Page 4 - Euroil Week 46 2019

EurOil COMMENTARY EurOil
EIB to halt fossil fuel
funding after 2021
Over the coming years the EU bank will make tackling climate change its core focus
EUROPE
WHAT:
The EIB will not sign off on funding for any oil and gas projects after 2021.
WHY:
EU member states finally reached a consensus on the ban.
WHAT NEXT:
Gas investments not already listed as projects of common interest could suffer.
THE European Investment Bank will no longer fund fossil fuel investments after the end of 2021, its board decided on November 15, cutting off financing to a raft of up and coming gas projects in Europe.
The EU bank’s new lending policy, approved with “overwhelming” support, was widely antic- ipated after a joint declaration by EU finance ministers earlier this month calling for an end to oil, gas and coal funding.
“Climate is the top issue on the politi- cal agenda of our time,” EIB President Wer- ner Hoyer said in a statement. “Today it has decided to make a quantum leap in its ambi- tion. We will stop financing fossil fuels and we will launch the most ambitious climate invest- ment strategy of any public financial institu- tion anywhere.”
The EIB had intended to phase out fossil fuel funding a year earlier. Germany, one of the EIB’s biggest shareholders, had initially opposed the move but eventually came around, cancelling out the negative votes of Hungary, Poland and Romania. The decision follows a recent move by the European Commission to reduce the num- ber of gas-related projects of common interest (PCIs) – priority infrastructure investments that are eligible for fast-tracked regulation and extra EU funding, including from the EIB. The bank will notably continue with financing plans it has already approved for PCIs, however.
But other investments in the pipeline, includ- ing new gas links between EU member states and LNG import projects, could suffer. In the past such projects have received broad support from EU financiers, because of their critical role in improving the security and diversity of gas supply. The EIB alone provided EUR13.5bn in fossil fuel funding between 2013 and 2018, according to NGO Bankwatch.
“The EIB’s new financing criteria will make lending to gas projects very difficult,” Wood Mackenzie director Nicholas Browne com- mented in a research note. “In turn this would be a major strategic challenge for companies that have identified gas as the key driver of future growth.”
While environmental organisations cele- brated the bank’s decision, while expressing dis- appointment that it did not come sooner, the gas lobby was strongly critical.
The International Gas Union (IGU), which
lobbies national governments to adopt pro-gas policies, said the EIB was undermining efforts to eradicate poverty as well as other UN Sustainable Development Goals.
“Natural gas is an essential component of the global energy mix if there is any hope of meeting the Sustainable Development Goals,” the IGU said in a press release issued on November 18.
“The IGU expresses its strong opposition and concern to the EIB decision,” it continued, “as we believe that prudent policy-making should be based on effective performance objectives and guided by desired outcomes, instead of picking technologies and prematurely choosing winners and losers.”
The EIB also set a new emissions limit for energy projects eligible for financing of 250 grams of carbon dioxide for every 1 kWh of electricity they produce, compared with a previ- ous cap of 550 grams. This means that gas-fired power generation will need to employ carbon capture technology or switch to biogas to still qualify.
The bank said its focus now would be on financing clean energy innovation, energy effi- ciency and renewables. It will aime to support EUR1 trillion in investments in these areas between 2021 and 2030, gradually increasing the share of climate action-related funding to 50% of its total by 2025. It will align all its financing actvities with the Paris agreement by the end of next year.
“The European Union and its bank, the EIB, commit to mobilise investments on an unprec- edented scale to support climate action projects around the world,” EIB Vice President Emma Navarro said.™
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w w w . N E W S B A S E . c o m Week 46 21•November•2019