Over the past four years, the European Investment Bank (EIB) — the EU’s house bank — has loaned 48 billion euros (US$62 billion) to energy projects around the world. Indeed, the EIB lends more to the energy sector than to any other, except transport — and its 72 billion euro total loan portfolio last year made it a bigger lender than the World Bank.
Investment on this scale can help countries worldwide to make vital progress on reducing greenhouse-gas emissions at a time when political solutions based on international agreement remain elusive. Unfortunately, the EIB’s lending priorities and energy-investment portfolio are making the problem worse.
In 2007, the EIB adopted its first energy policy — “Clean Energy for Europe: A Reinforced EIB Contribution.” Since then, the bank has significantly increased its lending for renewable energy, which totaled 13 billion euros between 2007 and last year.
Yet, over the same period, the bank compromised this performance by lending 16 billion euros for fossil-fuels projects, one-third of the institution’s total energy lending. Indeed, the EIB’s fossil-fuel lending grew from 2.8 billion euros in 2007 to 5 billion euros last year, including new coal units in Germany and Slovenia.
In new EU member states, the EIB has supported mostly high-carbon energy, which traps these countries in unsustainable energy systems.
The EIB also loaned northern Africa and Syria 1.6 billion euros for fossil fuels between 2007 and last year, which constituted 30 percent of total lending to the region.
Make no mistake: These are long-term investments. The energy infrastructure constructed today will be used for at least another 40 years, thereby tying countries to carbon-dependent paths. In
Slovenia, for example, if the government implements EU-wide climate targets, the new EIB-financed Sostanj lignite unit will consume most of that country’s carbon-dioxide emissions quota by 2050.
Meanwhile, the EIB invests only 5 percent of its energy portfolio in energy-efficiency programs.
The EIB argues that fossil-fuel lending supports strategic projects that safeguard European energy security. That is partly true: EU members’ political interests do drive some of this lending, particularly investments in oil and gas import infrastructure. The EU’s goals therefore embody an inherent contradiction — energy security versus climate-change prevention — which makes it difficult for the EIB to clean up its energy portfolio.
Yet a closer look shows that 6.7 billion euros of the 16 billion euros that the EIB loaned for fossil fuels went to coal, gas and oil-fired plants, both inside and outside the EU — not to EU energy-security projects. These figures suggest that the EIB might simply find dirty energy projects more familiar, easier to access and more profitable.
However, the EIB, which is both an investment bank and the EU’s public bank, is uniquely placed to lead markets, and should not merely be following them. As a public bank, its financial operations are guaranteed by European taxpayers’ money and its capital is immense. Moreover, it benefits from the information and know-how of EU institutions.
If the EIB were to put its clout behind renewable energy and energy efficiency, it could help to reconcile energy security and the fight against climate change. And Europe could lead that fight if it fully exploited its renewable and energy-efficiency potential. The EU would then have little need to rely on dirty-energy imports from politically unstable parts of the world.