European Bank Reneges on Pledge for Green Lending

The European Bank for Reconstruction and Development is reneging on pledges to support low-carbon economic models in Eastern Europe, and is instead ramping up its lending for fossil-fuel energy projects, critics say.

Critics say the bank (EBRD), created solely to help former communist countries transform their economies, more than tripled its lending for fossil fuel projects in 2008-2009, and is approving energy investments which would effectively lock countries in carbon-intensive economies for decades.

Fidanka Bacheva-McGrath of the NGO Bankwatch Network told IPS: “The EBRD has publicly said that it wants to back economies’ transition to low-carbon models, but the numbers are saying something different – that they are backing fossil fuel projects.”

The EBRD was created in 1991 to help former communist states across Eastern Europe and central Asia following the fall of the Iron Curtain. Since then it has invested heavily in projects in a raft of sectors. Its owners and financers include 61 countries and two EU institutions. Bankwatch and other groups say this means its lending for such projects is in effect using public money.

In recent years the EBRD has publicly stated a clear intention to promote energy efficiency, renewable energy and low-carbon economic models. But Bankwatch says this commitment is now in doubt as data from the EBRD shows that it is in fact increasing lending to projects based on exploitation of environmentally-damaging fossil fuels.

It says that the bank’s lending for coal, oil and gas power projects rose dramatically between 2006 and 2009 from a total of approximately 250 million euros in 2006 to over 1.3 billion euros in 2009, and that it tripled in 2008-2009 from 419 million euros to 1.3 billion euros. It adds that although the EBRD has made “praiseworthy” investments in energy efficiency averaging around 533 million euros per year, it has invested only 80 million euros per year in the 2006-2009 period in renewable energy projects.

The group says that its figures include EBRD lending to fossil fuel energy efficiency projects. But it points out that even if different methodology were used and fossil fuel energy efficiency projects were not included as fossil fuel investments, EBRD lending for fossil fuel projects has still risen sharply in the same period, and more than doubled between 2008 and 2009.

The EBRD has come under attack from other groups, such as the environmental movement Friends of the Earth over its lending for fossil fuel energy projects, and has been criticised for ignoring concerns over projects’ environmental impacts.

In 2006 the bank launched a Sustainable Energy Initiative aimed at helping to improve energy efficiency and promote the use of renewable energy sources. But Bankwatch says the EBRD’s most recent plans show it intends to continue its heavy support for fossil fuel projects.

It points out that one of the EBRD’s most recently approved investments is a 250 million euros loan for a new block at a lignite fired power plant in Slovenia. The group says that the project will tie the central European state to a carbon-intensive economic model for decades.

The EBRD has also recently announced plans to take a 21.9 million euros stake in the Central Europe Oil Company, which aims to redevelop hydrocarbon reservoirs in Central Europe.

Bacheva-McGrath told IPS: “The EBRD will go on investing more and more in fossil fuel projects. We have heard that they are interested in coal projects and we expect coal will be on the rise on their agenda. The EBRD will say that they are doing this because the demand is there (for fossil fuels) and these (CEE) countries have these resources and can benefit from them. But we say that public money should not be going into these projects.”

When contacted by IPS about Bankwatch’s claims, the EBRD defended its energy investment policy. Anthony Williams, head of media relations at EBRD told IPS: “As far as fossil fuels are concerned, the EBRD continues to finance such projects provided that acceptable technical, financial, governance, transparency and environmental standards are capable of being met. EBRD involvement in such projects always aims to achieve the highest possible environmental standards.

“It is also important to recognise that fossil fuel-based projects along the supply chain, where they are part of the least-cost fuel mix, can have an important positive economic impact as drivers of economic growth in countries or regions otherwise poor in resources and opportunities, and/or part of a clearly developed low-carbon economic growth strategy.”

He added that the EBRD’s investments in energy efficiency – which Bankwatch said “can only be welcomed” – was key to helping reduce carbon intensity in the region’s economies.

“The EBRD’s role in the modernisation of existing power plants also plays an important role in helping to reduce their carbon intensity,” Williams said. “The EBRD region has many outdated and inefficient power generation units which can be upgraded to achieve significantly improved efficiency and meet the EBRD’s standards for environmental performance, while prolonging their life for an interim period of 10-20 years.

“The EBRD will continue, where feasible, to prioritise projects that will introduce advanced technology for increased efficiency and reduced emissions, such as combined heat and power plants,” Williams said.

But Bankwatch believes that the EBRD must move away from further fossil fuel project investments if it is to fulfil its remit of helping countries in the region change their economies to long-term sustainable models that will benefit their people.

Bacheva-McGrath told IPS: “Doing what is easy and taking this route of supporting fossil fuel projects will not make Central and Eastern European countries better. It will not lead to a more sustainable and economically competitive future for these states.

“The EBRD should instead be supporting the development of radical technology and projects for renewable energy and sustainable resources. If people keep seeing that money is being used to support fossil fuel projects they will begin to lose faith in the EBRD’s promises to help economies transform to low-carbon models.”

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