Banking on high-carbon maritime industry

Aside from aviation and road transportation, the EIB is also greatly contributing to the growth of the maritime industry. This blogpost, building on a section from our recent report “The ‘EU Climate Bank’ – Greenwashing or a banking revolution?”, discusses why such investments are incompatible with the bank’s commitment to align with the Paris Agreement.

The maritime industry is often omitted as a polluting transport sector, even though global shipping accounts for more than 2% of global GHG emissions. Emissions from shipping have grown by around 70% since 1990 and are expected to continue to increase between 50% and 250% between 2020 and 2050. This means that on a business-as-usual pathway, shipping emissions could account for about 18% of worldwide GHG emissions by 2050.

Shipping also emits many pollutants that are responsible for a range of health and environmental issues. Ship engines, which predominantly burn heavy fuel oil, contribute to emissions of sulphur dioxides, nitrogen oxides and particulate matter, which can have severe harmful impacts on human health and ecosystems. The Danish Centre for Energy, Environment and Health found that European ship emissions were responsible for around 50,000 premature deaths every year.

Like aviation, shipping is considered to be one of the sectors in which decarbonisation is the hardest to achieve, mostly due to the high cost of and lack of availability of low-carbon technologies, but also to the fragmented structure of the industry as well as the difficulty to control the enforcement of environmental measures.

The EIB has spent almost € 3 billion (€ 2.828 billion) in maritime investment from 2016 to 2019. Several of its investments, such as the Green Shipping Guarantee programme, have centred toward “greening” the maritime transport sector through investing in new energy-efficient vessels , hull treatment and ballast water treatment systems and alternative fuels such as LNG .

Very recently, in February 2020, the EIB signed a € 41 million loan with the municipality of Ystad (Sweden) to expand harbour facilities so that new, larger LNG vessels can access the harbour. The new EIB Vice President Thomas Östros gave the following statement: “as the climate bank of the EU, the EIB wants to provide finance to projects that seek to reduce the environmental impact of their operations, while keeping business going and stimulating sustainable growth and job creation. This project is spot on in all of those senses.”

Some of the environmental claims for these investments can however be disputed, especially with regard to LNG fuels. A report from Transport & Environment described LNG as an expensive diversion that will make it more difficult for the shipping industry to align with the Paris Agreement goals. Rolling out LNG uptake would cost Europe more than € 22 billion, with – at best – a 6% to 10% reduction of GHG emissions compared to diesel fuel, and only when considered in an optimistic methane leakage scenario.

This level of potential GHG emissions savings is also likely to be cancelled out by the expected growth of maritime trade. What is brought into question is whether an increase in global trade and cruise ship tourism can be consistent with the objectives of the Paris Agreement, both of which are often the main rationale behind the EIB’s maritime investments. The EIB for instance invested more than € 1.7 billion in port expansions since 2016 to accommodate for a future increase of shipping traffic.

Contributing to a problematic development model

These loans are often prominently tied to the EU transport corridor agenda (see our recent blogpost on infrastructure mega-corridors). Several recent investments are intended to link into China’s Belt and Road Initiative (BRI) or similar routes eastwards. The bank for example recently loaned € 140 million to support the expansion of the Port of Piraeus, Greece’s largest port now owned in large parts by the Chinese COSCO Corporation. Established as a Special Economic Zone, the Port of Piraeus operates as an international cruise centre and commercial hub. It is now the main platform in Europe for China’s maritime ambitions as part of the BRI.

The expansion of the Port of Piraeus financed by the EIB is likely to drive a massive increase in imports for Chinese goods into Europe, raising concerns on the environmental and climate impact of this investment. Another dark side concerns the precarious and exploitative labour conditions at the Port of Piraeus revealed by several media reports and studies.

Some of the recent loans to port expansions, such as the ports of Brest and Marseille (Fos-sur-Mer) in France, Di Civitavecchia in Italy and several ports in Portugal, are even counted as part of the bank’s “Climate Action”.

Fos-Sur-Mer, France’s hidden pollution haven: According to a study published in 2019, people living closest to the port are more likely to suffer from health problems, notably cumulative cancers and asthma

The case of Fos-sur-Mer, one of the largest industrial zones in Europe, is particularly telling. The EIB’s recent loan of € 50 million to the port of Marseille-Fos, which is counted at 74% under its “Climate Action”, will include the expansion and construction of new quays to make way for “big cruise ships” and accommodate multiple “large container vessels simultaneously”. Despite claims from the Port that measures will be taken to deal with air pollution, many questions and serious concerns about its environmental impact on local residents remain unanswered.

Overall, it is difficult to see how a massive increase of shipping traffic and transport of international goods that such investment is fuelling can be compatible with the EIB climate goals and a 1.5°C warming trajectory, especially when taking into account the difficulty in decarbonizing the maritime sector.