The European Investment Bank faces a knife-edge vote on Tuesday on a proposal that would ban it from channelling billions of euros towards natural gas projects, extending a clampdown on fossil fuels by multilateral lenders.
The board of the world's largest multilateral development bank is poised to vote on whether to halt all new loans to fossil fuel projects from the end of 2020, despite pushback from members including Germany and the European Commission.
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The EIB — whose shareholders are the EU's member states — would be the first multilateral bank to boot natural gas out of its portfolio for new loans. It has already halted all coal lending.
Ursula von der Leyen, the incoming European Commission president, has pledged to make tackling climate change a priority, and talked about making the EIB a "climate bank" that can fund the transition to a low-carbon economy.
However, some big EU member states including Germany and Poland oppose the proposed changes to lending policy, while the existing commission has also expressed reservations.
"Natural gas will remain an important component in the EU's energy mix in the near future, as we move toward cleaner sources of energy, " commission spokeswoman Annika Breidhardt said in a press conference on Monday.
Environmental advocates say the vote could be a turning point for natural gas. "This is a test for whether the EU and its member states are serious about climate action," said Alex Doukas, analyst at Oil Change International.
"If you look at the rate at which Europe needs to decarbonise to meet its new climate targets, there is not room for new gas."
Werner Hoyer, the EIB president, wants more than half of the bank's lending to be climate-related and sustainability-related by 2025. The EIB is also targeting US$1 trillion ($1.5t) in total climate-related funding in the decade from 2020 to 2030, which would represent a significant acceleration.
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"We have just over ten years to turn the tide on the climate and environmental emergency," Hoyer said last month in New York. "The world is heading in the right direction, but it is behind schedule."
Since 2013 the bank has lent €13.4 billion ($23.4b) to fossil fuel infrastructure, of which more than €9b went to natural gas pipelines and distribution networks.
Industry campaigners argue that natural gas should be part of a transition to cleaner energy, because natural gas plants can be used to balance intermittent power from renewable sources such as wind and solar.
Proponents also point out that building less gas infrastructure could keep existing coal stations in operation for longer.
Last week Bob Dudley, BP's chief executive, complained that natural gas was getting "demonised" by the anti-fossil fuel movement, arguing that it has a "vital role" to play in the transition toward cleaner fuels.
Some EIB board members have asked to water down the proposal by pushing back the suggested 2020 implementation date.
The proposal would also apply only to "unabated" fossil fuel projects — those that emit carbon dioxide — leaving a potential opening for funding infrastructure that use technology such as carbon capture and storage.
A majority is needed to pass the proposal, and votes are weighted according to how much each country contributes to the EIB.
- Additional reporting by Mehreen Khan.
Written by: Leslie Hook
© Financial Times