12 Dec, 2022

Hoyer: Energy transition now more important than ever

The European Investment Bank President Werner Hoyer didn’t hesitate when it came to providing quick support to Ukraine. From assisting European households struggling with high inflation to balancing the use of sustainable energy sources and fossil fuels, we spoke with President Hoyer at a critical time in Europe’s history.

This interview was originally published in the ALDE Party Liberal Bulletin in December 2022. 

Since the beginning of the Ukraine war, you have pushed for the European Investment Bank to send funds to assist Ukrainians and their reconstruction efforts with unprecedented speed and flexibility. What led you to act so swiftly?

Russia’s invasion of Ukraine is the first full-scale military attack on a European country after decades of peace. As the EU bank, we didn’t hesitate to assist Ukraine as quickly as possible. Within days of the outbreak of war, we made available €668 million to support Ukraine to cover its most urgent liquidity needs. Moreover, our Board approved another €1.59 billion in July to repair the most essential damaged infrastructure and to resume critically important projects. This was only possible thanks to the strong support we received from the European Commission and EU Member States.

The European Investment Bank has been very active in Ukraine since 2007. We increased our activity considerably after the illegal annexation of Crimea by Russia in 2014. Back then, we immediately put our work in Russia on hold and instead focused on Ukraine. So, we have a long history working with Ukraine, and that’s why we could act swiftly when our help was urgently needed.

Many Europeans are worried about increasing energy prices and inflation. From your perspective, what steps should be taken to support those who struggle while avoiding another economic downturn?

The blame for the current energy crisis lies with the Kremlin. Since the beginning of 2021, Russia has gradually reduced gas shipments to Europe which has sent gas prices to record levels. Today, we only receive a fraction of the Russian gas we got before the war.

To overcome the energy crisis, we need to become independent of Russian fossil fuels. The answer lies in diversification of gas supply sources, as well as in accelerating the energy transition and investing more in energy efficiency, renewable energies and green innovation.

Reducing our reliance on fossil fuels also tackles one of the main factors behind soaring inflation: the high price of natural gas and other fossil fuels. But, investments in green energy do not materialise overnight and are no short-term fix. It’s for the European Central Bank to do something against the current inflationary environment that is more broad-based than many initially expected.

EU Member States have a large role to play in supporting those who struggle the most under rising prices. We see that measures are put into place by most national governments. It’s very important that governments act quickly with targeted support because high inflation is a threat to economic prosperity, social cohesion and political stability across Europe.

It concerns me that investment typically suffers first in a difficult economic environment. We have to be very careful that the current crisis doesn’t slow down our efforts in the fields of energy and climate as well as digitalisation and innovation. Otherwise, it’s not only us who shall have to struggle because of the current crisis – it will be future generations who will have to pay the biggest price.

This is exactly where the EIB can be helpful. We have the financial firepower to provide financing for much-needed investment programmes and to support SMEs during difficult economic times when
commercial lenders would scale back their business. We have done so during the debt crisis and during the COVID-19 pandemic. When needed, we will do so again.

During your mandate at the EIB, you have set a precedent by stopping the financing of fossil fuel energy projects. In the current situation, how can we balance the increasing EU need for energy with the need for more sustainable energy sources, without going back to using more fossil fuels?

Our global reliance on fossil fuels is not only what causes our climate to change, but it has also left us dependent on energy sources over which too many of the world’s autocrats – not only Russia – have a decisive say. It’s imperative for our future to phase out the use of fossil fuels as soon as possible.

However, fossil fuel investment would also be bad business. Fossil fuel projects are not only often more expensive and slower to roll out than low-carbon alternatives, but they are
likely to become stranded assets in the longer-term due to government policies and regulation that will phase out carbon-intensive energy sources. This is also the reason why we at the EIB decided in 2019 no longer to finance investment in new, unabated fossil-fuel infrastructure. As a bank, we have to be careful not to have stranded assets on our books.

We should be very careful not to invest in projects that are financially or economically unviable in the long term. This is why we should ensure that gas infrastructure put into place now so that we can become independent from Russia is already fit for low-carbon gases in the future.

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