By Werner Hoyer, President of the European Investment Bank
At a well-attended event organised this April in Berlin by the Institute for European Policy to boost young voter turnout, I commented to the German President Frank-Walter Steinmeier, “Look, this proves that young people can be mobilized for a good cause!” To which the German President Frank-Walter Steinmeier responded: “Yes, that is true. But much more importantly, it is the young people that will mobilize us.”
He is right. Young people like the hundreds of thousands of Fridays for Future climate protesters have mobilized us this year to protect humanity from the climate emergency.
At the European Investment Bank, the world’s largest multilateral bank, we have long been one of the world’s main financers of climate action. Still, we felt we needed to change our approach, so that we could have a greater impact on the climate. I want to share our experience with you, because climate change means all of us have to change. Institutions, companies, households need to change the way we do things. I know from our experience this past year that change can be difficult. But I also know that it is unavoidable, and – more importantly – possible.
How we changed
We decided to increase the bank’s climate finance to 50% of all our lending, which we hope will support €1 trillion of investment in climate projects by 2030. We proposed fully aligning our activities with the Paris Agreement. And we laid out an ambitious new energy lending policy, under which we would stop financing traditional fossil fuels and focus fully on energy efficiency, renewable energy and other innovative projects that would help keep climate change below 2°C.
Why did we feel we had to do this? Our mission, set out more than 60 years ago, calls for us to finance “projects of common interest to several Member States which are of such a size or nature” that it would be inefficient for individual countries to tackle them. Climate change is clearly a challenge of this size and nature. We all need to work together to mitigate greenhouse gases where they are created and to adapt infrastructure where it is most vulnerable to climate change. Polluting in one location can have a devastating effect in another place. Equally, the benefits of fighting climate change can be shared by many.
Once we announced what we wanted to do, a great debate ensued. We received almost 150 written submissions from concerned organisations and individuals, and petitions signed by more than 30,000 people, about what they wanted to see in our new energy lending policy. Protestors came to the bank’s headquarters. We had to acknowledge that some countries have very different starting points—including some among the EU member states that are our shareholders. For some countries, investment in natural gas would be a step in the right direction from coal, which pollutes even more. In others, there are such pressing needs for investment in public services that switching to a different energy source just doesn’t make it into the top concerns of the citizens. An end to fossil fuel financing will, in some countries, sooner or later bring an end to an industry that has sustained a lot of jobs and economic activity for entire regions. We must ensure a just transition in these regions to ensure that no one is left behind.
No stranded assets
So we were reminded that change is never easy, as we tackled these issues. At the same time, we had to draw the line somewhere. Our investments are for the long-term. Back in 1960, we invested in a coal power plant in West Berlin. It is still operational today. So we need to be very careful about future implications of investments we make today. It is a responsibility to the environment and to our investors. The projects we finance today should not end up being stranded assets in a decade.
Our plan is as much about what we won’t finance as it is about what we will do. We will finance the transition to a low carbon economy, help cut greenhouse gases, drive innovation and help millions living in energy poverty in Europe. But we cannot be half green. We must have climate in everything we do. For this reason we aim to be Paris aligned in our financing by the end of 2020. We will finance projects that help areas currently most dependent on fossil fuels for jobs and public services. And we will support innovation and new technologies across the energy sector—in energy production, energy storage, and energy consumption, for example in electric vehicles.
The Spanish are more optimistic
We need to start now. The Paris Agreement is a commitment to keep global warming below 2°C, aiming at 1.5°C. To reach this target, we have a total “carbon budget” of 580 gigatonnes. That means from now until forever, we can only emit 580 gigatonnes of CO2. Granted, it’s a big number, but at the current rate of about 37 gigatonnes per year we will have exhausted this budget by 2032. The next decade will be critical.
What will all these investments do to our way of life? A great example comes from Katowice. The Polish city phased out coal at the end of the 1990s. European Investment Bank financing has helped rejuvenate the city and turn it into a lively place today. Just recently, I met someone from Poland who told me how his grandmother in Katowice used to have to wash her curtains twice a week, because there was so much coal dust in the air. Now she only washes them twice a year. That is how much the city has changed. Last year, the main UN climate conference took place in Katowice, and I could not imagine a more suitable location to show that change is possible.
We know that people are with us in this fight. This year the European Investment Bank conducted a global climate survey to better understand people’s views. How people feel about the fight against climate change is important, because this determines whether they are open to change or not. Are they willing to recycle more, to use more public transport, to do things differently?
Our survey showed that climate is the number one concern for Europeans. Most people even told us that they are already feeling the effects of climate change. Most importantly, a lot of people were convinced it can still be reversed. Spaniards were generally more optimistic than average, with 68% believing climate change can be reversed and 80% of respondents seeing themselves as part of the solution. This is certainly how we at the European Investment Bank would have answered those questions. We hope to work with the Spanish public sector and private investors to back projects that will fight climate change.
We are truly at the dawn of a critical decade. The sun will rise, and it will be hotter. But we can also rise, and change for the better. This has been the message of the young people to all of us this past year. They are the ones who have the most at stake, so we had better let ourselves be mobilised.
Originally published in Spanish in el Economista.