12 November 2019
As the European Investment Bank (EIB) Board of Directors prepares to vote on excluding natural gas from its lending policy, lawyers have issued a clear warning: continuing to finance fossil fuels would breach the Bank’s legal duties.
The EIB, the world’s largest multilateral development bank, proposed a groundbreaking policy in July to stop all loans to fossil fuel projects from 2020, based on the urgent need for the EU to decarbonise in line with the Paris Agreement goals. The proposal had been widely welcomed by climate scientists and NGOs.
But the Bank’s final decision will be made by its Board, which is composed of Member State representatives with voting power reflecting each country’s contribution to the Bank. Germany – which has a 16% share in the bank – is pushing to keep gas loans alive. The EIB’s Board has delayed its decision to November 14.
ClientEarth, which has ongoing legal action against the EIB over its biomass lending, has written to the Bank’s Board, stating that a decision to keep giving public money to natural gas would constitute a “clear breach” of its legal duties. Between 2013 and 2017 the Bank gave around €10bn in loans to gas projects.
The environmental law charity also wrote this week to the relevant German ministries, reminding them of their legal position – and that pushing to keep gas lending in the EIB’s policy would breach Germany’s national and EU legal duties too.
ClientEarth CEO James Thornton said: “Our message to the EIB’s Board of Directors is clear: it must revert to its original draft policy, cutting gas lending out of its portfolio and channelling investments instead into clean energy and carbon-neutral solutions. In the transition to net-zero, it is impossible to justify ongoing finance to fossil fuels from the public purse.”
Governments frequently brand gas as a ‘cleaner’ alternative to coal, attempting to justify its use in the energy transition.
Thornton said: “Holding up gas as the lesser of two evils is irrelevant at this point. All fossil fuels are major greenhouse gas emitters and prolonging their use is unjustifiable while the world battles to keep climate change at bay. The case against gas becomes yet clearer when methane leakage throughout the supply chain is factored in.”
The new EIB policy would kick in in 2020, and if gas is included in it, public money could be used to enable projects with a 20- to 50-year lifespan.
Thornton added: “A policy that allows continued lending to gas will present one of two major problems: it will either lock in fossil fuels for decades to come, despite the urgent decarbonisation task we have on our hands, or yield a harvest of stranded assets when plants are forced to close before they make their money back.
“The EIB has been progressive so far on climate issues but it must not be undermined by its Member State directors at the last moment. It is 2019 – the horrifying impacts of climate change are materialising around us and public money must no longer be spent on fossil fuel projects.”
EU Member States also called on the EIB this week, encouraging it to adopt responsible investment policies – including the eradication of fossil fuel funding.
Notes to editors
The second letter to the German ministries can be found here, sent to accompany the legal analysis.
In the letters, the lawyers lay out the relevant legal obligations of Member States and the EIB, explaining that there is a clear imperative to phase out support for gas and other fossil fuel-reliant projects:
1. The Paris Agreement provides for greenhouse gas emission reductions and financial flows consistent with limiting global temperature rise. The EU is a party to the Paris Agreement and has repeatedly committed to making the emission reductions and facilitating the clean energy investment required by that Agreement.
2. Member States are legally obliged to act consistently with, and in support of, the commitments given by the EU on their behalf in the Paris Agreement. This obligation derives from the principle of sincere cooperation set out in Article 4(3) TEU. It includes taking such measures as are necessary to ensure the fulfilment of other obligations arising under the Treaties, including in relation to the EIB.
3. Under Article 309 TFEU and Court of Justice case law, the EIB is required to contribute towards the attainment of the EU’s objectives. Under Article 18 of the EIB Statute, the EIB is required to employ its funds rationally in the interests of the EU. The EU’s objectives and interests include the EU’s commitments under the Paris Agreement and its environmental protection obligations in Articles 11 and 191 TFEU.
Natural gas is by far the biggest fossil fuel beneficiary of the EIB’s lending – a combination of extraction, transmission, distribution and storage.
Oil Change International published a briefing in June, outlining the incompatibility of gas lending with the EIB’s responsibilities. It concluded: “The EIB cannot claim to uphold its commitment to align its finance with the Paris Agreement if it continues to finance fossil gas projects.”
Multiple NGOs spoke out in support of the draft fossil fuel exclusion policy issued by the EIB in July.
EIB chief Werner Hoyer was reported to say on the vote that the EIB was “expected to be ambitious…I do not believe we should disappoint”.
In an earlier interview, he also said: “We believe that gas emissions are too high and cannot be maintained. We must move out of these fossil fuels. We are aware that it takes help for the regions that are dependent on coal and gas. But one should not hide behind these arguments in order to perpetuate the use of these types of materials.”
EU President-elect Ursula von der Leyen wants half of the EIB’s annual lending to be ‘green’.
Read E3G’s briefing: Deep decarbonisation and the future of gas in the EU.
ClientEarth is a charity that uses the power of the law to protect people and the planet. We are international lawyers finding practical solutions for the world’s biggest environmental challenges. We are fighting climate change, protecting oceans and wildlife, making forest governance stronger, greening energy, making business more responsible and pushing for government transparency. We believe the law is a tool for positive change. From our offices in London, Brussels, Warsaw, Berlin, New York City and Beijing, we work on laws throughout their lifetime, from the earliest stages to implementation. And when those laws are broken, we go to court to enforce them.