Public consultation on the European Investment Bank Energy Lending Policy (ongoing, request for inputs/ideas, deadline 29/3)

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Dear all,

The EIB is currently requesting inputs for its financing policy related to energy infrastructure, in the context of accelerating climate change policies.

[In short] who is interested to work on a position paper in this regard? It might fall a little bit outside the purely technical ‘open energy model’ scope, but I think it would be highly interesting to contribute to the economic/institutional debate from a community like this, with both technical expertise and technology-based economic insight (together with other academic communities, such as: industrial ecology, input-output, …).

A draft google doc can be found at https://docs.google.com/document/d/1z_sCiuLyeR51zdJ1U8GacmMyXnO0ycWhnaFclejaoGo/edit?usp=sharing [please email me or request access in the document if you want to contribute]. The main content is at the moment a summary of the European Investment Bank (2019b) consultation document, listing the specific questions they want to have answers on.

[Longer] Some background information:

  • There is a (long-term) ongoing debate about to which extent the European Central Bank could use it’s Quantative Easing policy to direct funds for climate policy [energy infrastructure investment, climate mitigation & adaptation, …]. It is somehow split into a progressive [yes] and conservative [no] side, but it seems that the progressives are on the winning hand :slight_smile:
    • In the wider euro area ‘debt vs investment’ debate, 2013 Yannis Varoufakis and co. proposed a ‘Modest Proposal’ [tweet].
    • Paul de Grauwe (economist KU Leuven & LSE) also pointed regularly at the mismatch with having a EU monetary policy without a political union, in addition to the internal inconsistency of demanding climate investments and at the same time imposing fiscal rules that prohibit this [tweet]
  • Currently, there are more and more (economist) voices to take control of the ECB Quantitative Easing policy and direct it towards climate policies. A summary thread of the blogpost of Paul the Grauwe - in which he argues that the ‘best’ way to circumvent the traditional non-political role of the ECB would be to create money and give it to the EIB to direct investments - on this can be found here: tweet (+ original blogpost)
    • Other initiatives are steering in this direction, such as ‘Pacte Finance Climat’ (FR) and Roosevelt.be. (BE) There might be others in other countries (i would be interested to know them!), but PFC aims to be a European-wide movement to achieve this, preferably during the next elections. Some highlights of the conference of Pacte Finance Climat that took place in Paris last week 19/2 can be found here.
    • Another relevant event on the EU Energy Transition (role of institutions, decarbonisation policies and new energy players) took place the same day in Bruegel (Brussels). Some highlights from the event can be found here, as well as a google doc with notes from the event.
  • To know the exact numbers on how much national and multilateral investment banks invested in climate mitigation projects and renewable energy, the work of Bjarne Steffen and Tobias Schmidt from ETH [paper] is very instructive. A summary with key highlights and graphs from a webinar they gave in November last year can be found here.
  • Together with the consultation, the EIB published a piece in Euractiv to defend their policy and ask for further inputs [link to article, summary tweet]
    • They claim to have done a very large investment in the last years [link], but this does not seem to coincide with the conclusions of the paper of ETH [link]
    • Some interesting comments under the article (from ‘Mike Parr’, who claims to have been at previous workshops in Brussels) mention that the European Commission calculated that a yearly investment of 250 to 500 billion euros until 2050 is needed until 2050 to achieve zero carbon by 2050, which is far below the current rate (If somebody has more accurate / referenced material on this, I would be glad to hear from you).

To wrap up: as this is a highly political debate, I would think that it would be very valuable if there would be some voices from the academic community (technical and economic), to argue and push for the type and scale of investments. It seems the ‘central banking community’ are asking for those type of inputs as well, as can be seen from the agenda item How Academic Research Can Help Central Banks Contribute to the Transition? during a ‘Green Finance Research Advances’ seminar that was held at Banque de France in November 2018.

I am personally not an “expert” in this field, but I am following with high interest research and articles appearing in this field, and I am also active in the ‘Pacte Finance Climat’ community, trying to establish a meaningful link between the ‘academic literature community’ and political-economic groups and networks. Let me know if you are interested to join this effort, I would be happy to organize an (online) place where we could exchange thoughts and references.

Over the last months I created a literature folder [bibbase link] with papers related to climate finance and central bank policies, the next step is to summarise the EIB policy paper and consultation document. I also emailed the organizer of the consultation to ask if they would be happy with such a contribution, and whether the deadline of 29 March is a strict one. However, I suppose it should be possible to compile something useful by then. I will also reach out to the input-output and industrial ecology community for this, among other possible interested researchers (Paul de Grauwe, Pacte Finance Climat, …).

