EU bodies including the European Investment Bank and the European Bank for Reconstruction and Development are backing fossil fuel projects that threaten progress on climate targets, NGOs claim.
Despite the promises made in Paris in December last year, key European institutions continue to fund dirty energy generation over alternative energy sources, according to a new report released by Climate Action Network Europe (CAN).
The research alleges some of Europe’s most influential funding mechanisms are spending billions of Euros supporting fossil fuel projects, at a time when public funding should be used to drive the transition to cleaner energy systems.
The EU has overarching climate targets to cut its greenhouse gas emissions by 80 per cent by 2050, and in December was a leading player in the UN climate negotiations, which saw 197 countries commit to delivering net zero emission economy by the end of the this century.
But according to CAN analysis, the EU’s banks, investment funds and high-profile policy mechanisms continue to support projects that, if the EU remains on track to meet its climate targets, will prove obsolete in a matter of decades.
For example, the paper highlights the continued fossil fuel funding activity of the EU’s investment funds: the Connection Europe Facility (CEF) and the European Structural Investment Funds (ESI Funds), the umbrella term for a number of EU funds that channel financial resources to EU states for funding into agriculture, energy and transport projects.
The two funding streams are “crucial” to ensuring the EU’s climate and energy objectives are reflected in mainstream spending decisions throughout the trading bloc, CAN argues, yet between them they have allocated more than €1.6bn for gas infrastructure and gas pipelines between 2014 and 2020.
CAN argues the activities of these large funds should be much more closely aligned with “ambitious and visionary” public policies for decarbonisation. “The EU and Member States must seek to make a long-term shift in investments and incite similar action from the private sector,” the report notes. “It is therefore essential that national policies are realigned to meet the climate commitments set out in the Paris Agreement, and the allocation of financial support is subject to those policies and their overall climate and energy ambition.”
Specifically, CAN want to see the spending from ESI Funds aligned with the EU’s 2030 and 2050 climate targets, and more stringent assessment over whether the deployment of funds maximises renewable energy and energy efficiency potential of Member States.
The European Commission, which oversees the management of the funds, was still considering a response at the time of publish.
The report also shines the spotlight on the lending activities of the EU’s key banks – the European Investment Bank (EIB), which is wholly owned by EU Member States and directly aligned with EU policy, and the European Bank for Reconstruction and Development (EBRD), which is jointly owned by 65 countries and two EU institutions.
In September 2015 the EIB committed to dedicating at least 25 per cent of its lending to specific climate action projects, and was a high-profile attendee at the UN talks in Paris in December. But analysis from NGO Bankwatch, cited in the CAN report, suggests the EIB provided up to €7bn in funding for fossil fuel projects from 2013 to 2015 – almost 30 per cent of its total lending to the energy sector.
Although overall the EIB still lends more to clean energy than dirty energy projects, the gap is narrowing. Spending on fossil fuel projects was up 25 per cent from €2bn in 2013 to €2.5bn in 2015, according to CAN, while spending on renewables sank 21 per cent in the same period.
Similarly, while the EBRD is not so beholden to EU policy for direction in its funding decisions, it does have a mandate to promote sustainable development across Eastern Europe and Asia. And yet CAN cites figures from Oil Change International’s database that between 2008 and 2015 the EBRD invested €15bn in fossil fuel exploration activities.
In response to the report the EBRD told BusinessGreen it did not recognise the investment figures cited in the report. It said the bank’s total annual investment typically stands at €8-9bn, and the share of investment in fossil fuel production is “very low”. For example, it said that during the last strategy period, from 2006 to 2013, investments in oil and gas extraction totalled €300m. In comparison, its 2015 investment in renewable energy was €570m.
“We regret that this report was published without consultation with us and we will revert to CAN with a request for clarification,” a spokesman said.
This post was originally published in Business Green. Click here to read.