Climate change mitigation and adaptation: an EIB priority

European Investment Bank

Support for climate change mitigation and adaptation continues to be a priority for the European Investment Bank (EIB) in the current financial and economic crisis. Created by the 1958 Treaty of Rome as the long-term lending body of the European Union (EU), the EIB ensures the projects it finances are in line with EU policies and contribute towards the integration, balanced development and economic and social cohesion of the EU Member States.

EE lending amounted to EUR 700-800mil. in 2008, mostly to combined heat and power projects and district heating networks.

In accordance with the EU environmental sustainability goal to reduce CO₂ emissions, the impact of energy production and consumption on the environment, mitigation and adaptation measures are key to the EIB’s appraisal process. The Bank has invested considerable resources in cleaner energy sources lending, including renewable energy (RE) and energy efficiency (EE). Financing of renewable energy projects reached EUR 2.3bn in 2008. In 2009, the EIB decided at least 20% of its energy projects in the EU should be in renewables.

The EIB undertakes a due diligence project appraisal to evaluate the technical, environmental, economic and financial viability for all proposed projects. As standard practice, the Bank also considers whether projects use the best available technologies from an EE point of view. Energy audits to identify EE investments may also be funded by the Bank if justified, and technical assistance (TA) funds have been set aside. In 2007, the EIB established stricter criteria for the definition of EE projects insisting on an EE increase of at least 20% compared to the situation without the project. Projects resulting in lower EE increase may qualify if at least 50% of the investment cost relate specifically to energy savings.

The EIB’s additional energy and climate change package is EUR 6bn per year for 2009 and 2010, with an additional EUR 2bn per year for a clean transport facility for the automotive and other transport industries, their original equipment manufacturers and component suppliers. The European Clean Transport Facility will help lower CO₂ significantly through research, development and innovation investments and the financing of tangible fixed assets in related infrastructure and production plants. The Facility supports development of fuel-efficient vehicles to reduce the transport sector’s carbon footprint.

Cooperation with other institutions

A 2020 European Fund for Energy, Climate Change and Infrastructure (“Marguerite Fund”) is being set up by the Bank with the European Commission and others. The Fund will finance equity and quasi-equity projects in the EU, aiding the internal energy market, integration of renewables and enhancement of internal security of supply.

The EIB supports the Covenant of Mayors’ Initiative of the European Commission by increasing lending to urban environment projects developing EE and RE potential. A TA facility is being developed with the Commission to support this. The two institutions are also participating in the European Strategic Energy Technology Plan, designed to accelerate the development and deployment of cost-effective low-carbon technologies.

Outside the EU, the EIB strongly supports the implementation of a Mediterranean Solar Plan (MSP) as an EU priority project for the Mediterranean. The Plan aims to develop regional renewable energy sources, focusing on wind and solar power.

2009 should also see the finalisation of the first investments done by GEEREF, the Global Energy Efficiency and Renewable Energy Fund managed by the EIB Group for small and medium-scale EE and RE projects in developing countries and emerging economies.

Carbon finance

Carbon finance initiatives are integral to the EIB’s response to challenges raised by climate change. In cooperation with other public and private financing institutions, the Bank has established market-based instruments to encourage carbon trading at national and international levels. EIB-sponsored carbon funds focus on the less developed areas of the carbon market with the aim of helping EU Member States, companies, and institutions meet carbon emission obligations under the Kyoto Protocol and the EU’s Emissions Trading Scheme (ETS). The Bank seeks to anticipate market developments, build confidence in post-Kyoto regulatory developments and help promoters in economies in transition and developing countries to raise finance for low-carbon investments.

The most recent initiatives include the second tranche of the EIB-KfW Carbon Programme which focuses on purchasing carbon credits generated in least developed countries and, to some extent, transition economies. With a total amount of EUR 100mil., the fund covers post-Kyoto credits to 2020. Worth noting is also the first EIB-sponsored national carbon initiative. The Fonds Capital Carbone Maroc supports the development of Clean Development Mechanism projects by Moroccan promoters with a total envelope of EUR 26.5mil. for purchasing carbon credits.

The EIB has also launched a pilot exercise to measure the carbon footprint induced by the projects the Bank finances. The results should be available early 2010.

European Investment Bank (EIB)
W: www.eib.org