As part of putting the Paris Agreement into action, the EU and its member states should back the European Investment Bank’s proposal to cease fossil investments, writes Sir Graham Watson.
Sir Graham Watson is a member of the European Economic and Social Committee who works on energy issues. From 1994-2014, he served as a member of the European Parliament, including seven years as leader of its Liberal Democratic Group. He was a co-founder and for ten years president of the Climate Parliament initiative.
To give the world a fighting chance of delivering the Paris Agreement, the European Commission and Member States should confirm the European Investment Bank policy to end fossil investments by 2020 at a board meeting this week.
Faced with the crisis of climate change, the world’s largest multilateral bank—the European Investment Bank (EIB)—earlierthis year drafted an energy policy to phase out its fossil fuel lending by 2020.
This week, when the EIB board meets to decide on the proposal, the eyes of the world will be on Europe: will it lead the world into phasing out public funding for fossil fuel investments?
The upcoming decision will have broad ramifications for Europe and the rest of the world. Should the proposal be adopted, it will be leadership that many financial institutions will follow, including the other multilateral development banks that are working with the EIB to decide how they can align their lending to the Paris Agreement.
Should the proposal fail or be watered down, it will diminish the credibility of Europe’s commitment to addressing climate change under the Paris Agreement—and rightly so.
Led by incoming Commission president Ursula von der Leyen, the next European Commission is aiming for Europe to deliver steeper emissions cuts by 2030 and to achieve climate neutrality by 2050.
The new Commission is driven by the vision of a European Green Deal, a dossier to be held by the new Executive Vice-President Frans Timmermans. These objectives will be at risk if a behind-the-scenes push to include large concessions for financing fossil gas in the EIB’s next energy policy is successful.
The current Commission has not yet come out in clear support of the proposal – even though its own long-term vision to 2050 implies a steep decline in use of gas infrastructure.
The Commission’s current stance is inconsistent with the climate goals of the Paris Agreement, the incoming Commission’s priorities – and, most importantly, would allow taxpayers money to continue to be used for investments that are soon to turn into a liability. This is very far from any interpretation of a “Green Deal”.
A group of countries, including the Netherlands, France, and Sweden, are taking the lead in calling for the EIB to move beyond fossil energy and realise its aspiration of becoming Europe’s climate bank. Others are seeking to delay this process. Countries like Germany which have not yet come out in support of the EIB proposal, should do so.
Policymakers have not come to a joint strategic view on—or fully internalised—what the Paris Agreement entails in terms of transformation of the European energy system. As with any energy market, the danger is that belated or mixed signals from policymakers may result in short-sighted infrastructure investment choices.
These also bear the additional risk of becoming stranded assets.
Modelling of EU emissions pathways very clearly demonstrates that there is no space for European expansion of fossil gas in a scenario of climate neutrality by 2050. Despite talk of natural gas as a “transition fuel”, its chief task in Europe’s transition should be to decrease in use.
Specifically, EU demand for fossil gas must decline to roughly a sixth of its 2030 size by 2050, according to the Commission’s main scenarios for a climate-neutral 2050. Policymakers failing to plan for this reality are deliberately putting costs on future generations and betting on jobs in short-lived industries.
The draft EIB policy astutely places focus on supporting net zero carbon energy technologies—as the no-regrets option for delivering energy security and affordability in Europe.
The draft pledges a new initiative on building renovation and prioritises technologies providing the system flexibility needed for scaling renewables: battery storage, demand response, and interconnection.
Acknowledging its role in a just transition, the EIB also promises an Energy Transition Package alongside a commitment to economic development and job creation in select regions transitioning away from fossil fuels.
This and the draft’s commitments regarding Projects of Common Interest should win it the support of the Commission and any undecided Member States.
Recent revisions of the draft, however, permit near-unqualified support for gas boilers and questionable loopholes for gas-fired power generation and low carbon gas. These changes come across as hastily suggested concessions and should either be amended with tighter language or removed entirely.
Ultimately, what the world needs from the EIB is a policy that inspires confidence in Europe’s commitment to moving beyond the old energy system, including an approach to non-fossil gases informed by market realities and the science.
The present moment is ripe for change. Recent reports—about how fossil investments from the world’s largest banks have only risen year-on-year since 2015, about unprecedented changes to the oceans and cryosphere threatening human and marine life, about new-build renewables becoming cheaper than built fossil-fired plants—all heighten this sense of being at a crossroads.
Last week, leading research institutions, investors, and industry groups made a joint call for the EIB policy to phase out fossil investments in 2020, joining similar calls from over 70 NGOs and tens of thousands of petitioning citizens.
When the EIB’s draft energy policy was first released in late July, it came amidst the sweltering temperatures of the hottest month on record for this planet, and some heralded it as “a crack of light in the darkness”.
This week, Europe must choose whether to set a shining example or to darken prospects of addressing the climate crisis—and the world will be watching.