The European Investment Bank has announced it will stop funding fossil fuel energy projects from the end of 2021 as part of its new climate strategy and lending policy.
Any future funding will 'accelerate clean energy innovation, energy efficiency and renewables' the bank says.
EIB president Werner Hoyer says: 'Scientists estimate that we are currently heading for 3-4°C of temperature increase by the end of the century. If that happens, large portions of our planet will become uninhabitable, with disastrous consequences for people around the world. The EU bank has been Europe's climate bank for many years. Today it has decided to make a quantum leap in its ambition. We will stop financing fossil fuels and we will launch the most ambitious climate investment strategy of any public financial institution anywhere.'
Five lending principles have been established that will govern future EIB engagement in the energy sector, including prioritising energy efficiency, enabling energy decarbonisation through increased support for low or zero carbon technology, increasing financing for decentralised energy production, innovative energy storage and e-mobility and increasing the impact of investment to support energy transformation outside of the EU.
Wood Mackenzie research director Nicholas Browns says that this new financing criteria will make lending to gas projects very difficult.
'When burnt, gas releases less carbon dioxide, nitrogen and sulphur oxides than coal and oil. Furthermore, coal-to-gas replacement has had a profound impact on air quality in northern China to the huge benefit of public health. It also has significantly lower full life-cycle carbon emissions than coal. However, while the comparative combustion benefits are undoubted, the sector may not be able to rely exclusively on this argument to make the case for gas and LNG. The benchmark looks like it will be set higher. Gas and LNG may be better but are they good enough?
'Beyond financing, it is possible that the debate could start to impact procurement decisions from carbon-intensive projects and portfolios, likely accelerating carbon capture, carbon offsetting and electrification of liquefaction. This year already saw the first carbon neutral LNG cargoes delivered while several companies are implementing or investigating using renewable power to drive the liquefaction process.'