The European Investment Bank (EIB) has announced its plan to become the 'EU Climate Bank' with big fanfare at the end of 2019. The turning point was the approval of a new energy policy phasing out support to fossil fuels and the commitment that all EIB operations would be aligned with the objectives of the Paris Agreement by the end of 2020.
This step was historic. However, it is now high time for the EIB to deliver on its commitments. It is not yet the 'EU Climate Bank'.
Indeed, the EIB is still heavily supporting projects at odds with its climate commitments. During the period 2016-2019, the EIB financed high-carbon operations worth € 28.7 billion in the energy and transport sectors only.
The transport sector is a case in point: as revealed in a report published today by Counter Balance, the EIB provided more than €4 billion in loans for the expansion of airports, €10.65 billion to construct or expand roads, highways and motorways, and €2.83 billion in investments for the maritime sector, including for ships fuelled with fossil gas.
In the energy sector, despite the planned ban on fossil fuels, some loopholes remain in the EIB energy policy which still allows the bank to continue supporting nuclear energy and fossil fuel infrastructures. For example, in mid-June, the bank approved loans for two new gas projects: a controversial gas terminal in Cyprus and a pipeline between Bulgaria and Serbia.
There is a real risk that the EIB will make investments seem compatible with climate goals while the reality is a stark difference. Over 30 NGOs stood on their hind legs when they discovered that, as part of the Climate Roadmap that the EIB is currently preparing to achieve its climate commitments, the bank was still considering major investments in airports and motorways. Investments like these are the textbook definition of projects that a climate bank should stop supporting.
A VERBAL SMOKESCREEN
What the EIB labels as 'climate action' too often includes unsustainable projects. By using terms shaped by the industry like 'green and low carbon gas' or 'green aviation' the bank is effectively pulling up a smokescreen and risks supporting business as usual instead of the future of European citizens. Why? Because the reality is simple, this vocabulary is specifically designed by the gas and aviation industry to pull the wool over our eyes and greenwash their business.
Among the areas where the EIB risks supporting greenwashing practices, 'green and low carbon gas' shows up. But this is all based on a false promise, as the potential for truly sustainable renewable gas production in the EU is only a fraction of what industry claims is possible and will never be enough to substitute current fossil gas use. Focusing on this niche area for the future of the European energy system is not a credible solution in the long-term. It rather creates a diversion to most urgent needs around financing energy efficiency, the renovation of buildings and the development of renewable energy across Europe and beyond.
The concept of 'green aviation' is another myth that risks enabling further public investments to the aviation industry on the vague promise that it might become sustainable in the future. While some improvements might be possible, the options proposed for decarbonising the sector - like offsetting emissions or alternative fuels - thus far imply several problematic consequences and distract us from addressing the root of the problem, which is the growth of the aviation sector.
That is the real elephant in the room. It is unfair to the truth and it is unfair to the health and future of European citizens to bet our climate’s future on these uncertainties.
A CLIMATE BLACKBOX
Transparency is another crippling issue for the EIB when it comes to tackling the climate crisis.
Alongside direct financing of projects, the EIB works through so-called 'financial intermediaries'. The use of these intermediaries has skyrocketed in the past 20 years and now represents a third of the banks’ activities. These intermediaries are other public or commercial banks and investment funds that make use of EIB’s support to finance smaller projects and companies.
The end result? It is nigh impossible to see where the money goes and there is a threat it ends up supporting climaticide activities and as a blank cheque for polluters.
Introducing clear requirements for all EIB clients to adopt credible decarbonisation plans if they are to access public funds, and to report in a transparent manner on all direct or indirect operations supported by the EIB, are necessary steps.
TIME TO BECOME A REAL CLIMATE LEADER
If the EIB is to really become the 'EU Climate Bank', it needs to take concrete action very soon. Adopting an ambitious Climate Roadmap by the end of 2020 to set its long-term trajectory is a prerequisite in this regard. It’s time for the EIB to walk the talk and become a real climate leader.
This transformation into the 'EU Climate Bank' is all the more important considering the flagship role the EIB will play as part of the EU economic recovery package in response to the COVID-19 crisis, and its pivotal role in financing the future European Green Deal. By taking the right decisions in the coming months, the EIB can set a precedent among the banking industry and demonstrate that a green recovery and investments in a just transition are the way forward for EU public finance.