European Funding Financial institution resists strain to fund gasoline tasks
Banking and Investment

European Funding Financial institution resists strain to fund gasoline tasks

The European Funding Financial institution won’t fund any gasoline tasks despite intense strain from African and different growing international locations to reclassify gasoline to attract funding, the multilateral lender’s president has mentioned.

“We as a European public establishment shouldn’t put money into property that in the future will probably be seen as stranded property,” Werner Hoyer informed the Monetary Occasions.

Gasoline is comprised primarily of methane that may leak throughout distribution, and traps extra warmth within the environment over a shorter interval than carbon from burning coal.

As an alternative of backing the thought of gasoline as a so-called transition gasoline from coal, which is the sturdy place of most African nations, the financial institution ought to take “the vitality transition severely and transfer to renewables”, mentioned Hoyer.

The EU’s lending arm, and the largest multilateral financial institution by property, pledged in 2019 to section out lending for all fossil gasoline tasks, together with mainstream gas-fired energy vegetation, by the tip of 2021. The financial institution chief declared final yr that “gasoline is over” in presenting the EIB’s outcomes.

The EIB’s resolute anti-gas stance will most likely inflame tensions with African international locations over what constitutes a “simply” vitality transition.

Pravin Gordhan, South Africa’s minister of public enterprises, mentioned the hypocrisy of Europe’s place had been uncovered by its scramble for vitality after Russia minimize off gasoline provides.

“Europe, which took the toughest line by way of emissions, is now in bother. It’s protecting coal-fired energy stations going and importing coal,” Gordhan mentioned. “How does the EIB reconcile its views with what European governments are doing?”

In July, European lawmakers authorized a regulation designating each gasoline and nuclear as sustainable vitality sources for funding functions. That designation is now being challenged by environmental marketing campaign teams, in addition to dealing with threats of authorized motion from international locations led by Austria.

Hoyer acknowledged the hole between the European and African positions had widened, with what he described as doubtlessly “explosive” penalties. He mentioned the reply lay in additional fast expertise switch and funding for renewable vitality sources and biofuels, relatively than financing gasoline tasks.

New fossil gasoline tasks have been offered as transitional, he mentioned, however have been typically “a perpetuation train for gasoline”.

The EIB president additionally mentioned “blue” hydrogen tasks — utilizing gas-fired vitality to provide hydrogen, paired with carbon seize expertise to entice emissions — wanted to be “scrutinised.” Whereas some may be a part of a “credible transition effort”. others could also be a method to delay using fossil fuels.

Hoyer accused some international locations of “hiding behind the struggle in Ukraine . . . as a result of they don’t severely wish to go into the vitality transition and into renewables.”

A lot of the fault lay with western international locations, he conceded, as that they had did not “stroll the discuss” when it got here to serving to poorer international locations. “After I hear heartwarming pledges in direction of a partnership-based strategy between the north and the south . . . we should carry extra substance to that.”

The EIB chief mentioned he had been disillusioned to see so few European representatives attend a summit of African leaders in Rotterdam this month to debate local weather change adaptation.

Felix Tshisekedi, president of the Democratic Republic of Congo, who attended the summit, mentioned: “I deplore the absence of the leaders of the industrialised nations and the non-public sector who’re, as we all know, the best polluters.”

Africa’s 54 international locations have been liable for solely about 2-3 per cent of cumulative carbon emissions from vitality and trade, however are among the many worst affected by local weather change.

“On a per capita foundation, Europe’s electrical energy consumption from fossil gasoline is at the very least 25 occasions Nigeria’s consumption from all vitality sources,” mentioned Aliyu Suleiman, chief of technique at Dangote Group, Nigeria’s largest conglomerate, who mentioned he was talking in a private capability.

“Pragmatically, a few of this must come from pure gasoline,” he added. “Denying such funding for Africa is denying Africa the chance to develop its economic system and enhance requirements of residing for its residents.”

Hoyer’s feedback got here as world leaders gathered in New York for the UN Basic Meeting, and weeks forward of November’s COP27 local weather summit in Egypt. Leaders of growing international locations are anticipated to press wealthy nations at each conferences for monetary assist for climate-related destruction, or “loss and harm” financing.

Western nations have traditionally been reluctant to debate the difficulty owing to considerations that it could be seen as compensation. However progress is anticipated to be vital to the success of COP27 and to restoring belief within the multilateral course of after wealthy nations did not ship on their promise to mobilise $100bn a yr in assist of growing international locations by 2020.

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