Monetary Valuation of Climate Impacts and the European Investment Bank's Energy Policy

24 Sep 2019

Read on Twitter:

Thread on @EIB economic appraisal of energy investment + relationship with monetary climate impact valuation 👇

@AMcDowell #AskEIB

Ongoing EIB Energy and Climate Policy Review

[1] @EIB Energy Lending Policy (ELP) draft (July 2019) - under review - states to include external climate cost estimates associated with GHG emissions []

🤔What were related comments received?


[2] Emphasis on cost of renewables: @Grupa_PGE @FluxysGroup @eni @Eurogas_Eu @uniper_energy @EDSO_eu]. In reply, @EIB states that all projects need to pass economic assessment of Energy Lending Policy (Annex II)[]

🤔 How are external costs calculated and applied in project assessment?


[3] From EPL Annex IV []:

@EIB intents to use @JosephEStiglitz @lordstern1 cost estimates from 2017 up to 2050, in mid- to high range scenario:

(a*) This means dropping low-range scenario sourced from @SEIclimate 2006-study in 2013 [‘Economic Appraisal of Investment Projects at the EIB’ @calthrop_e:], which was reiterated and extended to 2050 in 2015 ‘EIB Climate Policy’ []


Climate impacts should not be monetized

Climate impacts should not be monetized to start with. This is an existential problem that requires political decisions, not monetary cost-benefit balancing.

@ProfSteveKeen @blair_fix @MaxJerneck @gwcarpenter @delbeke_jos @noahq @JesseJenkins @AarneGranlund

Monetizing long-term climate impacts is almost impossible, and holds enormous uncertainties.

mainstream economic research does not account for this, and doesn’t acknowledge this sufficiently


Links with @KevinClimate @jessicadjewell @nature debate on role IAMs with free-market axioms feeding @IPCC_CH

[@Peters_Glen + @jessicadjewell]

Using unreliable long-term estimates for real-world policy that affects everybody is unresponsible.

The only thing that counts is deciding that:

We. don’t. want. fossil. energy/emissions. any. more.

Do what it takes.

➡️❗️Use fine-grained short-term physical quota ❗️

Additional information on external cost estimate integration in IEB assessment

Further info on how those monetary values are used in @EIB project assessment:

High range value is used to evaluate low-carbon projects, low-range value is used to evaluate conventional energy projects]

“Cost-benefit analysis needs to account for costs that already have been internalized through other policy measures” (such as EU ETS, price-floor, fossil subsidies)

This seems a very slippy ground. @EIB admits this.

@EIB claims needing long-term forecasts of ETS prices for appraisal energy projects (no surprise, lock-in effects!).

“it does this based on a range of forecasts from specialized consultancies and scenarios from relevant bodies”

“The bank does not make those public”


Additional information

(1) RE vs. fossil investments of multilateral/state development banks: @BjarneSteffen

Based on 841 projects (2006-2015), @EIB claim of being ‘biggest climate financer’ seems not to hold :]


(2) Carbon capture and storage #CCS is not a miracle solution (although good to deploy, we will need it)

@baeckelmans @snam @exxonmobil @Shell

Summary thread @SimonLLewis @guardian & @DrSimEvans @CarbonBrief :

(3) Planting trees on the scale that was recently argued to be used as a tool for climate mitigation, is neither a solution (although nevertheless, good to take care of that as well)

Summary thread blogpost @rahmstorf :

(4) The EU ETS system did until now not provide what it was designed for.

Summary thread of EU ETS functioning and carbon leakage calculation method:

Even the recent decline in coal production in Germany can be hardly attributed to the EU ETS, and is rather an effect of decreasing international gas market prices.

Summary thread @KarstenCapion :


(5) In addition to unclear @EIB subsidy rules based on monetary values of climate change, there is the problem of subsidizing fossil fuel-dependent sectors :

Summary thread of 6 recent reports :

Twitter thread summary: Blogpost summary:

An example is the Germany company #Uniper lawsuit using Investor-State Dispute Settlements regulation against the Dutch government for it’s coal-phase out @corporateeurope

Ongoing implementation of @icao Corsia offsetting-scheme might also undermine EU action in aviation [].

Based on @EUCouncilPress @Transport_EU docs, it does not seem that member states realize this.

Pre-debate thread: