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"We do believe we are helping to set the standard for all international institutions for what it means to be Paris aligned," Andrew McDowell, the bank's vice president in charge of energy.
The shift in policy approved in Luxembourg sends a clear signal that business as usual when it comes to financing big energy projects is dead. Getting the bank's stamp of approval and cheap finance is crucial for project developers, allowing them to more easily tap private markets.
The rules will end lending to fossil fuel projects as of 2021. That's a year later than the EIB had originally suggested, but their 2020 proposal sparked a storm of protest from the EC and some of the 28 EU countries that are the bank's shareholders.
The 2021 cut-off will allow for the financing of a last wave of infrastructure projects that have already received EU backing — a compromise the Commission pushed for and said it's "satisfied" with. By 2025, half of the bank's investments — it loaned €55.6 billion last year, of which about €16 billion went for energy projects — will go to climate and sustainable investment projects.
The bank also set a strict limit for financing power generation projects of 250 grams of carbon dioxide per kilowatt-hour — replacing the old standard of 550 grams. The tougher guidelines exclude not only coal-fired power (which the bank has already stopped financing) but also unabated natural gas — that means projects will have to incorporate technologies like carbon capture and storage to squeeze under that threshold.