The European Union has made €5bn of fossil fuel loans through its financial arm despite carbon reduction targets for members
The world’s biggest lender to energy and climate action projects almost doubled the funds given to fossil fuels between 2007 and 2010, a new report published on Thursday reveals.
The European Investment Bank (EIB), a bigger lender than the World Bank, also tripled the lending to renewable energy according to the campaign group behind the report, Bankwatch. But the group said that overall, the bank is failing in its responsibility to further the goals of the European Union, including cutting carbon emissions by at least 20% by 2020.
“Our study highlights once more the secret hypocrisy at the heart of EU climate action,” said Piotr Trzaskowski, Bankwatch energy co-ordinator. “While the EU appears to be the world’s most progressive actor in the global struggle against climate change, the financial arm of the union is putting billions of euros of public money into energy infrastructure that will lock in countries into a fossil-fuel dependent path for four or five decades. Considering what we are hearing from [the UN climate talks in] Durban this week, if even the EU acts this way, we are tragically on a sure road to disaster.”
The EIB offers loans subsidised by government guarantees, but at the UN climate change negotiations in South Africa on Wednesday, Nicholas Stern told delegates that rich nations were wasting money and disadvantaging renewable energy by giving away tax breaks, loans and other subsidies to the fossil fuel industry. In November, the International Energy Agency warned that on current trends, the world will have built enough fossil fuel burning plants by 2016 to break the 2C limit deemed “safe” by scientists.
A spokesman for the bank said: “The EIB is committed to supporting key investment in projects that support the fight against climate change. This has been demonstrated this week in Durban with new funding for flagship renewable energy and water projects, as well as support for the South African renewables initiative.”
The Bankwatch report shows EIB fossil fuel lending rose from €2.8bn in 2007 to €5.0bn, while renewable energy loans rose from €1.7bn to €5.8bn. Funding for power transmission infrastructure rose over fourfold over the period, from €1.1bn to €4.6bn. Loans for nuclear power fell from €200m to zero in 2010.
Bankwatch also criticised the EIB for allotting less than 5% of the €49bn over the four years to energy efficiency projects: fossil fuels got seven times more.
“It is imperative that the EIB revises its energy policy in line with climate science, as well as with EU 2050 climate objectives,” said Anna Roggenbuck, Bankwatch EIB co-ordinator. “The EIB should immediately stop lending to coal, the most carbon intensive type of energy generation, and develop and implement a plan to phase out lending to other fossil fuels and prioritise energy efficiency as the most important area of intervention.”
The EIB spokesman said: “Energy efficiency is the greenest form of energy there is. The EIB is continuously looking for good projects, both with industry and public bodies, ideally at a large scale.” He added: “The EIB adopted a new energy lending policy in 2007 which is based on the two priority areas of climate action and energy security. This new approach ensures a selective approach to coal and lignite fuelled power stations.”
He said the Duisberg-Walsum coal power plant in Germany and the Sostanj lignite power plant in Slovenia had been approved under the old guidelines and that none of the €820m pledged to the German project and the €550m pledged to the Slovenian project had yet been disbursed. He noted the approval was only valid for a certain period of time but was unable to elaborate further.
The European Bank for Reconstruction and Development (EBRD), part owned by the EIB, has also significantly increased its loans to fossil fuels, between 2006 and 2010. Gas loans rose 10-fold to €929m between 2006 and 2009, before falling back to €435m. Lending for renewables rose from just €5.5m in 2006 to €232m in 2010, but over the five year period, fossil fuels got 35% of the €7.7bn total while renewables got 6%. The biggest sector was energy efficiency, which was awarded 43% of the funds.
The EBRD was is the biggest investor in its area of operation, eastern Europe, the Balkans and central Asia. It was established to support “the development of market economies” following the widespread collapse of communist regimes. It is owned by 61 countries, the EU and the EIB.