solar projects in the Gulf kingdom’s existing fields, insisting the funding “is not expected to result in a meaningful increase in oil and gas production.”
But the project includes drilling 400 new oil wells and 30 new gas wells, increasing its overall emissions of planet-heating pollution to more than 1.4 million metric tons per year, according to the Ex-Im Bank’s own environmental impact analysis.
The investment, the bank’s largest in overseas oil and gas in years, fails all three litmus tests that climate campaigners say might typically help justify financing foreign production with taxpayer dollars when the U.S. is ― in the federal Energy Information Administration’s own words this week ― “pumping more crude than any other country, ever” and smashing records in gas drilling.
“Maybe it’s a really small transaction, or maybe it’s a least-developed country or maybe it’s downstream and will help provide more energy access ― those are the three main excuses we see for why countries approve an oil and gas investment like this,” said Nina Pušić, an expert on export financing at the green group Oil Change International. “None of these apply in Bahrain.”
Bahrain’s crude output is small compared to the U.S. or neighboring Saudi Arabia, with which it shares one of its main offshore oil fields. But drilling made the Persian Gulf monarchy, an island of 303 square miles, one of the world’s richest nations ― with a per-capita income higher than Spain’s, and roughly twice that of major U.S. territories like the Northern Mariana Islands and American Samoa, according to World Bank data.
Two advisers on President Joe Biden’s 18-member climate task force reportedly quit last month in protest of the administration’s support for the Bahrain deal.
“We’re shocked” the administration didn’t change course, Pušić said.
Its size alone made the deal what one researcher called an “unusual” foray into fossil fuels for the Export-Import Bank, which has in recent years made larger investments into the kinds of climate-friendly energy technologies the U.S. government says it wants to see become dominant, like solar and nuclear power.
“But I don’t think it’s any surprise,” said Gregory Brew, an oil historian and analyst at the New York-based Eurasia Group geopolitical consultancy. “It comes at a time when Bahrain is playing a kind of unique role among Arab states and in the Persian Gulf specifically.”
Along with the United Arab Emirates, Bahrain was one of the first two signatories to the U.S.-brokered Abraham Accords that in 2020 established formal diplomatic relations and trade with Israel. While Abu Dhabi has put pressure on Washington over its support for Israel’s brutal war against Hamas in Gaza, Bahrain has taken what Brew describes as a quieter approach, even as the government in Manama has allowed for rare protests in solidarity with Palestinians.
Bahrain is the only Arab state that joined the U.S. and British forces in combating the Yemen-based Houthi rebels attacking cargo ships bound for the Suez Canal.
“So a gesture like this from the United States supports ongoing positive relations with Bahrain and suggests they want to maintain that relationship going into the future,” Brew said.
“It definitely has a geopolitical element to it,” he added. “I don’t think there’s any question about that.”
Geopolitics have helped Biden fend off criticism from environmentalists on the oil and gas export boom over which the administration has presided.
When Russia invaded Ukraine in 2022 and Europeans scrambled to find alternatives to the Kremlin’s gas pipelines, U.S. fracking fields in states like Texas, New Mexico and North Dakota helped supply American allies with barges full of liquefied natural gas.
The power of international oil exporter cartels that previously wielded supply cuts as an economic cudgel against Washington ― where administrations from both parties are sensitive to voters’ concerns over the price at the pump ― is waning. In a sign of how U.S. production has changed global dynamics, last fall’s cuts to output from members of the Organization of the Petroleum Exporting Countries did little to spike oil prices.
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How China Became the World’s Leader on Renewable Energy
China has achieved stunning growth in its installed renewable capacity over the last two decades, far outpacing the rest of the world. But to end its continued dependence on fossil fuels, it must now move ahead with planned reforms to its national electricity system.
Last November, Chinese climate envoy Xie Zhenhua and U.S. climate envoy John Kerry shook hands on a pledge to triple renewable energy globally by 2030. It was hailed as a welcome revival of climate cooperation between the world’s biggest and second-biggest emitters of greenhouse gases and offered hope that the two veteran climate negotiators had found a way through a blizzard of negative diplomatic exchanges to keep alive the prospects for greater global ambition on tackling climate change.
