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The EU has vowed to spend billions on international development
finance with a move it compared to China's Belt and Road, but with
"the highest environmental standards."
China's Belt and Road initiative has invested in projects such
as roads, power stations, railways, airports, and port across
Eastern, Southern, and Central Asia.
On 1 December, the European Commission (EC)
announced the new strategy, dubbed Global Gateway, through
which it will facilitate foreign investments of up to $339 billion
(€300 billion) by 2027.
The EC responded to the comparison with China by saying it was
"offering an innovative choice" and filling an infrastructure
finance gap for low- and middle-income countries estimated at over
$2.7 trillion in 2019 and worsened by the COVID-19 crisis.
In particular, the Global Gateway will use the EU's existing
European Fund for Sustainable Development+ to offer up to $152.83
(€135 billion) of guaranteed investments for infrastructure in
countries in the EU's region and in Africa.
It will not only provide grants, loans, and budgetary guarantees
to de-risk projects like renewables and smart grids, but it will
also support what it termed "soft infrastructure" such as health
projects, education, and research.
Its energy investments will include growing hydrogen production
through state partnerships, to "promote the creation of competitive
markets to enable such hydrogen produced outside the EU to be
traded internationally without export restrictions or price
distortions."
The EU will pour funds into its neighbors to the east, including
Albania, Bosnia and Herzegovina, North Macedonia, Montenegro,
Serbia, Kosovo Armenia, Azerbaijan, Belarus, Georgia, the Republic
of Moldova, and Ukraine.
This will extend to its North African neighbors like Algeria,
Egypt, Libya, Morocco, and Tunisa as well as its Middle Eastern
neighbors Israel, Jordan, Lebanon, Palestine, and Syria.
But the EU's broad net for finance under Global Gateway also
captures Central Asia and Latin America.
The EU plans to provide technical assistance and apply
standards, including environmental, for projects. "Projects will
live up to the European Green Deal oath to 'do no harm' and ensure
the use of environmental impact assessments and strategic
environmental assessments," said the EC in the announcement.
The plan not only aligns with the Paris Agreement, which targets
an upper limit on 2.0 degrees Celsius on global warming, but also
the UN's social and environmental targets, including its aim to end
poverty by 2030.
Also, the strategy was billed as a response to this month's
COP26 climate summit discussions. At that summit, a group of less
developed countries was "disappointed" that
no deal was reached to finance climate adaptation.
The EU's main infrastructure investment bank, European
Investment Bank (EIB), and states are among the financial backers
behind Global Gateway. These include its international finance arm,
European Bank for Reconstruction and Development (EBRD).
The EC hopes its public financing muscle will attract more
private investors, taking advantage of
skyrocketing demand for green bonds. Some estimates put the
amount of capital investment seeking sustainable assets to finance
at around $30 trillion.
The EU itself recently issued what it
called a record €12 billion worth of green bonds through its
NextGenerationEU €800 billion coronavirus recovery fund.
President of the European Commission, Ursula von der Leyen,
framed the Global Gateway investment strategy as a response to
calls to use COVID 19 pandemic recovery funds to "build back
better."
At the same time, the EU is mulling a European-level export
credit facility, "to complement the existing export credit
arrangements at member state level and increase the EU's overall
firepower in this area."
Posted 03 December 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability
