Illustration: Sarah Grillo/Axios
A wonky budget problem is holding back international funding for countering China's control over the energy transition.
Why it matters: Addressing the issue would help the U.S. challenge China's Belt and Road Initiative, its sprawling overseas investment strategy that helped it lock up minerals worldwide.
Driving the news: Sen. Chris Coons told Axios he is privately pushing OMB to help the Development Finance Corporation, a U.S.-backed investment vehicle that puts equity — e.g. investment stakes — into early-stage energy, resource and infrastructure projects around the world.
- During a winding walk-and-talk, Coons outlined how a budget scoring problem has handcuffed the DFC because OMB automatically considers all of the corporation's investments to be a total loss to the government.
- The DFC is key to President Biden's global climate engagements, including countering China's power. The agency is involved in international renewables investments and linked to the Mineral Security Partnership, its transition mineral "friend-shoring" effort.
- "As China's economy is slowing," Coons said, "we have a critical window of opportunity to make a difference."
How it works: Coons shepherded the creation of the DFC in 2018 under former President Trump, whose administration then began investing in early minerals projects.
- The Biden administration has used the agency in a similar way, putting money into projects like a railroad in mineral-dense African nations and renewables projects in Egypt and India.
- But government data suggests the DFC spends less than is authorized in its budget.
- That's because — unlike other U.S. credit programs — the government's budgetary ledger doesn't consider anticipated returns from DFC equity investments.
The intrigue: The Delaware senator described this as OMB seeing the agency's investments as automatic losses when "we all know that's not true."
- "If you invest $100 million in 50 different ventures, you might not get every dime back, and you might not get every dollar back that you invested, but you'd have to be incompetent to get nothing."
- There's bipartisan support to make this change happen. Coons and Sen. John Cornyn put out a bill that would mandate this fix to the budget wrinkle, but it's not made headway in our mercurial Congress.
- Coons is pushing for OMB to find a workaround, a Senate Democratic aide told Jael. The effort involves the DFC, the African Development Bank and the Development Bank of Japan.
- "This little scoring is holding up the potential to leverage billions to really compete with [China] around the world," the aide said.
The other side: The administration supports this kind of "budgetary treatment," but it "requires a change in the law," OMB spokesperson Timothy White said.