In one key sector essential to that ambition, however, the Chinese government can argue, with some justification, that it is China, not the United States, that is in the lead. In a world in which national climate targets are being missed, the speed and scale of expansion in China’s installed renewable capacity is unmatched.
In 2020, for example, China pledged to reach 1,200 gigawatts of renewables capacity by 2030, more than double its capacity at that time. At its present pace, it will meet that target by 2025, and could boast as much as 1,000 gigawatts of solar power alone by the end of 2026, an achievement that would make a substantial contribution to the 11,000 gigawatts of installed renewable capacity that the world needs to meet the 2030 targets of the Paris Agreement. Fossil fuels now make up less than half of China’s total installed generation capacity, a dramatic reduction from a decade ago when fossil fuels accounted for two-thirds of its power capacity.
When the International Energy Authority issued its assessment of the pledge to triple renewables globally by 2030, it pointed out that the 50 percent increase in global renewable installations in 2023 was largely driven by China. In 2022, China installed roughly as much solar photovoltaic capacity as the rest of the world combined, then went on in 2023 to double new solar installations, increase new wind capacity by 66 percent, and almost quadruple additions of energy storage.
For the past two decades, China has been notorious as the world’s biggest emitter of greenhouse gases, a country that also uses as much heavily polluting coal as the rest of the world combined. How did it also become the world’s renewable powerhouse?
Part of the answer goes back to investment decisions made in the mid-2000s when China’s decades-long phase of rapid GDP growth was coming to an end. Labor costs were rising, and China’s development model, with its overwhelming dependence on coal, had plunged China into multiple crises of air, soil, and water pollution. In the first decade of this century, China’s emissions more than doubled, and by 2006 it had overtaken the U.S. to earn the unwelcome title of the world’s biggest emitter of greenhouse gases by volume.
China’s leadership was alert to the negative diplomatic impacts of being the world’s worst polluter, especially in those countries most vulnerable to climate impacts. At the same time, China’s own exposure to climate change effects, on top of its escalating pollution crisis and the public unrest it was generating, was becoming a significant topic in Beijing’s top-level policy discussions. China’s planners were looking for investments that would create an opportunity for a more advanced technological future, and this coincided with the need to clean up China’s environment and the global effort to cut emissions. All this pointed to supporting the development of the renewable technologies the world would need if it was to avoid climate catastrophe.
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‘We don’t know where the money is going’: the ‘carbon cowboys’ making millions from credit schemes
In the districts surrounding Lake Kariba in Zimbabwe, most people have little idea their villages were at the centre of a multimillion-dollar carbon boom. Punctuated by straw-thatched mud houses, the Miombo woodlands on the edge of the enormous artificial lake are mostly home to smallholder farmers. The gravel roads are full of potholes; cars are infrequent, as are medical facilities and internet connections. Data on the region is patchy, but Hurungwe district, that covers a number of the villages has an average poverty rate of 88%.
These communities fall within the vast, lucrative Kariba conservation project, encompassing an area almost the size of Puerto Rico. It is among the largest in a portfolio of forest offsetting schemes approved by Verra, the world’s largest certifier. Since 2011, this project alone has generated revenue of more than €100m (£85m) from selling carbon credits equivalent to Kenya’s 2022 national emissions to western companies, according to now-deleted figures published by the project developer. Proponents say these schemes are a quick way of transferring billions of dollars of climate and biodiversity finance to the developing world through company net zero pledges.
More than a decade on from the project’s inception, however, many local people say the projects and infrastructure they anticipated never emerged. Only a fraction of the €100m has been distributed to the villages within the project.
‘We are not seeing money trickle down’
“Surely a reward must come,” says Rogers Kavura, a 46-year-old who lives in Chikova village in Hurungwe district. He became a forest ranger with the local council, funded by the offsetting project.
“We hear reports that the company has been making lots of money, but we do not know where this money is going. The community is complaining because they are not seeing money trickle down,” Kavura says.
