The European Investment Bank (EIB) decided on December 12 to delay its decision on a €1.5bn loan for the Trans-Adriatic Pipeline (TAP).
The pipeline, currently under construction, is a key part of the Southern Gas Corridor. It is intended to connect to infrastructure carrying gas from Azerbaijan’s giant offshore Shah Deniz II field to the Turkish-Greek border and on across Greece, Albania and the Adriatic Sea to southern Italy.
The EIB’s decision — initially related to bne IntelliNews by a group of environmental NGOs — came after pressure from a growing number of civil society groups.
“In the last few days over 4,000 people across Europe and beyond told the bank’s board members that supporting TAP with a massive public loan would be inconsistent with the EIB’s attendance at the One Planet Summit in Paris where the bank pledged, once again, to align its finance with the Paris climate Agreement,” the emailed statement from Counter Balance, CEE Bankwatch Network, Friends of the Earth France and 360.org said.
“[T]he EIB board seemed to recognise the myriad problems with the TAP project and decided it needs further discussion before deciding on such a large, controversial loan,” said the statement.
“Acknowledging the impacts the project would have on both the climate and impacted communities, the EIB board decided it needs more discussion. We expect the board to demand the bank responds meaningfully to all the complaints raised so far by affected communities along the pipeline route,” commented Anna Roggenbuck, EIB policy office with CEE Bankwatch.
Meanwhile, Xavier Sol, director of Counter Balance, claimed the decision “is an important sign that the project’s toxicity has become increasingly obvious”.
However, a spokesperson for the bank said the timing was coincidental, and the delay in making a decision was not related to the One Planet Summit.
“It was one of four projects where a decision was postponed … this is a large project with a number of due diligence issues that merits proper discussion,” the spokesperson told bne IntelliNews. Full discussions of the TAP project will take place on February 6, when a decision on whether to extend the loan is expected to be made.
“We have a clear mandate to support climate action and security of energy supply at the same time,” he added.
A December 12 statement on the development bank’s website outlines the climate finance statement agreed at the One Planet Summit, in which “more than 30 major international financial institutions affirm their commitment to the fight against climate change”. They agreed to “joining forces to meet ambitious climate finance goals set by the Paris agreement.” The EIB said that it “put its weight behind the formulation of the joint statement”.
On the same day, the World Bank said it would end funding for oil and gas exploration and gas extraction projects.
Construction of TAP is already underway, with trenching completed on nearly two-thirds of the route in Greece and Albania, according the latest update from the project operator TAP AG.
The 878km pipeline will transport natural gas from the giant offshore Shah Deniz II field in Azerbaijan to Europe. It will connect with the Trans Anatolian Pipeline (TANAP) at the Turkish-Greek border at Kipoi, cross Greece and Albania and the Adriatic Sea, before coming ashore in southern Italy. It is expected to become operational in 2020.
It is one of a network of three inter-related pipelines that will carry 16bn cubic metres (cm) of gas from Azerbaijan to Turkey and Europe starting in 2019. The overall cost of the three pipelines and the offshore works at the Shah Deniz gas field in Azerbaijan's portion of the Caspian Sea is $40bn, with multilateral development banks expected to finance a significant portion of the cost.
Controversy previously erupted over other development banks’ plans to finance parts of the massive international project.
In October representatives of CEE Bankwatch slammed the European Bank for Reconstruction and Development’s (EBRD) lending of $500mn for the Trans Anatolian Pipeline (TANAP), which will run between the South Caucasus pipeline in Azerbaijan and Georgia and TAP. The bank is also expected to approve a further $1bn credit for the project.
However, an EBRD spokesperson told bne IntelliNews at the time that the development bank does believe the approval of the loan is consistent with its principles and code of conduct, stressing that it is “of strategic importance for the region and Europe” and will support diversification of energy supply, as well as shifting the energy mix away from, for example, coal and lignite towards cleaner forms of energy.
Despite the EU's public commitment to advancing renewable energy and energy efficiency in the bloc, Brussels and the international financial institutions EIB and EBRD have equivocated with regard to fossil fuels. The official position in Brussels is that gas will serve as a transition fuel from coal to renewable energy, because it is cleaner than oil and coal.
It was later revealed that two top European Commission officials had been lobbying the two development banks to extend financing for the pipeline infrastructure between Azerbaijan and Europe.
Miguel Arias Canete, the EU's climate change and energy commissioner, and Maros Sefcovic, vice president of the European Commission, were found to have sent a letter to the EIB and the EBRD urging them to finance a gas pipeline running from Azerbaijan to Europe, Climate Home News revealed on November 27.
The European Commission released the letter, which was dated July 13, 2017, under freedom of information laws. In it, Arias Canete and Sefkovic urge Werner Hoyer, the EIB president, to support a project that the European Union has deemed as of common interest, namely the Southern Gas Corridor.
Edited to add reaction from EIB.