The European Investment Bank (EIB), the world’s largest multilateral lender, said in mid-November that it will cease financing fossil fuel energy projects from the end of 2021 under its new climate strategy and energy lending policy. It will also align all financing activities with the goals of the Paris accord on climate change by the end of 2020, and will aim to support 1 trillion euros (US$1.1 trillion) of investments in climate action and environmental sustainability by 2030.
How big a deal is this? In the statement announcing the move, EIB President Werner Hoyer describes it as “the most ambitious climate investment strategy of any public financial institution anywhere”.
It’s also a big hit on the international liquefied natural gas industry. According to a Reuters report, there are $200 billion of LNG projects worldwide slated to go ahead over the next five years as a touted cleaner alternative to coal and oil. But the EIB obviously doesn’t consider gas a real alternative. The report says the EIB’s move would make financing of LNG projects very difficult, unless they adopt carbon capture technologies or other novel approaches to diminish their global warming impact.
The 2021 target was determined after lobbying by some laggard EU member governments, otherwise it would have been end-2020.
The EIB’s shareholders are the European Union member states. Its action is a signal of their approval, and the way their own policies are heading. EU finance ministers had already unanimously backed the end of funding for hydrocarbon projects, including gas, a week before the EIB’s announcement.
Will this encourage similar moves elsewhere? The EIB statement includes a commitment to “support energy transformation outside the EU”. Its actions are bound to have repercussions elsewhere. Fortunately, the cold equations of financial risk are sure to work in favour of the initiative, as well as more enlightened considerations of the greater good.
The policy risk attached to the value of any hydrocarbon enterprise must now be tremendous, which is only fair considering the risk they now pose to our future. According to the EIB statement, carbon emissions from the global energy industry reached a new record high in 2018.
If that’s where the fossil fuel industry is after so many decades of warnings, concerted action can’t come soon enough.