South Pole, the carbon scheme’s broker and technical lead, walked away from the Kariba scheme in October saying it was determined to learn from its experience on the project. The changes followed exposés by Follow the Money, Die Zeit and the New Yorker, which raised concerns about its financial transparency and undisclosed trophy-hunting activity in the project area. The confusion leaves Kariba’s villages and forests with an uncertain future. And after a year of controversies, the wider carbon market is in crisis – with some experts concerned other schemes around the world could be abandoned amid evidence that many projects are producing huge numbers of worthless credits that many believe do not mitigate global heating.
Under this kind of carbon offsetting scheme, communities are meant to be rewarded – via cash or investment in local infrastructure – for keeping trees standing. In reality, however, there are no legal or contractual obligations for companies selling offsets to share revenues, which are often kept secret by project developers.
Much of the €100m revenue generated by Kariba has been carved off along the way by the project developers in fees and expenses: €86m went into costs and profits assigned to the broker and technical lead South Pole and to the project coordinator Carbon Green Investments. In the end, only a maximum of €14m went to Kariba’s communities through cash transfers and infrastructure improvements.
The Guardian reviewed project documents, approached district council officials, contacted Verra, South Pole and Steve Wentzel, the Zimbabwean entrepreneur who owns land for the Kariba project and owns Carbon Green Investments, the company responsible for distributing the funds; and sent a reporter to Kariba to interview people and look for evidence of projects. While there was evidence some funds had been distributed to communities in the area, we found that only a fraction of the project’s revenue reached ground level.
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Nearly 130,000 children exposed to lead-tainted drinking water in Chicago
Study says the 19% of kids using unfiltered tap water have about twice as much lead in their blood as they would otherwise
About 129,000 Chicago children under the age of six are exposed to poisonous lead in their household drinking water because of lead pipes, according to a study published on Monday.
The study used artificial intelligence to analyse 38,000 home water tests conducted for the city of Chicago, along with neighborhood demographics, state blood samples and numerous other factors.
It found that Black and Latino residents are more likely to have lead-contaminated water because of lead pipes. And it estimated that the 19% of Chicago children who use unfiltered tap water as their primary drinking source have about twice as much lead in their blood as they would otherwise.
“These findings indicate that childhood lead exposure is widespread in Chicago, and racial inequities are present in both testing rates and exposure levels,” said the study, published by the Johns Hopkins Bloomberg School of Health in Jama Pediatrics. “We estimated that more than two-thirds of children are exposed to lead-contaminated drinking water.”
The federal government has said that there is no safe level of lead in drinking water. Studies have shown that even small amounts of the highly poisonous metal can affect childhood brain development and contribute to preterm births, heart problems and kidney disease. Yet Chicago still has 400,000 homes served by potentially water-contaminating lead service lines – more than any other US city.
“I think residents have reason to be concerned,” said public health professor Benjamin Huynh, who authored the study with Elizabeth Chin and Mathew Kiang. “I think this should be a call to get your water tested for lead, see what the results are, then make your decisions accordingly.”
Huynh said the idea to conduct the research came after seeing the Guardian’s analysis of 24,000 city water tests, which found one-third of home water tests had more lead than the federal limit for bottled drinking water, which is 5 parts per billion (ppb).
The Johns Hopkins study used a more stringent measure, and flagged as concerning any home tests that detected more than 1ppb. Huynh said this was based on the fact that no level of lead consumption is considered safe and lead service lines can often create spikes in lead levels that go undetected, especially after they are disturbed by nearby construction. Similarly, the American Academy of Pediatrics has called for state and local governments to limit the lead in school drinking fountains to no more than 1ppb.
The US Environmental Protection Agency (EPA) has a municipal “action level” of 15ppb, meaning that cities are only required to notify the public when at least 10% of a small sample of homes tested are above that amount.
By this measure, Chicago is in compliance.
“Nothing is more important than the health and safety of Chicago’s residents and, particularly, our children,” city spokesperson Megan Vidis said in an emailed statement. “Chicago’s water continues to meet and exceed all standards set by the US Environmental Protection Agency.”
She said that “the city has introduced five programs to remove Chicago’s 400,000 lead service lines and offers free water testing to any resident”.
While the EPA is proposing to require most cities around the nation to remove all lead service lines within 10 years, it is giving Chicago 40 years to do so because of the large number of unreplaced pipes in the city.
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