The European Investment Bank has agreed to phase out lending for all fossil fuel projects, including mainstream gas-fired power plants, the first time any major multilateral lender has curbed lending to natural gas projects because of climate change concerns.
The EU lender, which has already stopped coal lending, said it would cease funding for all unabated projects — those that emit carbon dioxide — including new gas plants, by the end of 2021.
The cut-off date was a year later than previously proposed after the EIB encountered heavy lobbying from some member states.
The new policy came at a marathon board meeting on Thursday after months of wrangling between the EU lender’s national shareholders.
The timetable for phasing out all fossil fuel support had sparked opposition from a number of the EIB’s member governments, and, despite a series of compromises, the decision met with opposition from Poland, Romania and Hungary.
Other multilateral development banks, such as the World Bank and the European Bank for Reconstruction and Development, have greatly increased their funding for climate change programmes, and stopping funding new coal power plants. However, none has gone as far as the EIB and cut lending to natural gas projects.
The EIB was last month forced to delay its new energy policy given complaints from some member states to the idea of ceasing funding for gas power plants.
Countries such as Poland, which are attempting to shift away from coal-fired power, have been arguing that they need longer to make a transition to less polluting fuels, and that gas provides a useful alternative.
Under the new regime, certain low-emission gas projects will still be possible, as long as they meet a new lower emissions performance standard of 250 grammes of Co2 per kilowatt/hour. The EIB will also finance up to 75 per cent of project cost for new projects in countries that face a particularly steep climb reducing their reliance on carbon-intensive energy sources.
The compromise also allows new pipeline projects contained in a list proposed by the European Commission to go ahead if they win approval by 2021.
Bruno Le Maire, the finance minister of France, which supported the compromise along with other large EU members including Germany, said: “It will help channel more investments towards sustainable projects to reach the Paris agreement goals. This decision confirms that the EU is living up to its climate ambitions and is leading the way at international level.”
Gas advocates point out that natural gas-fuelled power produces fewer carbon dioxide emissions and fewer harmful pollutants than coal generation. Natural gas power also pairs well with intermittent supply from wind and solar, because gas plants can be switched on and off much more quickly than coal-powered stations.
However, environmental groups are increasingly taking aim at natural gas because of the warming impacts of the methane leaks that occur during production and transportation. Methane is a potent greenhouse gas that has more than 25 times the impact of the equivalent amount of carbon dioxide, although it does not stay in the atmosphere as long.
Since 2013, the EIB has lent €13.4bn to fossil fuel infrastructure, of which more than €9bn went to natural gas pipelines and distribution networks.
The bank has been expanding its climate-related work, and has set a target that half of its lending will be related to sustainability and climate projects by 2025.
Ursula von der Leyen, incoming European Commission president, has also pointed to the EIB playing a key part in her green deal, and talked about making it a “climate bank” that can help fund the transition to a low-carbon economy.
Sébastien Godinot, economist at WWF’s European policy office, said: “All public and private banks must now follow suit and end funding of coal, oil and gas to safeguard investments and tackle the climate crisis.
“The EIB itself must not make use of the exemptions in its energy policy that allow it still to finance some gas projects. It should focus exclusively on clean power sources like wind and solar.”
Additional reporting by Mehreen Khan
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