European Bank Mulls New Lending Strategy

The European Investment Bank is planning to cut all further lending to nearly all fossil-fuel projects from the end of next year, according to a leaked document intended for the board's discussion in September.

Following a consultation it began in January, it is proposing to phase out support to energy projects reliant on fossil fuels: oil and gas production, infrastructure primarily dedicated to natural gas, and power generation or heat based on fossil fuels. These types of projects – perhaps the largest of which is the Southern Gas Corridor – will not be presented for approval to the bank's board beyond the end of 2020. They will have to look elsewhere for funding.

But the bank expects to "support connections to new sources of low-carbon gas, or the adaptation of existing infrastructure towards a credible, imminent use of a high blend of low-carbon gases."

It will continue to support the development of electricity networks, including the interconnection target agreed for 2030 and European projects of common interest. But it will look to prioritise investments that increase network flexibility, it said.

High efficiency gas-fired combined heat and power production will be eligible for support, as will efficient gas boilers included within building renovation programmes. These investments support the energy transition path, it said. But it will no longer support upstream oil or gas production. "This reflects the prioritisation of the EIB and does not say anything about the importance of EU energy policy goals, including limiting import dependency," it said, in its response to comments raised during consultation.

Despite the recent increase in investment in renewable energy, the EU is still largely dependent on fossil fuels for transport, industry and heating and, in many EU member states, for power generation. "This highlights the considerable challenge the EU faces in meeting the long-term targets of the Paris Agreement," it said, explaining its decision to direct money to support alternative energy systems.

In her July 16 speech to the European parliament on her election as the next president of the European Commission, Ursula von der Leyen said the "EIB would become Europe’s climate bank, raising the present quarter of its total financing spent on climate investment to at least half by 2025."

The document may be found here.