The world’s largest development bank is mulling a ban on financing fossil fuel projects, inside a move hailed by climate campaigners.
European Investment Bank (EIB) revealed the strategic shift in a draft on energy lending policy on Friday.
If adopted by EU finance ministers on 10 September, the policy will pull the plug on finance for infrastructure focused on coal, oil and gas after 2023. Instead, it'll pivot to wash energy projects.
“This is the result of many months of labor also it's a reflection from the views we've been told by countless stakeholders across Europe in regards to what the priorities from the European Bank ought to be when it comes to supporting energy later on,” said vice president Andrew McDowell in a video statement.
“The primary proposals are evident: you want to increase our support for that energy transition in Europe, the decarbonization of the European economy. We want to support more energy efficiency and savings projects, you want to help further decarbonize energy supply, through more support for renewable energy. You want to support energy innovation, technology that'll be necessary in the future to meet ambitious climate and energy commitments. And we need to support more the energy infrastructures of the future, specially the electrification from the European economy.”
The draft proposes some exemptions including production of biofuels and high-efficiency gas-fired combined heat and power plants.
Environmental organisations, which have been with this type of shift for a long time, erupted over the news.
“This is a crack of sunshine in the darkness,” Colin Roche, fossil free campaigner at Friends of the world Europe said. “While the EU and national governments are floundering as the planet burns, the EU's public bank makes the brave, correct and merely proposal to prevent funding fossil fuel projects. We're now urging the ecu Investment Bank's board to endorse this step forward, and ensure there are no loopholes for fossil fuel funding.”
The policy is one thing the EU could present in the climate action summit convened by UN chief Antonio Guterres in Ny on 23 September.
“Saying their bank is aligning its energy lending with Paris [Agreement] by ruling out fossil-fuel funding, is pretty significant,” Lisa Fischer, an insurance policy advisor at think-tank E3G, told Climate Home News. “It will set the conventional for other people to follow.”
The initiative would also “put a lot of pressure around the Eu to align its infrastructure priorities,” Fischer said.
The proposed ban on funding natural gas may meet resistance, Fischer said. Having committed to end coal power by 2038, Germany is eyeing gas like a bridge fuel.
“We all know that there’s a disagreement between ministries in Germany, so that the environment ministry [wants] to exclude fossil fuels, but they’re not actually holding the pen,” Fischer said. “It’s the economy ministry that's writing the positioning and sending the finance ministry that will relay it.”
Meanwhile, Romania hasn't abandoned the dream of extracting gas within the Black Sea, despite a spate of latest regulation making that task harder. Another country full of gas, Bulgaria, could also lobby from the proposal.
Championed by French economist Pierre Larrouturou and top climate scientist Jean Jouzel, the idea of an EU bank for climate investments has piled pressure on the EU’s lending arm previously months. A lot more than 600 political figures backed the initiative, with French president Emmanuel Macron, Spanish president Pedro Sanchez and the pope ranking among its most influential supporters.
“It's place a large amount of tension around the EIB that wasn't there beforehand,” Fischer said. “The EIB came out saying: 'Hang on, we are the climate bank!' I think that elevated the bar after which it was about translating what that means.”
Last year EUR16.2 billion euros, or 30% from the EIB’s lending, went towards climate action.
