EU must stop subsidising fossil-fuels infrastructure
The European Fund for Strategic Investments is funding dozens of carbon-intensive projects, at the expense of genuinely sustainable infrastructure, argues Anna Roggenbuck
The EU had just begun recovering from the economic and financial crises, when European Commission president Jean-Claude Juncker presented his “A new start for Europe” investment Plan back in 2014.
The so-called Juncker Plan - with its ambitious outlook for over €300bn in additional transformative and job-creating investment - thrilled everyone.
Long lists of projects were dug out from the deep drawers in many EU capitals to prove the necessity of this grandiose initiative. Criticism however, was voiced by Bankwatch and other environmental groups and think tanks regarding the sustainability of the proposals.
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Since it became fully operational in January 2016, the so called Infrastructure and Innovation Window, a bigger part of the European Fund for Strategic Investments (EFSI), has guaranteed European Investment Bank (EIB) loans worth over €20bn.
This was supposed to guarantee EIB high risk loans or provide guarantees to activate projects which otherwise would be of only limited scale or not materialise at all. Therefore expectations were high.
In the energy sector in particular many had hopes that energy efficiency and renewables projects, which had not enjoyed EIB support until then, would help generate new jobs.
In October 2016, Bankwatch’s first analysis of the EFSI investments showed that, despite claims by the EIB and the European Commission that the EFSI was a strong contributor in the fight against climate change, the fund has in fact, handed out billions of euros of public money to fossil-fuels projects and motorways, in wealthier EU Member States.
"Our latest study has revealed that EFSI has supported EIB loans to fossil fuels projects in the energy sector to the tune of €1.85bn"
These were not only our concerns. The Commission also proposed a new regulation for post-2018 EFSI restraining it from aiding these kinds of investments and earmarking 40 per cent of EFSI funds as climate finance.
Our latest study has revealed that EFSI has supported EIB loans to fossil fuels projects in the energy sector to the tune of €1.85bn. Most of these investments were located in Italy and some in the UK, Germany, Spain and Portugal.
Renewable energy projects received only slightly more, €2bn. Around 75 per cent of these projects are in just three states, the UK, France and Belgium, where in the last three years EIB renewable energy investments has already been above the EU average. Is the EFSI really addressing the market failure it was meant to address?
EFSI investments in the transport sector - which is responsible for almost a quarter of Europe's greenhouse gas emissions - are just as unsustainable. Over €1.2bn went to motorways, half of this sum was spent in Germany, the Netherlands and Italy which do not lack roads.
"It is incomprehensible that, in spite of EU policymakers’ repeated rhetoric about climate leadership, the EU budget is used to finance new, unnecessary gas and motorway projects but is absent where it is really required"
Another €1.3bn was awarded to the car industry, despite the Dieselgate controversy and the EU anti-fraud office’s investigation that confirmed Bankwatch’s concerns that EIB money had likely been fraudently used in emissions rigging.
Additionally, EFSI cash has not managed to leverage climate action investments - that would not have been possible without EIB guarantees. In fact, in 2016, only 20 per cent, or €2.5bn of EIB loans through the EFSI guarantee contributed to climate change mitigation and adaptation, whereas the EIB’s standard portfolio reached more than 25 per cent.
No less than 70 per cent of EFSI’s support to climate action went to Belgium, France and Germany.
We are missing an opportunity for EFSI to enable genuinely sustainable infrastructure that is 100 per cent climate-proof. It is incomprehensible that, in spite of EU policymakers’ repeated rhetoric about climate leadership, the EU budget is used to finance new, unnecessary gas and motorway projects but is absent where it is really required.
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