European development bank’s new fossil fuels pledge falls short of aligning with the Paris Agreement
The governors of the European Bank for Reconstruction and Development (EBRD), representing 69 shareholder governments as well as the EU and the European Investment Bank, decided yesterday the Bank will decrease its support for the fossil fuels industry.
2 July 2021
Photo: European Bank for Reconstruction and Development (CC BY-NC-ND 2.0)
Bankwatch welcomes the EBRD’s decision to stop financing exploration and production of oil and gas and to develop a methodology to assess projects’ climate footprint as part of the global effort to tackle the climate crisis.
This is a step in the right direction, but people in the EBRD’s countries of operation, some of them among the most vulnerable to the impacts of the climate crisis, deserve to know the Bank’s investments will no longer back fossil fuel dependent economies.
The EBRD has in fact already started phasing out its support for oil exploration and extraction since 2018. So, yesterday’s commitment to keep investing in midstream and downstream fossil fuels projects is at odds with the latest call from the International Energy Agency (IEA) to cease support for fossil fuels. It also represents a failure to recognize the gravity of the crisis, not least, since the Bank, with its focus on economic transition, was well positioned to send a strong signal to its countries of operation and their markets concerning the energy transition.
According to the IEA, international financial institutions have to scale up their lending for energy efficiency and renewable energy in developing and emerging economies as these countries have to increase their spending seven-fold before 2030 in order to stay on a path compatible with the Paris Agreement.
The credibility of the EBRD’s approach to fossil fuels projects will be judged by the success of its new methodology for assessment of proposed projects’ climate footprint, so that indeed those expected to be emission-intensive would not qualify for EBRD support.
As heat records are shattered from the Pacific Northwest to the United Arab Emirates, it becomes abundantly clear we are in the midst of a climate emergency. The EBRD has played a role in this. Bankwatch’s latest analysis shows that in 2019-2020 alone the Bank has extended EUR 1.5 billion in public money to the fossil fuels industry .
Bankwatch and many other civil society groups have been calling on the EBRD to end its support for the fossil fuels industry for over a decade. And yesterday’s announcement is a recognition the Bank has a duty to facilitate the much needed energy transition in its regions by urgently shifting its investments from fossil fuels to energy efficiency and renewables. Business as usual is no longer an option.
The Bank acknowledged the need to boost its support to developing the necessary policies to enable its countries of operation to achieve net zero emissions by 2050. The Bank also needs to start demanding such plans from all its corporate clients if it is to ensure that EBRD investments indeed support clients on their decarbonisation paths.
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