Climate Justice • 30 Jul 2020
The EIB fossil fuels ban: The proof is in the Pudding
This blogpost builds on our recent report “The ‘EU Climate Bank’ – Greenwashing or a banking revolution?” to expose the loopholes of the new energy policy and the many gas projects that continue to be approved by the European Investment Bank (EIB). As last week’s blogpost has similarly shown, the risk that the EIB will continue to finance fossil fuels through the back door is very well present.
As part of its aspiration to become the “EU Climate Bank”, the EIB recently made considerable progress by adopting a new energy policy ruling out most fossil fuels support by 2021. The policy however still contains three important exceptions that could undermine its objectives:
Firstly, it still allows the EIB to approve projects from the 4th list of the so-called ‘Projects of Common Interest’ (PCIs) until the end of 2021. This list has been heavily shaped by fossil gas lobbies and contains over 50 new fossil gas projects (the list says 32 but many of those are actually projects bundled together). Many of these projects have already been signed and more are currently under appraisal.
Secondly, it still enables the financing of new highly-polluting fossil gas infrastructure, on the basis of a vague promise that it will one day transport ‘cleaner’ gas. This is problematic because both the benefit for the climate and the economic potential of these low carbon gases are uncertain. There is also no accepted definition or set of criteria to identify what gas is considered low-carbon and what isn’t and considerable risks remain in the use of many of these gases, for instance from methane leakage and the high level of energy required in their production. This could allow financing for new, highly-polluting fossil gas infrastructure, based on promises of operational carbon capture and storage (CCS) and low carbon fuels in the future – promises that may never materialise. See our previous blogpost on green and renewable gas here.
Finally, the policy still allows financing for power generation projects that emit fewer than 250 grams of CO2 per Kilowatt-hour (gCO2/kWh) over their economic lifetime. This threshold is extremely high and risks allowing gas projects to receive EIB loans. It is essentially an open door to support conventional fossil gas plants and plants accompanied by CCS under the promise of incorporating renewable or green gases in the future.
Over the last few months, the EIB has already been making extensive use of these loopholes. Just a month after the adoption of its new energy policy, the EIB for instance signed a €234 million loan for the construction of the Gustorzyn-Wronów pipeline in Poland and the Polish section of the Poland-Slovakia interconnector. And more of these loans keep moving forward.
In Mid-June, the bank approved loans for a pipeline between Bulgaria and Serbia, as well as a controversial gas terminal in Cyprus. Financing such polluting projects completely misses the opportunity to increase renewable energy and work towards national and international climate goals. It is difficult to understand why fossil gas is being prioritised in a country like Cyprus when it is very far from meeting its renewable energy targets despite high levels of sunshine.
Even more recently, the EIB signed a €25 million loan for the construction of the Greek section of a 55km-long gas pipeline linking Greece and North Macedonia as well as a €125 million loan for a new gas-fired combined cycle power plant in central Greece. The latter is another emblematic example of how projects that are no longer eligible under the new policy still manage to make way. Indeed, the emission standard of the power plant is estimated at 321 gCO2/kWh, which the EIB justified as being below the threshold in force when the project entered the EIB’s appraisal process – so before the 250 gCO2/kWh threshold was approved.
The use of these loopholes is deeply worrying as adding any new gas projects risks locking us into this damaging fossil fuel for decades to come. Given the long-term tenor of EIB loans – typically 15 to 20 years – the bank will be keeping such harmful projects on its balance sheet until 2040.
If the EIB is serious about becoming the “EU Climate Bank” and aligning its operations with the Paris Agreement by the end of 2020, it will need to implement its new energy policy in a much more stringent manner and stop making use of these loopholes to finance any more highly-polluting fossil fuel infrastructure before the ban enters into force.