European Investment Bank caps emissions in its new energy investments policy
The European Investment Bank (EIB) will phase out its support for the most polluting coal and lignite power plants, environmental lobby WWF said on Wednesday, if it implements new energy lending criteria.
The Bank voted to confirm its new lending policy on Tuesday, after a stakeholders' consultation started in October 2012 on economic challenges facing the energy sector. As a part of its new lending policy, the EIB will introduce a new emissions performance standard for all fossil-fuel generation projects to screen out investments with carbon emissions above a threshold level.
It will apply to new projects, an EIB's spokesman said, while already approved projects are exempt. The Bank has set the new measure, which acts as a carbon intensity cap, at 550gCO2/KWh.
This threshold reflects existing EU and national commitments to limit carbon emissions, the Bank said. "The board agreed that the emissions performance standard would be kept under review and that more restrictive commitments could be considered in future," the EIB said in a statement published on Wednesday.
An EIB presentation shows that combined-cycle gas turbine and combined heat and power (CHP) plants; high efficiency coal/lignite fired CHP plants; and coal/lignite plants with carbon capture and storage; and some coal or lignite stations co-fired with biomass will still be eligible for funding from the bank. But oil, lignite and coal plants will be ineligible, with some exceptions, under the new rules. According to WWF, the EIB board has to clarify exemptions to ensure stringent implementation of the phase out.
"The new policy is very ambitious," said a WWF spokeswoman, adding that more work is needed to implement it.
WWF also called on the EIB to lower the emissions cap for fossil-fuel power plants eligible for funding in coming years. "It also needs to set measurable financing targets for energy efficiency and renewable energy support - as a way of sending a clear and strong signal to both investors and the industry," WWF said in a statement.
EU Commissioner for Climate Change Connie Hedegaaard welcomed the new EIB policy. "Good to see that finance institutions join up sound economic thinking and climate action," she said on Twitter.
EU Commissioner for Energy Gunther Oettinger echoed this view, saying that the EIB "plays a valuable role in financing public and private sector investment in energy infrastructure and supporting projects that contribute to achieving EU energy policy goals". He added that the new guidelines created a "framework" for doing so in future.
Impact on investments
A source expects the new EIB lending policy to only have limited impact on the market, at least in the medium term.
Generally, restricting access of coal-fired power plants to finance would reduce the number of such projects, he said.
"However, I am not sure how many of such projects would be pursued anyway in the current power market environment where renewable power production tends to crowd out fossil power anyway and thus the demand for additional fossil capacity is pretty limited," he added.
"If you really need fossil power production capacity, the financing is probably not the most sensitive issue," he said.
He added that the issues that would drive investment decisions would be:
the price of fuels, such as coal, as lignite is significantly cheaper than gas;
the type of future production required, such as baseload or peak generation; and
which fuel is most suitable to it.
Other banks' energy strategy
The EIB decision follows that of the World Bank, which said last week that it will limit funding for coal power plants to tackle climate change (see EDCM 17 July 2013). The European Bank for Reconstruction and Development (EBRD) launched last week a public consultation on its energy sector strategy, which ends in September.
Last month, some NGOs said that investments in fossil fuels by development banks in the western Balkans, where the EBRD is very active, could jeopardise these countries' ability to meet EU energy and climate targets (see EDEM 26 June 2013). Matilde Mereghetti
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