As the European Investment Bank launches a public consultation on future energy lending, Vice President Andrew McDowell argues for a doubling in energy investments in the next ten years.
Andrew McDowell, Vice President of the European Investment Bank
Our planet’s climate is changing and we must respond by transforming the way we produce energy and consume it. It is imperative that we rein in carbon emissions just as we bring clean and affordable energy to those who lack safe, secure supplies.
We all care about this. Our climate survey shows that 78% of Europeans are “concerned” or “alarmed” about climate change. People also care about jobs and social cohesion. In Germany, the announcement that coal is to be phased out rightly enthused those who see the potential for a dramatic reduction of emissions. It also triggered anxiety about the rate of the phase out and its social costs. Transforming our energy mix is a complex task involving a wide range of stakeholders. And yet, if we handle the shift to clean energy correctly, we can generate strong enthusiasm for climate action and greater confidence in its economic impact. After all, since 2012, the number of renewable energy jobs has grown 45% worldwide, compared to an increase in all jobs of only 5%. In the EU, renewable energy jobs more than doubled since 2000, against a 7% overall increase in jobs.
Multilateral public investors like the European Investment Bank (EIB) have a significant contribution to make. Our financing and advice must be directed at investments that cut emissions and combat climate change. It must create the jobs and growth in the renewable energy and energy efficiency sectors that will ensure the transition leaves behind no part of our societies and no region of the world. To make this work, there has to be substantial thinking on the principles and guidelines followed by major investors.
The stakes are high: we are one of the world’s biggest financers of energy projects. In 2013-17, the energy projects we signed resulted in avoided emissions annually of about eight million tonnes of CO2, equivalent to emissions from 1.7 million cars driven for one year. In the last five years alone, the EIB provided over €50 billion in energy investment in Europe and around the world to renewable energy, energy efficiency and electricity grid projects. This lending helped make solar and wind power much cheaper, with costs down 73% and 22% respectively since 2010. By 2050, energy costs could fall from 5% of global GDP to a little over 2%.
Today a policy we laid out in 2013 guides our lending. In that year, the EIB became the first multilateral development bank to introduce an emissions performance standard — a cap on emissions in the projects we finance —that blocked loans to coal-fired power generation. We stopped financing coal production 30 years ago. The global impact of EIB renewable energy projects since 2013 will ultimately be 38,000 MW of generation capacity, producing enough clean energy to supply 45 million households.
To be sure, part of the balance we must strike between environmental and social concerns is evident in our continued financing of gas extraction, transmission and distribution, as well as some gas-fired power generation. Under our existing policy, we have financed gas to keep energy affordable and secure, as well as to provide backup for renewables, as a cleaner alternative to coal and/or liquid fuels. But as we prepare our new energy lending policy, we believe that the gas industry must now explain its decarbonisation strategy and show how it is consistent with EU emissions reduction targets.
Over the next decade, energy investment will have to double. More than 50 million people across Europe live in energy poverty, struggling to get warm enough, unable to pay utility bills or inhabiting places that are damp and mouldy.
The wind doesn’t blow every day, and neither does the sun shine around the clock, so we must finance energy infrastructure and innovative digital technologies like smart meters to better manage and store renewable power generated throughout the year. Digital innovation is essential to scaling up the use of electric cars and public transport. The EIB has provided €3.5 billion since 2008 in energy-related research development and innovation, and manufacturing. About two-thirds of that went to wind or solar.
But global investment in research and development in renewable energy is still much too low. The global number in 2017 was $32 billion, of which $22billion was provided by governments. That is half of what the EU automotive industry alone invests each year in R&D.
Success also depends on the solar panels on your roof and financing from the bank on the corner of your street. In less mature energy sectors, such as energy efficiency and small-scale off-grid renewables, there is room to grow. Local banks and pension funds will have to be part of the financial solution. Given their lack of technical expertise and financial experience in the energy sector, these vital players need the support of large multilateral financial institutions.
This month and next, the EIB is holding a comprehensive public consultation on future energy lending. I invite a contribution from all stakeholders concerned or involved with energy policy and investment, or from those wishing to help us accelerate the energy transition.
We want to hear from you how we can do better. We must all work together on this great energy transition.
As originally published on 20 February 2019 on https://foresightdk.com/invitation-energy-transformation/
Please go to this link if you want to find out more about the EIB’s public consultation: http://www.eib.org/en/about/partners/cso/consultations/item/public-consultation-energy-lending-policy.htm