The European Bank for Reconstruction and Development (EBRD) has adopted a new strategy that will guide its investments in the energy and natural resources sector for the next five years.
In this strategy the Bank – already the largest investor in renewable energy and energy efficiency projects in its region of operations – in its own words “sets out a commitment to helping its countries of operations move toward a sustainable energy future.”
According to the EBRD, “the EBRD region, which stretches from Morocco to Mongolia, is faced with a challenge of providing sustainable, secure and affordable energy. The energy strategy identifies energy efficiency as the first and best response to this challenge.”
EBRD Managing Director for Energy and Natural Resources, Riccardo Puliti, said: “Our region of operations is dealing with the legacy of decades of command economies, which created some of the most wasteful energy sectors on the planet. What the EBRD brings to this challenge is our focus on structural reform. We have learnt from our work that, when properly channelled, market forces can be harnessed to make energy sectors more sustainable – environmentally, economically and politically.”
The new strategy also sets out the EBRD’s revised policy in two key areas. In the document, the Bank says it “builds on its well-established support for the Extractive Industries Transparency Initiative by requiring clients operating in the extractive industries sector to disclose subsoil contracts and licenses as well as all payments they make to local and national authorities.”
In the case of coal-fired generation, “the strategy supports the move to lower-carbon fuel sources in response to the challenge of climate change. In alignment with other international financial institutions, the EBRD will not finance any coal-fired power generation projects except in rare and exceptional circumstances in which there is no feasible alternative energy source.”
The strategy also reinforces the EBRD’s “growing support for renewable energy, which will include financing both energy-generating capacity and key infrastructure such as transmission lines and backup generation.”
Riccardo Puliti added: “We place great importance on combining our investments in renewables with policy dialogue and technical cooperation. For example, we have worked with countries that are highly dependent on fossil fuels – such as FYR Macedonia, Kazakhstan, Serbia, and Ukraine – to develop renewable energy projects and regulation that allows them to develop a cleaner, more diverse energy mix. We have also developed and invested in the first wind farm in Mongolia – where it was also the first new energy generator in 30 years.”
The EBRD strategy is the first to be adopted for the energy sector since the Bank began working in the southern and eastern Mediterranean (SEMED) countries of Egypt, Jordan, Morocco and Tunisia. It focuses on the challenges and opportunities these countries face, in particular, how to meet rising demand, reduce energy subsidies, minimise water consumption and exploit the superb wind and solar resources in the region.
Since 2006 the EBRD says it has invested €8.8 billion in the energy and natural resources sector. Over that period the Bank has made direct investments worth more than €2 billion in the renewables sector, with an additional €760 million channelled via local banks. The EBRD has also invested over €675 million in energy security projects in Europe, such as Polskie LNG or gas storage in Hungary, Serbia and Croatia.
Coal-related projects – mostly dedicated to improving the efficiency of existing plants –accounted for 6 per cent of the Bank’s work in the sector.
The EBRD is also actively engaged in helping countries to switch from coal to gas. In the latest deal to address this issue the Bank arranged a loan in roubles equivalent of €280 million to Russia’s InterRAO to move away from using old coal-fired plants in the Urals by decommissioning them and switching to a much more efficient and environmentally friendly combined-cycle gas turbine.
Under the EBRD’s Sustainable Energy Initiative, which includes the energy and natural resources sector as well as other sectors such as infrastructure, the Bank has invested over €12 billion since 2006 in energy efficiency and renewable energy projects.
In a reaction to the new strategy, Fidanka Bacheva-McGrath of the NGO CEE Bankwatch Network says: “The EBRD has made a positive step forward in restricting investments in coal power plants and introducing a shadow carbon price for all fossil fuels, which can be a powerful tool for internalising their hidden costs. The strategy approved today makes it clear that everyone in the bank and in many of its shareholders’ capitals is now tiptoeing around coal. This should serve as one more warning for the coal industry that it can no longer ignore our health and our climate. The bank’s criteria can be used to exclude almost any greenfield project. But it will be only with real investment proposals, such as the upcoming Kosovo C, that we will see whether the EBRD is ready to not just tiptoe around coal but to walk boldly towards a coal-free future.”