Campaigners celebrate “a significant victory for the climate movement” as major EU banking institution agrees to stop financing fossil fuel projects.

The European Investment Bank (EIB), one of the EU’s main financing tools, announced on Thursday that it will no longer finance fossil fuel projects from the end of 2021.

Since 2013, the EIB has funded €13.4 billion of fossil fuel projects.

The decision, which was largely seen as a compromise, comes after months of heated discussions in Brussels. In the original proposal, the EIB was asked to end fossil fuel spending from 2020, a year earlier than eventually agreed.

The governments of Hungary, Poland and Romania voted against the decision, according to POLITICO. Hungary and Poland are also amongst the three countries, alongside the Czech Republic, currently opposing a motion that would commit the EU to achieving net-zero emissions by 2050.

Victory for the climate

NGOs hailed the news as “a significant victory for the climate movement.” Colin Roche, a campaigner with Friends of the Earth Europe, said in a statement: “Finally, the world’s largest public bank has bowed to public pressure and recognised that funding for all fossil fuels must end – and now all other banks, public and private must follow their lead.”

However, he warned that the bank would still be able to fund fossil gas projects beyond 2020 due to “a dangerous loophole” in the agreement. The loophole “would leave the door open to fund fossil gas projects on the promise that they use so-called ‘low-carbon gas’ in the future,” Friends of the Earth Europe wrote.

The clean gas myth

In recent years, the gas industry has successfully convinced policymakers to divert public funds to fossil fuel infrastructure such as new gas pipelines, hailing gas as a greener alternative to oil and coal. Brussels-based lobby groups have reportedly spent over €100 million in 2016 to push the myth that gas is clean.

As part of separate negotiations, EU governments are also currently discussing whether to continue financing fossil fuel projects under the next EU budget. Funded mostly by member state contributions and import duties, the budget allocates funds to specific areas such as agriculture, transport, and industry for a seven-year period.

European Commission President-elect Ursula von der Leyen vowed to publish a detailed European Green Deal in 2020.

Like EIB funding, the EU budget – also known as the EU’s ‘Multiannual Financial Framework’ (MFF) – contributes to translating policy objectives into action and helps set priorities and conditions of EU funding. None of the money invested by the EIB comes from the EU budget.

Whether Europe will be able to finance its transition to a zero-carbon economy will depend on the amount of money and spending priorities set by the EIB as well as the EU and national budgets with support from private investments.