Best regards,

Florian

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Hey everybody, an update on the EIB consultation:

I went through (half) the consultation document and summarised the most important parts (see Google Docs Summary of consultation request), but it should be sufficiently instructive to have meaningful inputs, as they focus on a specific group of question, with a specific demand of technology-specific inputs on which types of technologies and infrastructure to support [links point directly to google docs]:

  • General:
    • Q1: Long-term strategy: additional dimensions to include?
    • Q2: EIB Framework: areas where bank can improve?
    • Q3: Area of renewables/efficiency/energy grids: can have EIB higher impact?
    • Q4: How can EIB address affordability: social and regional disparities?
  • Energy Efficiency:
    • Q5: Buildings: agree with proposed approach to only fund nZEB standard from 2021?
    • Q6: EIB energy efficiency financial and technical assistance products: experience/advice?
    • Q7: Energy efficiency in SMEs: technical assistance? Which type?
  • Decarbonising power & heat:
    • Q8: Auctions / declining costs renewables: how can EIB best support those?
    • Q9: EPS for power generation = appropriate saveguard? Adjustment for flexibility? Exemption for EPS in developing countries appropriate?
  • New energy technologies and business models
    • Q10: How to get more targeted support for renewables? New business models with financing needs?
    • Q11: EIB products to support innovative energy projects: appropriate / advice?
    • Q12: Expensive technologies: continue financing?
  • Securing infrastructure needed for transformation:
    • Q13: Long-term network development: where to focus on? PCIs, … ?
    • Q14: Gas infrastructure investment: views?
    • Q15: Should EIB stop supporting hydrocarbon production (in addition to exploration) ? Gas treated similar as oil?
  • Supporting transformation outside EU:
    • Q16: Where should EIB focus support: renewables, energy efficiency, electricity grids, … ?

Feel free to take a moment if you have any inputs on them and put them in the document! Although the EIB doesn’t decide everything on where to invest and in what, it is an important player. And the investments decided today will determine the next 20/30 years of energy system planning and climate mitigation.

I will continue the summary if I have time left (but other obligations for now), but any input, even very small, is very useful. I have been in contact with the EIB and they told they would very much appreciate every comment, and they demand specifically numbers and studies to enable increasing their climate ambition and action in stakeholder-dialogues. The :warning: deadline is on the 29th of March :warning:, but I understood that a small extension of this timeframe is possible.

For those who want to have more background information, I’ve put some documentation on my Github Pages:

Also instructive in this regard is the research of ETH (Bjarne Steffen & Tobias S Schmidt) on multilateral and national investment banks policies related to climate and energy: summary of their research presentation 4 months ago.

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For those interested in the ongoing EIB energy policy lending review, some updates on the matter:

  • The submission discussed above [ResearchGate link] got included in a comment synthesis report [input nr. 143, July 2019], serving as argument for:

    • Alignment with the Paris agreement (p. 1/13 - first number = written page number, second number = pdf page number )
    • The EIB should support further renewables including the needed network infrastructure. (p 89/101)
    • The need for energy efficiency improvement should be a focus area (…)
    • The EIB should support storage investments (p 90/102), one out of two in favor.
    • The EIB should provide technical assistance for policy advice, and this is an important role.
    • The EIB should take a more prominent role in helping to define and build proper energy policy in weaker countries, support the process of the Paris alignment, provide training to financial institutions and promote technology adoption (p 92/104)

  • I went through the resulting first draft energy lending policy document (July 2019), and wrote down comments in a twitter-thread and - more readable - blogpost. Most of it is specifically focusing on the role of monetizing future climate impacts and how the EIB plans to integrate this in project assessment.

  • In the meantime, this draft review document got revised again (26 September). The most noticeable change criticized by NGOs and to a certain extent industry, is the introduction of a vaguely defined carbon threshold/kWh for projects and addition of gas infrastructure as viable type of project. This version is up for debate by the EIB board on the 15th of this month.

    • However, not mentioned by the NGOs is that the EIB plans (although in vague wording) to evaluate gas projects according to the ENTSOG cost-benefit assessment criteria and not the EIBs [for which some reservations can be made as well, see previous blogpost on the first review document]. Although both methods can be criticized - mostly related to social cost of carbon / IAM debate / private long-term market information on EU ETS / discount rate issues, the method of ENTSOG only accounts for carbon benefits of replacing older fossil fuel infrastructure with gas infrastructure, while ignoring other renewables. Which is a wrong starting point to begin with. I wrote a twitter thread and blogpost with more details on this matter.