The European Investment Bank (EIB) will stop backing new fossil-fuel power projects by the end of 2021, in a move by the EU Bank that analysts said raises questions over gas’s role in the energy transition.

The EIB announced the move against unabated fossil projects, including gas, as part of a revised lending policy that it said will help unlock €1trn ($1.1trn) of climate action and environmental sustainable investment in the decade to 2030, to aid the EU as it seeks to hit a renewable energy target of a 32% share by then.

The policy includes a new emissions performance criteria of 250g of CO2 per kWh, down from the current 550g/kWh, a barrier to current gas-fired technologies.

Nicholas Browne, research director at Wood Mackenzie, said the move means that “gas is also increasingly in the spotlight of the climate debate”.

Browne said: "The EIB's new financing criteria will make lending to gas projects very difficult”, adding that gas’s better emissions profile in relation to coal may not now be enough to make its case.

“The benchmark looks like it will be set higher. Gas and LNG may be better but are they good enough?” said Browne.

With increased scrutiny on gas’s credentials, Browne said there is a chance that “the popular and political tide turns on natural gas like it already has on coal in most countries.

“If this does occur, it may slow the rate of growth of gas and LNG demand. In turn, this would be a major strategic challenge for companies that have identified gas as the key driver of future growth.”

The popular tide could turn on natural gas like it already has on coal.

The EIB’s move – which enters force a year later than originally planned, and which it described as a “compromise” after “long discussion” – comes soon after the EU’s incoming energy commissioner was criticised for talking-up the role of gas in the energy transition.

A previous EIB financial review of energy lending in 2013 had already effectively ended financing for coal and lignite power generation through the adoption of a strict emissions performance standard.

The EIB said gas projects would still be possible, but would only be considered if based on what the bank describes as “new technologies”, such as mixing renewable gases with natural gas, carbon capture and storage, or combining heat and power generation.

The EIB’s new energy lending policy will be governed through five principles, including enabling energy decarbonisation through increased support for low or zero carbon technology, aiming to meet a 32% renewable energy share throughout the EU by 2030.

The bank will also increase financing for decentralised energy production, innovative energy storage and e-mobility. It will also aim to ensure grid investment, essential for intermittent energy sources like wind and solar as well as strengthening cross-border interconnections.

Colin Roche, fossil free campaigner at Friends of the Earth (FoE) Europe, called the decision “a significant victory for the climate movement. Finally, the world’s largest public bank has bowed to public pressure and recognised that funding for all fossil fuels must end – and now all other banks, public and private must follow their lead.

“But 2021 is still too late if we are to avoid the worst effects of climate breakdown.”

Kate Cahoon, Germany campaigner at pressure group, claimed loopholes for fossil gas remain with any project added to the EU’s ‘Projects of Common Interest’ (PCI) list before 2022 still eligible for EIB funding. She warned that at present there are more than 50 fossil gas projects included.