The European Investment Bank (EIB) has announced it will end all financing for oil and gas from the end of 2021.
The EIB said it will look to implement a new “energy lending policy” and will use EIB Group funding of more than £850 million to invest in clean power sources.
It said the new investment scheme would “accelerate” energy efficiency and the renewable energy sector.
Andrew McDowell, EIB vice-president for charge of energy said: “Carbon emissions from the global energy industry reached a new record high in 2018.
“We must act urgently to counter this trend. The EIB’s ambitious energy lending policy adopted today is a crucial milestone in the fight against global warming.
“Following a long discussion we have reached a compromise to end the financing by the EU Bank of unabated fossil fuel projects, including gas, from the end of 2021.”
The EIB said stakeholder engagement since January had produced more than 149 written submissions from concerned organisations and individuals and petitions signed by more than 30,000 people.
But Wood Mackenzie research director Nicholas Browne cast doubt on whether the switch would have the desired results.
He said: “The EIB’s new financing criteria will make lending to gas projects very difficult.
“It highlights that gas is also increasingly in the spotlight of the climate debate.
“When burnt, gas releases less carbon dioxide, nitrogen and sulphur oxides than coal and oil.
“Furthermore, coal-to-gas replacement has had a profound impact on air quality in northern China to the huge benefit of public health.
“It also has significantly lower full life-cycle carbon emissions than coal.
“However, while the comparative combustion benefits are undoubted, the sector may not be able to rely exclusively on this argument to make the case for gas and LNG.
“The benchmark looks like it will be set higher.
“Gas and LNG may be better but are they good enough?”