The European Investment Bank (EIB) has chosen a strange time to backtrack on its climate commitments.
In the weeks before COP27, the bank rolled back(€) its financing limits on the world’s worst polluters - including the fossil fuel giants who caused the climate crisis. Instead, the bank has given polluters a free pass to keep receiving EIB support for energy projects.
Good COP, bad COP
By loosening the climate criteria companies have to meet to qualify for support, the EIB is undermining a policy it only launched a year ago. The EIB used COP26 in Glasgow to release its PATH Framework, yet 12 months later it took the wind out of PATH’s sails.
Companies can now increase their oil drilling or even engage in the most polluting forms of unconventional fossil fuel production - coal mines and power plants, extracting oil from tar sands, drilling in the Arctic or fracking - and still receive public money from the EIB.
PATH was not perfect. It did not require companies to have clear exit plans for oil, gas and coal. Yet, it was a step in the right direction. Making PATH weaker for energy projects (renewables, energy efficiency, grids and storage, electric-vehicle charging infrastructure and new technologies like low-carbon hydrogen) until 2027 sabotages the bank’s own intention to become a Climate Bank by 2025. If the EIB had a ‘good COP’ in Glasgow by announcing the Framework, then COP27 is the ‘bad COP’ where the strategy was quietly watered-down so the bank could work with oil and gas majors on energy projects again.
More public money, more private profits
The EIB hid its increased support for fossil fuel polluters within a decision to invest an additional €30 billion into the energy sector over the next five years as part of its support for the European Commission’s RePowerEU plan. Unfortunately, watering down its climate criteria is not the only way the bank will prop up some of the world’s most carbon intensive companies.
Previously, the EIB was willing to finance up to half of an energy project under PATH. So, if a company approached the bank asking for a loan to build a wind farm, the bank would provide a loan covering up to half of the total cost (if it agreed to support the project).
The EIB has now raised the maximum amount of finance it will provide for an energy project to 75 percent.
Of course, increased support for genuinely renewable energy and energy efficiency measures is essential for Europe to reduce carbon emissions enough to stave off catastrophic climate change.
Yet by increasing investments in polluting companies to build energy projects while simultaneously freezing the need for these companies to green their ways, the EIB is making the fossil fuel companies responsible for causing the climate crisis even richer.
Support companies truly investing in a green transition
Handing out more public money to fossil fuel companies creates a dangerous feedback loop. Rather than making polluters pay for the solutions to problems they themselves caused and continue to exacerbate, the EIB is instead helping them line their pockets even more. Polluting multinationals keep more of their profits if the EIB bankrolls renewable energy projects for them, resulting in more cash funnelled to their shareholders as dividends instead.
Fossil fuel corporations do not need to be propped up by the EIB or any other public finance institution. A recent report by Counter Balance member ReCommon estimated that the six European oil majors - BP, ENI, Shell, Total Energies, Repsol and Equinor - paid three times more in dividends to shareholders in the first half of 2022 then they planned to invest in supposedly green projects for the whole year. The International Energy Agency states fossil fuel companies worldwide will make up to €2,000 billion in excess profits in 2022 - enough to pay for a green global transition themselves.
Providing more public support for these companies is senseless. Rather than handing out cheap loans, the EIB should impose stringent conditions on companies to make sure their business activities help solve the climate crisis rather than make it worse.
There should be no room for public support for any company still engaging in new fossil fuel exploration, extraction or mining. Financing should be dependent on energy companies stopping new oil and gas development and putting their profits into truly green projects instead.
Rolling back on climate commitments before the world’s largest climate summit is strange. Yet allowing the fossil fuel industry to reward shareholders while waiting for an EIB handout for renewable energy investments is even more self-defeating. It’s time the bank brought these days to an end.