European Bank makes coal untouchable, oil and gas stay, for now

The European Bank for Reconstruction and Development (EBRD) has approved its new ‘energy sector strategy’ that targets the creation of an energy sector which delivers clean, secure and affordable energy for all. The new strategy will look to focus on key renewables financing, while no longer financing thermal coal mining or coal-fired electricity generation projects.

The strategy will look to scale-up the investments in renewables in the next five years, by supporting the integration of energy systems, promoting the switch to cleaner and more resilient energy sources and facilitating electrification as a means to clean the economies where it invests, which include some of the least energy-efficient and most polluting economies and cities in the world, the bank said.

Complementing the direction of the new strategy the Bank confirmed in its statement that it will no longer finance thermal coal mining or coal-fired electricity generation, and will also stop funding any upstream oil exploration, and won’t finance upstream oil development projects except in rare and exceptional circumstances, where such investments reduce greenhouse gas emissions. The Bank will, however, continue to support the gas sector where it is consistent with a low-carbon transition that is both secure and affordable.

EBRD did almost 11 billion dollars worth of funding in 2017.

Nandita Parshad, EBRD Managing Director, Energy, and Natural Resources, said, “Urgent and decisive steps are needed to address the challenges posed by climate change and poor air quality. This requires a fundamental shift away from hydrocarbons to cleaner energy sources. That means the electrification of economies, including industry, transport, and heating, with that electricity generated overwhelmingly from renewable sources. This is the goal that we have placed at the centre of our new energy sector strategy: to decarbonise the power sector with a decisive shift away from the most polluting fuels. Achieving this goal requires smart, integrated and resilient networks and reliance on competitive, regionally integrated and resilient markets to deliver this change. Our dual role as investors and facilitators of policy reform, coupled with our commitment to promoting environmentally sound and sustainable development, means we are ideally placed to deliver this transition.”

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The new strategy sets the strategic direction of the bank’s investments and policy dialogue in the energy sectors of the 38 economies where it works for the period 2019-23. Covering two key areas in which the Bank is involved, electricity generation, transmission, distribution, storage and supply; and hydrocarbon extraction, processing, transportation, distribution, storage, and supply. “The strategy focuses on the generation and supply of energy and thus complements the EBRD’s efforts in demand-side energy efficiency,” the release noted.

A big break for renewables which have often found it harder than conventional fossil fuels to secure investments from Banks. More tragically in the sub-continent where investments in thermal coal projects have continued to flow out, even as it looks to aggressively push for renewable power.