EBRD chief Riccardo Puliti warns Europe not to be hasty in adopting ‘ideological’ policy on carbon intensity funding
One of Europe’s most influential government-owned investors in the energy industry has hinted it may expand funding of high-carbon coal projects despite mounting pressure from climate change campaigners to rule out such investments.
Riccardo Puliti, energy chief at the European Bank for Reconstruction and Development (EBRD), warned against an “ideological” policy on carbon intensity in funding decisions without giving weight to other considerations.
The EBRD, which is based in London and owned by more than 60 countries, including the UK, is reviewing its energy policy. It has a €37.5bn (£32bn) loan book, with 41% of its investments last year channelled into the energy and infrastructure sectors.
Puliti’s comments came as scientists declared the highest day-long concentration of C02 in human history and a line of global institutions such as the International Energy Agency have called for public subsidies of fossil fuels to be phased out.
But Puliti defended the EBRD, which has just provided €100m (£85m) to a new lignite plant at Sostanj in Slovenia and is understood to be ready to finance new coal operations in Kosovo and Serbia. Lignite is a particularly polluting form of coal.
“We strongly believe in a transition to a low-carbon economy and that is what we want to do as an active citizen. But other pillars need to be addressed,” he said.
“Affordability is a problem, even in developed countries, and security of supply is a problem. These pillars need to be addressed and analysed in a proper way so we find the best optimum solution. So I can’t say yes or no [to coal].”
Puliti was speaking to the Guardian on the fringes of the EBRD’s annual meeting, this year in Istanbul. He said the EBRD had funded about 200 energy projects between 2006 and 2012 with only two related to coal. Those two were designed to improve efficiency while at least 80 of the 200 schemes were related directly to renewable energy, sustainability or wider energy efficiency.
Puliti said it was impossible to impose a one-size-fits-all policy. “The issue must be seen in the context of different countries. Energy is used not just for power but for heating too. A country like Mongolia has access to just one fuel – coal – although the EBRD has financed and is an investor in the first ever wind farm in Mongolia … You cannot be ideological about this.”
In those countries with no access to gas, nuclear or hydro it may be best to replace old and inefficient coal-based combined heat and power (CHP) schemes with more efficient units, he argued.
But low-carbon campaigners said this policy could not be justified. “With repeated warnings about the need to end public subsidies for fossil fuels, pouring millions of euros into coal is unacceptable for a public institution like the EBRD,” said Fidanka McGrath, from the non-governmental organisation CEE Bankwatch. “At a time of scarce public finance, the EBRD must lead rather than follow markets.”
Bankwatch argues that under the current EBRD policy, nearly half of its energy investments went to fossil fuel projects including oil and gas, with its lending for coal increasing from €60m (£50m) to €262m to (£221m) in the five years to 2011.
The bank has been consulting its member countries since December about its new energy policy and hopes to have a draft document ready by the summer. After this, it will go back to shareholders for the definitive policy to be adopted by December of this year, says Puliti.
Insiders at the bank admit that major coal producers and exporting countries, such as Russia, are putting considerable pressure on the EBRD not to turn its back on coal. But some other countries are pushing in the opposite direction, recognising it is time for change. There have been repeated warnings about a “carbon bubble” of fossil fuel assets as more and more countries move away from coal and oil for powering their electricity systems.