European Investment Bank - An actor in financing climate projects
By Valérie Thill, SCC/COM/CSO, EIB - March 2007

• Introduction
• EIB Climate Change Facilities
• EIB & Carbon Finance
• EIB Support to Renewable Energies

The European Investment Bank (EIB) is the European Union's (EU) long-term financing institution. Its activities under the heading of environmental sustainability cover the full range of environmental concerns, including climate change, protecting nature and wildlife, health, natural resources and waste management, and also include improving the quality of life in the urban environment.

In 2006, the EIB signed individual loan agreements for 96 major environmental projects, amounting to EUR 10.9bn, i.e. 23.7% of its total lending (EUR 45.8bn of which 39.8bn in the EU and 5.9bn in the Partners countries). Small investment schemes dedicated to environmental objectives or containing environmental components may also be financed via EIB credit lines to local, regional or national financial intermediaries.

Guided by the Kyoto Protocol, which aims to cut greenhouse gas emissions by 8% over 1990 levels by 2008-2012, EIB made a particular effort by lending EUR 2.3bn for investment in the reduction of GHG emissions from transport (EUR 1,499m), renewable energy (EUR 506m) and energy efficiency (EUR 317m).

• The EUR 1 billion Climate Change Financing Facility (CCFF) (2005-2008), provides long-term loan finance to companies participating in the EU Emissions Trading Scheme (ETS). It includes a EUR 200 m allocation for companies operating outside the EU and developing Joint Implementation (JI) and Clean Development Mechanism (CDM) projects. The Facility was renewed in May 2006 – CCFF II - and enlarged to include financing for any project that significantly reduces or mitigates greenhouse gas emissions, regardless of region, sector or type of greenhouse gas, or makes a significant contribution to climate change adaptation outside the EU.

• The EUR 5 million Climate Change Technical Assistance Facility (CCTAF) provides advance funding for activities associated with the development of project-based carbon credits under the JI and CDM mechanisms of the Kyoto Protocol on a conditional loan basis. The CCTAF involves three stages of support:
  
  Phase I (carbon feasibility study);
  Phase II (preparation project documentation for submission to the CDM Executive Board (or JI equivalent);
  Phase III (JI/CDM project validation and registration).

Climate change considerations are systematically included in the Bank’s internal appraisal procedure, so that all projects are now routinely screened for their potential to mitigate climate change and generate carbon credits.

• The European Bank for Reconstruction and Development (EBRD) and the EIB have established a joint Multilateral Carbon Credit Fund (MCCF). The MCCF is designed to develop the carbon market in countries in transition and to help EBRD and EIB shareholders and other parties to meet their mandatory or voluntary greenhouse gas emission reduction targets. The Fund will source and purchase carbon credits from projects financed by the EBRD and/or the EIB in countries eligible for EBRD operations. It will also facilitate "Green Investment Schemes" in which the proceeds of state-to-state trading of carbon credits are used to finance climate friendly projects in the selling country. The MCCF aims to stimulate and complement the participation of the private sector in the carbon market. The size of the MCCF has aggregate commitments of EUR 165 for project-based carbon credits. Also see press release of 13/12/2006

• The Carbon Fund for Europe (CFE) will be co-managed by the World Bank and EIB. The Fund initially disposes of EUR 50m but may rise to a total of EUR 100m. The CFE is designed to facilitate the transition of market activities from the public to the private sector, catalysing the development of projects and helping EIB shareholders and clients meet their carbon emission reduction obligations. The Fund places an emphasis on CDM projects. A key aspect of the Fund is that it would primarily purchase verified emission rights (VERs), prior to CDM Board approval. The CFE can also buy VERs for delivery post-2012, i.e. after the first Kyoto commitment period. The EIB is already actively working on proposals for carbon funds for this period.

Targets for 2007-2009

The EIB has significantly increased targets for Renewable Energy (RE) lending since its introduction in 2002. In 2007 the Bank decided to integrate energy as a specific objective in its Corporate Operational Plan 2007-2009, with reviewed RE financing targets for 2007-2009.

The five target areas for EIB energy lending are:

• Renewable energy
• Energy efficiency
• Security and diversification of internal supply (including TENs)
• Research, development and innovation (RDI)
• External energy security and economic development with the Neighbouring and Partner countries

2007 Quantitative Targets

• annual target of EUR 600-800 million lending to RE projects
• 50% of EIB lending to electricity generation associated with RE technologies

These targets are in line with the EU targets of:

• doubling RE contribution to total energy consumption from 6 to 12% by 2010
• 22% share of electricity generation being met from RE
• 20% for the share of total energy supply to come from renewable sources.

These new targets will further diversify the Bank's RE projects portfolio by developing less mature markets in and outside the EU and by favouring the deployment of less-developed RE sources (such as solar power, biomass or bio-fuels). EIB will also put emphasis on the development of new technologies.

The Bank does not only support EU climate change policy via its lending in favour of projects fostering RE sources, but also by promoting a rational use of energy. Energy efficiency considerations are mainstreamed into all EIB operations, working with promoters to extend the EE potential of projects.