The European Investment Bank (EIB) will end financing of unabated fossil fuel projects within two years as it steps up its action against climate change.
The bank said it will no longer back projects with carbon emissions of more than 250g of CO2 per kilowatt-hour from end of 2021, down from its existing emissions performance standard of 550g CO2/kWh.
The measure is a key part of the EIB’s new energy lending policy that sets out five principles governing its future engagement in the sector.
The principles include prioritising energy efficiency with a view to supporting the new EU target under the Energy Efficiency Directive.
The EIB also wants to enable energy decarbonisation through increased support for low or zero carbon technology, aiming to meet a 32% renewable energy share throughout the EU by 2030.
The third principle is increasing financing for decentralised energy production, innovative energy storage and e-mobility.
The EIB also wants to back grid infrastructure for renewables as well as strengthening cross-border interconnections.
Fifthly, the EIB will target increasing the impact of investment to support energy transformation outside the EU.
The bank meanwhile confirmed its goal of unlocking €1 trillion of climate action and environmental sustainable investment between 2020 and 2030.
The EIB will align all financing activities with the goals of the Paris Agreement from the end of 2020, it added.
“The EU bank has been Europe’s climate bank for many years,” said EIB President Werner Hoyer.
“Today it has decided to make a quantum leap in its ambition. We will stop financing fossil fuels and we will launch the most ambitious climate investment strategy of any public financial institution anywhere,” he added.
Wood Mackenzie research director Nicholas Browne said the EIB’s new financing criteria will make lending to gas projects “very difficult”.
“It highlights that gas is also increasingly in the spotlight of the climate debate,” he added.