The European Investment Bank has introduced a new policy which means the bank will stop funding for all fossil fuel-based projects, which includes the mainstream gas-fired power plants. This is a major step in reducing the amount of fossil fuels used and it is the first time that a major lender has put forward plans to stop funding towards natural gas projects due to climate chance concerns.
The investment bank, which has already halted lending for coal based plants, has stated that it will stop funding any projects which emit carbon dioxide by the end of 2021. This, however, is 1 year later than originally planned by the EIB due to some member states of the EU complaining about the earlier date.
The new policy was recently introduced at a marathon boarding which has came after months of debate between the EIB and the EU lenders national shareholders.
Three countries from the EU have opposed this decision. Poland, Hungary and Romania have opposed this decision even though there have been many compromises on the way to making it. This opposition has meant this announcement ended up being delayed by several months.
Other development banks, such as the European Bank for Reconstruction and Development and the World Bank have taken steps to reduce the effects of climate change. Both these banks have largely increased funding towards numerous climate change programmes and have also stopped the funding of new coal fired power plants. However, no bank has gone as far as the EIB and stopped lending to natural gas projects.
The reason for countries such as Poland to complain about this decision from the EIB is because they see using natural gas power plants as a steppingstone from coal power to using all renewable power plants. Therefore, stopping funding of natural gas power plants will make this transmission period even harder for them to get through.
This new policy does not eliminate the opportunity for nations to have gas projects. New guidelines in the policy mean that if the projects meet a new standard of 250 grams of carbon dioxide per kilowatt-hour produced then they can go ahead. The EIB has also said they will help finance up to 75% of a project’s cost for new projects in nations where they will have a particularly hard time reducing their reliance on high carbon emitting sources.
Another compromise that was made was that the EIB are allowing a list of proposed projects by the European Commission to go ahead as long as they are approved by 2021.
The finance minister of France, Bruno Le Maire, has stated he is happy with the new policy from the EIB and that it will cause more sustainable projects to go ahead, meaning it’s more likely the Paris agreement goals will be met and it shows the EU is heading in the correct direction in terms of climate change.
Opposition to the new policy were quick to point out that natural gas fired power plants produce a considerable amount less carbon dioxide than a similar coal fired power plant would do. Natural gas power plants are also useful to use if wind farms and solar power are not producing enough required electricity as they can quickly be turned on and off, unlike coal fired power plants.
However, environmental groups are becoming more and more against the use of natural gas power plants. Methane leaks that can occur during production and transportation have a large effect on global warming due to it being a potent greenhouse gas and having 25 times the effect of what the same amount of carbon dioxide would have, although it does not last as long in the atmosphere.
In general, this has been seen as a step in the right direction from the EIB.