EU bank brokers late-night deal to phase out fossil fuels

By Sam Morgan

The European Investment Bank (EIB) decided on Thursday (14 November) to scrap financial support for fossil fuels from 2021, after marathon talks ended in a compromise that has been hailed as “a significant victory” for green policies.

It took an entire day of negotiations for sceptical countries like Germany and Italy to sign up to the EIB’s ambitious review of its energy lending policy, which is set to transform the EU lender into a fully-fledged ‘climate bank’.

Under a compromise fleshed out during the talks, the EIB’s initial proposal to scrub its loan books of fossil fuel projects by 2020 is extended to 2021 in order to placate countries that wanted more flexibility for gas projects.

It will mark a drastic change for the triple-A rated lender, which according to figures compiled by NGO Bankwatch lent €13.5 billion to the fossil fuel sector between 2013 and 2018

The extended negotiations paid off as Germany, which is one of the EIB’s largest shareholders, eventually backed the updated policy, cancelling out the negative votes of Hungary, Poland and Romania.

Berlin had originally threatened to abstain from any vote, after its various ministries could not agree on a common position. That risked another delay, after the bank cancelled a previously scheduled ballot in October.

Bank President Werner Hoyer said that “today [the EIB] 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.”

Vice-President Andrew McDowell, whose compromise tabled last week laid the groundwork for yesterday’s deal, confirmed that “we have reached a compromise to end financing of unabated fossil fuel projects, including gas, from the end of 2021”.

The new policy will also increase the upper-limit of project financing, currently set at 50%, to 75% for ten lower-income countries, in order to address “specific energy investment challenges”.

All member states will be able to access that higher financing ceiling for certain renewable energy projects, another compromise point that won over some countries who flinched at the two-tier policy that had started to emerge.

The bank will also increase its support for the European Commission’s upcoming Just Transition Fund.

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