Check against delivery
Ladies and gentlemen,
It is a great pleasure for me to be with you this morning. I would like to thank the Atlantic Council for hosting this event during this very busy week here in Washington DC.
The reason why EIB wanted to organise this event with the Atlantic Council today on financing the energy transition is to explain the new proposed Energy Lending Policy for the Bank.
- This policy is needed now more than ever as we support countries in their transition towards a low carbon economy.
- It is timely given the discussions on the Paris Agreement ahead of 2020, when the nationally determined contributions are expected.
- It is ambitious, reflecting the new EU climate and energy targets.
- And it is a paradigm shift for an International Financial Institution, because the EIB is proposing the phasing out of our support to fossil fuels.
Ladies and gentlemen,
Energy has always been at the core of EIB activity. The first energy projects that the Bank financed 60 years ago in the early 1960’s were a coal-fired power plant in West Berlin, Germany [BEWAG].
This plant is still in operation today (e.g. Reuter CHP), which illustrates perfectly well the lifespan of energy infrastructure.
It reminds us that the projects that the Bank is financing today will still be operating in 2040, 2050 and even beyond 2050. By then, we have to meet our 2050 target of “net zero” emission. We therefore need to ensure the correct direction of travel.
Ladies and gentlemen,
We are now at a crossroads. We must act immediately and swiftly if we want to ensure a sustainable transition to a “net-zero” emissions economy.
The accumulation of greenhouse gases has caused average temperatures to rise by almost 1°C globally above pre-industrial levels. Two-thirds of this increase has occurred since 1975.
If business continues as usual, we will have stoked a rise in global average temperatures of 4°C by the end of this century.
Under such a scenario, heatwaves would become the norm. An average July day in Europe and the US would see temperatures in excess of 40° Celsius or 104° Fahrenheit.
Drought, forest fires, crop failures, food shortages and disease pandemics would become commonplace events, potentially displacing millions of people.
We should remember that the present wave of migration in the Middle East had its origins in drought and other climate-related problems.
The EIB is already green
From our establishment in 1958 right through to today, we have supported post-war reconstruction, the single market and the integration of new members and indeed economic and social cohesion across all regions of the Union.
Through the last decade, we evolved our policies and priorities to help fight the financial and sovereign debt crises and support jobs and recovery, particularly by improving SMEs’ access to finance.
These, of course, remain important objectives, but there can be little doubt that the most urgent challenges facing the EU – and indeed the world – today are environmental, notably the challenge to adapt to rising global temperatures.
The IPCC reminds us in stark terms that the world is nowhere close to meeting the targets agreed at Paris, and that on current trends we face potentially catastrophic risks.
The EIB has always been at the forefront of Multilateral Development Banks’ efforts on climate. Since 2012, we have provided around USD 170 billion of finance supporting over USD 600 billion of investment in climate action and environmental sustainability, making the EIB Group the world’s largest multilateral provider of finance for climate projects.
Since we first set ourselves a climate action finance target in 2010, our ambition has been increasing. In 2015, we pledged to provide USD 100 billion for climate action projects in the five-year period to 2020. We are delivering on that target. Indeed, since 2016, we have invested approximately USD 71 billion into climate action projects.
Having said that, the EIB can and is ready to become even greener.
The EIB Group is currently finalising its increased ambition for 2030 climate action and environmental sustainability. Our approach builds around three pillars:
1) An increase in our own financing. Last year, nearly 30% of the EIB’s new commitments worldwide were dedicated to climate and environmental goals. I would like the EIB to be much bolder and aim for 50% for these objectives by 2025.
2) A commitment to grow sustainable finance from billions to trillions. By working with our public and private partners, we aim to help unlock at least USD 1.1 trillion of investment by 2030. This will include a marked increase in support for climate adaptation and resilience.
3) Building on our 2015 Climate Strategy, we will align all the EIB Group’s financing activities with the principles and goals of the Paris Agreement by the end of 2020.
EU Climate and energy ambitions
The EU is the world’s pathfinder in the energy and climate transition, and is on course to deliver on its 20/20/20 targets by next year.
You may recall, these commitments were that by 2020, the EU would
- reduce by 20% the emissions of greenhouse gases (GHG) compared to 1990 levels,
- increase by 20% the energy efficiency in the EU,
- and reach a 20% share from renewables in the EU’s total energy consumption.
The new 2030 EU Climate and Energy Targets agreed as part of the Clean Energy for All Europeans package aims for:
- at least 40% cut in GHG emissions (from 1990s level),
- at least 32% share of renewable energy in final energy demand, and
- at least 32.5% energy efficiency improvements.
The European Commission – supported so far by 24 Member States – has gone further, and proposes that the EU commit to “net zero” emissions by 2050.
- Current greenhouse gas emissions will need to be cut by 50% in the next 10 years, and then by another 50% by 2040.
- The energy sector will have to lead the way - energy related investments will need to double to more than USD 440 billion per year of investment in the next decade and to over USD 600bn per year in the decade thereafter, in order to take nearly all greenhouse gas emissions out of our energy system by 2040.
The incoming European Commission announced in September 2019 ambitious objectives to further increase decarbonisation efforts with the proposal for a European Green Deal, aimed at making the EU the world’s first climate neutral continent by 2030. This includes calls for the Bank to increase its support to climate action and to assume a stronger role as the EU Climate Bank. We welcome this and the Bank is already stepping up to this challenge as I have outlined.
Business-as-usual – or even incremental policy changes – will not deliver on these ambitions. The decisions we make today have long-term consequences.
Policies need to change, and change quickly. If we get it wrong, we will lock in high carbon energy infrastructures that ultimately will make the energy transition much more costly for us all, in both financial and environmental terms.
The EIB’s new Energy Lending Policy
The new EIB Energy Lending Policy, subject of a constructive and controversial discussion by the EIB Board earlier this week, will be an important step in this regard. Our proposal has a strong focus on energy efficiency, renewable energy, power grids and research and development.
The Bank has in recent years delivered debt financing of around USD 13-15 billion per year in the energy sector, helping to finance the creation of around USD 39 - 44 billion of new assets. This is significant but still small compared to Europe’s overall needs, never mind the world.
The question before us today is how best to use the scarce financial and human capacity at EIB to best effect to accelerate the energy transition.
Vice-President Andrew McDowell, who is leading the review of the EIB Energy Lending Policy, will present the content of this policy.
But before that, let me end with one last important point.
EIB support to the just transition
We must not forget that some countries are further advanced than others on the road to a low-carbon economy, and that some areas, communities and sectors will be more deeply affected than others by this transition.
We are fully aware that some regions are very dependant on fossil fuels production in particular from coal and have different needs and we are committed to ensuring that no one is left behind. We need to focus in particular on jobs in these regions.
We have seen the detrimental effects on communities and regions in the past when a transition is not fair and just.
We stand ready to develop new products and ideas to make this vision a reality.
Thank you very much!