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Global Briefing: EU approves €1tr 'Climate Bank' plan

Global Briefing: EU approves €1tr ‘Climate Bank’ plan

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Global Briefing: EU approves €1tr 'Climate Bank' plan

All the green business news from around the world this week

EIB gives green light to ‘Climate Bank’ plan

The European Investment Bank (EIB) has this week approved a €1tr ‘Climate Bank’ plan that will see the bank drastically increase its support for low carbon infrastructure over the coming decade.

The plan will see €1tr invested through to 2030 on climate, biodiversity, and sustainability-focused projects, while at the same time “all financing activities” from the bank will have to be aligned with the goals of the Paris Agreement by the end of this year.

“It is a major contribution to Europe’s role leading the way toward decarbonisation and a green, resilient and socially inclusive economy,” EIB President Werner Hoyer said in statement.

The move provides a major boost to the bloc’s plans for a ‘green recovery’ package in support of its long-term goal to become the world’s first “carbon neutral continent” by 2050.

The plan was broadly welcomed by green groups, but they also lamented that it could allow for some continued financing of oil and gas projects in the near term and would see the EIB continue to support road building programmes.

US Federal Reserve identifies climate as risk to financial stability for first time

The US Federal Reserve this week published its annual Financial Stability Report (FSR), highlighting the threat posed by climate change to financial satbility for the first time.

In a statement to accompany the launch of the report, Governor Lael Brainard welcomed the introduction of climate risks into the influential report. “Climate change poses important risks to financial stability,” he said. “A lack of clarity about true exposures to specific climate risks for real and financial assets, coupled with differing assessments about the sizes and timing of these risks, can create vulnerabilities to abrupt repricing events. Acute hazards, such as storms, floods, or wildfires, may cause investors to update their perceptions of the value of real or financial assets suddenly. Chronic hazards, such as slow increases in mean temperatures or sea levels, or a gradual change in investor sentiment about those risks, introduce the possibility of abrupt tipping points or significant swings in sentiment.”

He added that while supervisors expect banks to have systems in place that appropriately identify, measure, control, and monitor their material risks, financial markets faced challenges in analysing and pricing climate risks, while financial models may lack the necessary geographic granularity or appropriate horizons. “Increased transparency through improved measurement and more standardized disclosures will be crucial,” he said. “It is vitally important to move from the recognition that climate change poses significant financial stability risks to the stage where the quantitative implications of those risks are appropriately assessed and addressed.”

The report is likely to be seized upon by the incoming Biden administration, which is reportedly considering using financial regulation and regulators such as the SEC to help deliver on its sweeping climate policy push, given attempts to pass legislation through Congress are likely to be blocked by Republican lawmakers.

Global development banks deliver landmark climate pledge, but duck fossil fuel financing phase out

The world’s top development banks this week pledged to align their activities with the goals of the Paris Agreement, but again resisted calls to commit to ending financing for fossil fuel projects.

A meeting of 450 public development banks orchestrated by the French government this week saw the influential banks commit to increasing “the pace and coverage” of investment in renewable energy, energy efficiency, and clean technologies.

But disagreements over how quickly to phase out financing for fossil fuel projects were left unresolved. A group of European Development Banks had led calls for a phase out commitment, but they faced push back from some other development banks while the Asian Development Bank (ADB) reportedly refrained from signing the final declaration altogether.

A version of the statement seen by Reuters said that “we will consider the range of fossil fuel investments in our portfolios, avoid stranded assets, and work towards applying more stringent investment criteria, such as explicit policies to exit from coal financing in the perspective of COP26”.

But in a sign of the challenges diplomats face as they seek to broker an ambitious climate agreement to be finalised at the COP26 Summit in Glasgow next year, sources indicated that the statement had been watered down under pressure from a number of Asian banks. And even the diluted version was not approved by the ADB. “ADB supports many of the elements of the Summit Declaration but will not be signing it, as it contains policy commitments that have not yet been deliberated by the ADB Board,” said Woochong Um, the director general of its Sustainable Development and Climate Change Department.

The meeting was branded “another wasted opportunity” by divestment campaign group 350.org. “With their public mandate, development banks have a great responsibility in making sure that investments directly benefit communities,” said Clémence Dubois, France Team Leader at 350.org. “We urge them to stop funding fossil fuel projects, and place human rights, racial and climate justice at the core of their actions. They must seize the opportunity to lead the way and initiate a deep and rapid shift in the way they operate, in line with a Just Recovery for all. But they are choosing to lag behind.”

However, diplomats indicated that they remained hopeful that a stronger commitment in support of the phase out of fossil fuel financing could yet be realised at next year’s COP26 Summit, given recent moves by China, Japan, and South Korea in support of the transition to a net zero emission economy.

Reports: Gas denied transition fuel status in EU green taxonomy finance rules

Gas power plants will not be classed as “sustainable” or “transition” investments in Europe unless they meet strict emission limits that are expected to necessitate the installation of carbon capture technoloies, according to draft EU rules seen by the EURACTIV news agency.

The new standards are expected to be tabled in the coming weeks as the EU moves to finalise its sustainable finance taxonomy, which determines what type of investments can carry a “sustainable” label that can help make it easier for project developers to attract finance.

The negotiations over the taxonomy have proved controversial, with various industries such as gas power generators and nuclear operators lobbying hard for inclusion and environmental campaigners countering that sectors with high environmental impacts should not be able to carry the label.

The draft rules governing gas fired power stations look like a major win for green groups and would ensure that projects only qualify for the “sustainable” or “transition” label if they emit less than 100 grams of CO2 equivalent per kilowatt hour – a level well below that currently achieved by new gas plants.

BP and Orsted reveal plans for green hydrogen tie-up

BP and Orsted have this week revealed plans to work together to produce green hydrogen at the Lingen oil refinery in north-west Germany.

BP said the project would see it initially build a 50MW electrolyser that would be powered by electricity from offshore wind farms to replace 20 per cent of the natural gas-based hydrogen at the plant. Production is now slated to start in 2024.

Louise Jacobson Plutt, BP’s senior vice president for hydrogen, told Reuters that the project could be expanded to up to 500 MW at a later stage to replace all of Lingen’s fossil fuel-based hydrogen.

BHP to team up with China’s Baowu Group for low carbon steel push

Anglo-Australian mining and metals giant BHP Group has announced the first project to be backed by its recently launched $400m climate investment, after inking a memorandum of understanding with China’s biggest steelmaker. The company is to team up with China Baowu Group under a five-year partnership that will see BHP invest $35m in low-carbon steelmaking technologies and share technical knowledge with Baowu.

The project is expected to explore a number of different avenues for slashing emissions from steel manufacturing, including carbon capture and storage and the utilisation of low carbon fuel sources such as hydrogen.

“Our investments are focused on actions that can create real change in emissions,” said Mike Henry, BHP’s chief executive.

New South Wales sets sights on becoming renewables superpower

The Australian federal government may be notorious for its opposition to ambitious climate action, but that has not stopped state government’s adopting net zero emissions targets and now the New South Wales has become the first regional government to unveil detailed plans to phase out coal power and drastically increase renewables capacity.

The new plan, released this week, aims to attract $32bn of private investment in clean energy infrastructure, delivering 6,300 construction jobs and 2,800 ongoing jobs, and resulting in 12GW of renewable energy and 2GW of storage capacity, largely from pumped hydro projects.

The government is optimistic the region’s excellent wind and solar resources could result in some of the cheapest and most reliable clean power projects anywhere in the world.



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