European Investment Bank resists pressure to fund gas projects

The European Investment Bank will not fund any gas projects in spite of intense pressure from African and other developing countries to reclassify gas to draw investment, the multilateral lender’s president has said.

“We as a European public institution should not invest in assets that one day will be seen as stranded assets,” Werner Hoyer told the Financial Times.

Gas is comprised mainly of methane that can leak during distribution, and traps more heat in the atmosphere over a shorter period than carbon from burning coal.

Instead of backing the idea of gas as a so-called transition fuel from coal, which is the strong position of most African nations, the bank should take “the energy transition seriously and move to renewables”, said Hoyer.

The EU’s lending arm, and the biggest multilateral bank by assets, pledged in 2019 to phase out lending for all fossil fuel projects, including mainstream gas-fired power plants, by the end of 2021. The bank chief declared last year that “gas is over” in presenting the EIB’s results.

The EIB’s resolute anti-gas stance will probably inflame tensions with African countries over what constitutes a “just” energy transition.

Pravin Gordhan, South Africa’s minister of public enterprises, said the hypocrisy of Europe’s position had been exposed by its scramble for energy after Russia cut off gas supplies.

“Europe, which took the hardest line in terms of emissions, is now in trouble. It is keeping coal-fired power stations going and importing coal,” Gordhan said. “How does the EIB reconcile its views with what European governments are doing?”

In July, European lawmakers approved a law designating both gas and nuclear as sustainable energy sources for investment purposes. That designation is now being challenged by environmental campaign groups, as well as facing threats of legal action from countries led by Austria.

Hoyer acknowledged the gap between the European and African positions had widened, with what he described as potentially “explosive” consequences. He said the answer lay in more rapid technology transfer and funding for renewable energy sources and biofuels, rather than financing gas projects.

New fossil fuel projects were presented as transitional, he said, but were often “a perpetuation exercise for gas”.

The EIB president also said “blue” hydrogen projects — using gas-fired energy to produce hydrogen, paired with carbon capture technology to trap emissions — needed to be “scrutinised.” While some might be part of a “credible transition effort”. others may be a way to prolong the use of fossil fuels.

Hoyer accused some countries of “hiding behind the war in Ukraine . . . because they do not seriously want to go into the energy transition and into renewables.”

Much of the fault lay with western countries, he conceded, as they had failed to “walk the talk” when it came to helping poorer countries. “When I hear heartwarming pledges towards a partnership-based approach between the north and the south . . . we must bring more substance to that.”

The EIB chief said he had been disappointed to see so few European representatives attend a summit of African leaders in Rotterdam this month to discuss climate change adaptation.

Felix Tshisekedi, president of the Democratic Republic of Congo, who attended the summit, said: “I deplore the absence of the leaders of the industrialised nations and the private sector who are, as we know, the greatest polluters.”

Africa’s 54 countries have been responsible for only about 2-3 per cent of cumulative carbon emissions from energy and industry, but are among the worst affected by climate change.

“On a per capita basis, Europe’s electricity consumption from fossil fuel is at least 25 times Nigeria’s consumption from all energy sources,” said Aliyu Suleiman, chief of strategy at Dangote Group, Nigeria’s largest conglomerate, who said he was speaking in a personal capacity.

“Pragmatically, some of this will have to come from natural gas,” he added. “Denying such funding for Africa is denying Africa the opportunity to grow its economy and improve standards of living for its citizens.”

Hoyer’s comments came as world leaders gathered in New York for the UN General Assembly, and weeks ahead of November’s COP27 climate summit in Egypt. Leaders of developing countries are expected to press rich nations at both meetings for financial aid for climate-related destruction, or “loss and damage” financing.

Western nations have historically been reluctant to discuss the issue owing to concerns that it may be viewed as compensation. But progress is expected to be critical to the success of COP27 and to restoring trust in the multilateral process after rich nations failed to deliver on their promise to mobilise $100bn a year in support of developing countries by 2020.