No justification for more public money going to the fossil fuels industry, say dozens of central and eastern European civil society organisations. The European Bank for Reconstruction and Development must urgently shift its investments to help accelerate the energy transition.
Ido Liven, Communications officer | 6 December 2022
In recent weeks, dozens of environmental groups in Romania, Estonia, Poland, Czechia, Georgia, Slovakia, Hungary and Latvia have sent letters to the European Bank for Reconstruction and Development (EBRD) representatives in their countries. In these letters, the NGOs demand the Bank stops direct finance to oil and gas and indirect support for coal, oil and gas and instead shifts its investments to help step up energy efficiency and expand sustainable renewable energy.
The groups underlined that such investments are needed for the reduction of these countries’ dependence on fossil fuels and that they would increase energy security and reduce CO2 emissions as well.
The EBRD is currently drafting its next Energy Sector Strategy that will determine which energy projects could be eligible for the Bank’s support.
The letters make clear that, rather than continuing to entrench dependence on volatile, polluting fossil fuels, the EBRD could play an important role in catalysing the energy transition in its 38 countries of operation.
In Romania, there is an urgent need to modernize and shift district heating systems from fossil fuels to renewables, and investments in industrial-scale heat pumps and the utilization of waste heat from cooling and industrial processes could really move the needle.
EBRD money could also support the development of solar capacities in Estonia, chiefly in communities that can use municipal buildings and facilities or former industrial sites.
There is also a great potential for investments in energy efficiency measures in Latvia in multi-apartment buildings, municipality-owned buildings, single family houses, small businesses and industry.
SlovSEFF, Slovakia’s sustainable energy financing facility developed by the EBRD itself could use an upgrade to bring it into the 21st century, by excluding support for both fossil fuels and false solutions such as biomass or waste-to-energy projects.
In Georgia, the EBRD’s long-standing, generous support for controversial hydropower projects needs to be replaced with promoting decentralised renewable systems that tap the country’s vast wind and solar potential while ensuring the protection of biodiversity.
And in Poland, EBRD financing could help step up the development of energy communities and the realisation of the geothermal potential in the country.
‘The recent energy crisis has shown us that we cannot base our energy systems on fossil fuels that increase the cost of living and lead to climate degradation,’ wrote a group of Romanian organisations.
EBRD support to fossil fuels continued to rise 2014-2020
The EBRD has long been boasting about its green credentials, all while channelling millions to the fossil fuels industry. Our analysis has shown that between 2006 and 2020 the EBRD forked out over EUR 9 billion in public money to the fossil energy industry. Worse still, of the four leading multilateral development banks, the EBRD was the only one that kept increasing its investments in fossil fuels during the warmest decade on record.
In 2021 Bankwatch analysed the EBRD’s energy-related operations for 2014-2020 and found that overall, the Bank had invested more in fossil fuels than in renewables. Of the EUR 11.8 billion lent by the EBRD for energy projects during this period, fossil fuel operations made up 43 per cent, followed by renewables (excluding large hydropower plants), which made up 26 per cent. Although the EBRD’s lending in the power sector has made strong progress towards decarbonisation in the recent years, this has been undermined by its continued support for fossil fuels and for fossil-fuel dependent utilities, both in the power sector and natural resources sector.
But there is a growing recognition that business as usual is no longer an option. In May 2021, the executive director of the International Energy Agency Fatih Birol told The Guardian that ‘if governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now – from this year.’
What happened to the EBRD’s Paris alignment pledge?
Two months later, the EBRD announced that all its operations would be in line with the Paris Agreement by end of 2022, then repeated this rhetoric ahead of this year’s UN climate summit.
And yet, even though the impacts of a rapidly warming planet are already taking a deadly toll on communities around the globe, the EBRD is apparently getting cold feet. In a recent briefing, the Bank’s managing director Harry Boyd-Carpenter, reportedly told journalists the public financier will not divest from existing oil and gas exploration and production projects and that, because of the ongoing energy crisis, the board might not support ending financing for fossil fuels just yet.
Except the EBRD is already lagging behind. The European Investment Bank (EIB), the world’s largest multilateral lender, was the first to cease all investments in fossil energy starting at the beginning of this year. And in a September interview the EIB’s President rightly rejected the suggestion that, due to the energy crisis, the Bank might reconsider this decision.
Against this backdrop, Bankwatch and over 90 civil society groups are now urging the EBRD to recognize the climate emergency the world is in and divest from fossil fuels once and for all.
In a letter sent on Monday (5 December) to the EBRD’s President and board directors, the NGOs are demanding that the Bank lives up to its climate pledges and works to exclude all fossil fuels – upstream, midstream and downstream – from its investment portfolio to facilitate the energy transition.
According to the letter, ‘The EBRD needs to signal to its countries of operation that the clean energy transition represents the best way out of current crises: climate, energy, and cost of living,’ the letter reads. ‘Structural changes in the EBRD’s countries of operation must be accelerated. With the limited resources that the Bank has at its disposal, this cannot be achieved if it is trying to balance between scaling up the energy transition and financing dirty technologies.’
As a development bank owned by governments, the EBRD’s financial capacity needs to facilitate, not hamper, the international community’s effort to address the biggest crisis humanity has ever faced. The urgency to break free from fossil fuels could not be clearer. The Bank’s new Energy Sector Strategy must not perpetuate countries’ dependence on coal, oil, and fossil gas but rather help them speed up the deployment of sustainable renewables and energy savings.
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