By Isabella Kaminski
One of the world’s biggest lenders has said it will stop financing most fossil fuel projects by the end of 2021 to bring its business in line with the Paris Agreement.
The European Investment Bank (EIB) agreed on an ambitious new energy lending policy Thursday after a long day of negotiations among its shareholders.
Under the new policy, new energy projects applying for EIB funding will need to show they can produce one kilowatt hour of energy while emitting less than 250 grams of CO2.
Oil and gas production and traditional fossil fuel-based heating infrastructure would effectively be excluded, although projects would still be considered that use carbon capture and storage, combined heat and power generation, or those that mix renewable gases with fossil gas.
ClientEarth lawyer Peter Barnett described the decision as a “major step in the flight of capital from fossil fuels.” Since 2013, the bank has loaned around $14.8 billion to fossil fuel projects, mainly gas.
“The EIB has set the standard for banks worldwide with this move—and clearly signalled that oil, gas and coal lending is inconsistent with the Paris Agreement goals,” Barnett said.
The EIB had considered an even stronger policy. The original draft, which had aimed to stop funding fossil fuels a year earlier, was watered down following lobbying from some EU member states, particularly Germany. The bank will continue to approve projects already under appraisal as well as gas projects on the EU’s Projects of Common Interest list.
However, the bank’s new climate investment strategy does promise that all its financing activities will be ‘aligned’ with the principles and goals of the Paris Agreement by the end of 2020.
The bank acknowledged that fossil fuels would continue to play a role within the global energy system up to 2030 and that switching from oil or coal to natural gas may reduce greenhouse gas emissions in the short term. But, it said,: “These investments are very likely to take place even without EIB financing.”
EIB Vice President Emma Navarro, who is in charge of climate action and environment, said in a statement that the decision sent an important signal to the world just weeks before the latest United Nations climate conference in Madrid.
Before the November meeting, ClientEarth had warned that a decision to continue funding natural gas projects would constitute a “clear breach” of the EIB’s legal duties since the EU is a Paris Agreement signatory. It had urged the bank to institute a tougher 100g of CO2 per kWh emission standard.
Barnett said he expected gas projects considered before the 2021 cut-off to undergo tough scrutiny and ClientEarth, which already has ongoing legal action against the EIB over its biomass lending, would consider litigation if this does not happen.
ClientEarth had also written to several German ministries, reminding them of their legal position, and said pushing to keep gas lending in the EIB’s policy would breach Germany’s legal obligations as well. A climate-related lawsuit against the German government by three farming families and Greenpeace Germany was recently dismissed.
Under the banner of the Fossil Free EIB campaign, more than 60 organizations including Greenpeace, Friends of the Earth, Christian Aid and Climate Action Network (CAN) Europe had also called on the EIB to press ahead with its more ambitious original plan.
Markus Trilling, finance and subsidies policy coordinator for CAN Europe, said the EIB had taken the first step to become the EU’s ‘climate bank’ as promised by the European Commission’s president elect Ursula von der Leyen. “This is also a clear call for all EU funds to follow suit and rule out all activities that worsen climate change from funding possibilities,” he said.