Published on 26 November 2019

SUSTAINABLE FINANCE

The European Investment Bank makes a historic decision to stop fossil fuel financing

This month, the European Investment Bank (EIB) announced that it will stop funding new projects related to fossil fuels, including gas, from 2022 onwards. This decision has been hailed for its contribution to the fight against climate change.

Banque européenne d'investissement @EIB
The European Investment Bank (EIB) has just announced that it will cease financing fossil fuels. This was the first "historic" step towards its transformation as a climate bank.
@IEB

This has been a "historic" decision for French Minister of the Economy and Finance, Bruno Le Maire, and "a giant leap" for EIB President Werner Hoyer. "We will stop funding fossil fuels and we will launch the most ambitious climate investment strategy for all public financial institutions in the world," said Hoyer during the announcement. The EIB had advocated for ending investment in projects linked to fossil fuels, including gas, as early as July. However, lengthy discussions amongst members or the board of directors, including representatives of the Member States and the European Commission, prolonged the process. But now, it’s finally been accomplished.

Conventional gas at the center of debate

Discussion was indeed "long," acknowledged EIB Vice President Andrew McDowell. Several NGOs have denounced hesitation surrounding the inclusion of projects related to gas, which is the least CO2 emitting fossil fuel. Nevertheless, the European Commission supported the EIB's new policy and was pleased with a "ttransitional arrangement for phasing out gas projects, including vital projects for gas interconnection and storage, so-called projects of common interest".

At the end of 2021, the EIB will introduce a "performance" standard which will mandate an emissions threshold of 250 grams of carbon dioxide per kilowatt hour. All future projects will have to comply with this standard to be approved. However, such a threshold closes the door for conventional gas projects according to the EIB. For example, only the use of "green" gases or advanced carbon storage technologies would meet this criterion, according to EIB. On the other hand, organizations like the WWF deem the threshold to be "too high" considering gas power plants remain eligible for approval under these standards.

The Climate Bank

In addition to the historic announcement on fossil fuels, the EIB hopes to "unlock" up to €1 trillion for investment in climate and sustainable development projects over the next decade. According to McDowell, every other euro invested by the EIB by 2025 will be dedicated to environmental projects.

These announcements appear to be the first steps toward the climate bank that future president of the European Commission, Ursula von der Leyen, has called for. These actions are in alignment with the EIB's investment policy and with the commitments made at the signing of the Paris Agreement on Greenhouse Gas Emissions Reductions. "This decision confirms that the EU is endowed with financial means to match its climatic ambitions and must create a global dynamic," said Bruno Le Maire, recalling the support of President Emmanuel Macron at the moult of the EIB. France is even "ready to increase its stake in capital to serve this ambition," he added in an interview to Les Echos newspaper.

Towards a new standard?

The decision was hailed by several NGOs, even if it is has been considered too "late" in the face of today’s climate issues. "Today's decision is an important victory for the climate movement, and the world's biggest public bank has responded to public pressure and recognized that funding for all fossil fuels must stop," said Colin Roche of Friends of the Earth, as he called on other private and public banks to take note. For French financial actors, this is far from being the case for coal, according to a report released on November 14, 2019 from the French chapter of Friends of the Earth.

"It is also a clear call for all EU funds to follow suit and exclude all activities that make climate change more difficult for funding opportunities," added Markus Trilling of Climate Action Network.

According to Greenpeace and WWF, 19 Member States supported the new policy, including France and Germany. The lack of flexibility on gas disgruntled several countries that ultimately abstained or voted against the policy. According to these organizations, Austria and Luxembourg abstained from the new policy to protest against the inclusion of nuclear power.

Béatrice Héraud with AFP


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