(CN) – To fight climate change, the European Investment Bank, the world’s largest development bank, voted Thursday to stop funding fossil fuel projects despite opposition by some countries, most notably Germany.
The bank’s board backed eliminating funding for fossil fuel projects by the end of 2021 in a closed-door session during a meeting in Luxembourg. The bank is seeking to align its funding by the end of 2020 to meet the goals of Paris Agreement on climate change and help foster a low-carbon economy.
The EIB is the first multilateral development bank to stop funding fossil fuel projects. It had already booted coal out of its lending portfolio.
Werner Hoyer, a German politician and the bank’s president, said the EIB’s decision to steer funding away from fossil fuels was “a quantum leap in its ambition” to fight climate change.
“We will stop financing fossil fuels and we will launch the most ambitious climate investment strategy of any public financial institution anywhere,” he said in a statement.
But the ban on fossil fuel projects will go into effect one year later than first proposed.
Under the new lending policy, the bank will fund energy projects that produce one kilowatt hour of energy while emitting less than 250 grams of carbon dioxide, a standard that bars traditional gas-burning power facilities. But some gas projects may still be funded, such as those that rely on carbon capture and storage methods or use a combination of renewable energy and natural gas.
Hoyer said the bank must do what it can to prevent a rise in global temperatures that would make much of the planet uninhabitable “with disastrous consequences for people around the world.”
The investment bank acts as the development arm of the European Union and funds numerous projects both in Europe and elsewhere, such as in Africa and Asia. It is the world’s largest multilateral development bank.
Anna Roggenbuck, a policy expert at Bankwatch Network, a Prague-based environmental and human rights group that monitors public financial institutions, called Thursday’s vote a historic moment.
“It is important not just for EIB and Europe but for other financial institutions,” Roggenbuck said in a telephone interview with Courthouse News. She said the EIB’s move could encourage other financial institutions to follow its example to provide support to projects based around energy efficiency and renewable energy.
Even before Thursday’s vote, she said the EIB had been cutting back on the number of fossil fuel projects it was financing. She said the bank had found them “uneconomic and detrimental for the environment.”
Last week, EU finance ministers backed the bank’s move to divest from fossil fuel projects, but Germany and other countries such as Poland and Italy wanted funding for natural gas projects to continue.
Opponents argued that natural gas is a cleaner source of energy than oil and coal and will help countries make the transition to renewable energy. They also said they needed to project jobs and energy security.
Since 2013, the EIB has spent about $2.2 billion a year on fossil fuel projects, mostly on natural gas infrastructure such as pipelines.
Hoyer said the bank aims to make half of its projects tackle climate change by 2025. He said that between 2021 and 2030, the bank plans to lend about $1.1 trillion in funding for low-carbon projects.
The EIB’s move fits well with the goals of Ursula von der Leyen, the incoming European Commission president who has made tackling climate change a priority.
The bank said it will focus on energy efficiency, innovations in energy storage and investing in new energy sources like wind and solar. It also said it will help several EU countries struggling to move away from their old energy sources.
Andrew McDowell, the bank’s vice president, said carbon emissions from the world’s energy industry hit a new record high last year and that it was urgent “to counter this trend.”
He called the EIB’s lending policy against fossil fuels “a crucial milestone in the fight against global warming.”
(Courthouse News reporter Cain Burdeau is based in the European Union.)