EIB Drops Fossil Fuel Funding (Update)
(Adds comment from Eurogas)
The European Investment Bank (EIB) has pledged to stop all funding for fossil fuel projects by 2021, depriving the sector of €2 ($2.2)bn in annual financing.
The EU bank’s board of directors approved the move on November 14, which was widely anticipated after EU finance ministers unanimously called on the EIB and other international lending institutions to phase out oil, gas and coal funding. Previously the bank had promised to end fossil fuel financing in 2020.
Since 2013, the EIB has funded €13.4bn of fossil fuel projects, the majority of which have been gas-based. Gas is seen as a cleaner alternative to other fossils that can help some member states reduce their carbon footprint.
The EU bank has been Europe’s climate bank for many years. Today it has decided to make a quantum leap in its ambition,” EIB President Werner Hoyer said in a statement. “We will stop financing fossil fuels and we will launch the most ambitious climate investment strategy of any public financial institution anywhere.”
The EIB halted funding for coal and lignite power generation back in 2013. Under the new regime, energy projects will now have to show they can emit less than 250 grams of carbon dioxide for every 1 kWh of power produced, compared with the previous 550-gram limit. This rules out conventional gas-burning power plants.
“The EIB’s new financing criteria will make lending to gas projects very difficult,” Wood Mackenzie research director Nicholas Browne said in a research note. “It highlights that gas is also increasingly in the spotlight of the climate debate.”
The Edinburgh-based consultancy warned that there could be a higher risk “that the popular and political tide turns on natural gas like it already has on coal in most country,” potentially weighing down on demand growth.
“In turn, this would be a major strategic challenge for companies that have identified gas as the key driver of future growth,” it said.
Utility lobby group Eurogas said the "new rules will support the deployment of carbon capture and storage (CCS), power-to-gas, hydrogen and biogas. Investments in the gas infrastructure will deliver these technologies that all support the achievement of the 2050 carbon neutrality target. The bank has also identified the need to complete the gas infrastructure with many Projects of Common Interest focusing on natural gas eligible for financing. Importantly the bank will continue to support projects to deploy small gas boilers, which help to improve air quality and reduce greenhouse gas emissions in areas still using solid fuels or oil for heating."
It also repeated its call for EU-wide binding targets for renewable and decarbonised gas, "such as countries like France have done with a 10% target for renewable gas by 2030. This is now a time for action and delivery."