Energy investments in the Balkans damaging EU prospects – report

27 June 2013, New Europe

Continued investment by international public finance institutions in traditional energy projects are hindering the chances of countries in the western Balkans to comply with EU accession requirements, according to a new report.

According to the report, Invest in Haste, Repent at Leisure, international finance institutions (IFIs) continue to invest in large-scale, fossil-fuel reliant infrastructure projects at the expense of smaller projects that promote energy efficiency and savings.

As Croatia joins the European Union on 1 July, the report is calling for an end to the public financing of fossil fuels, and for a renewed effort in funding for energy efficiency projects.

The report, published on 25 June and complied by civil society organisations CEE Bankwatch Network, South East Europe Change Network (SEE Change Net) and WWF focuses on the activities of the European Bank for Reconstruction and Development (ERBD), The European Investment Bank (EIB), the EU’s instrument for pre-accession (EU-IPA) and the World Bank in the western Balkans and Albania.

From 2006-2012, a total of €1.68 billion was invested in energy infrastructure in the region, with fossil fuels receiving 32 times more financing than non-hydropower renewables. Fossil fuels received €597.3 million of the total IFI energy financing, while hydropower received €301.1 million, and renewables received €18.5 million in financing. Investment in energy efficiency amounted to €288.8 million.

According to report co-author, Pippa Gallop, this is down to the “volume-led psychology” of the financial institutions.

“Although they are public institutions, they think like traditional banks, always trying to attract business. Their perception of sustainability and knowledge of the ground is very different from ours,” she says.

Speaking at the launch of the report in Brussels on 25 June, she said that as public intuitions, the banks “are not supposed to invest in any old project that comes along,” but effectively that is how business is carried out. “They are not doing enough to help the Balkan countries meet their EU objectives,” she says, including working towards decarbonisation of the energy sector by 2015.

In addition to Croatia, which joins the EU on 1 July, at present the Former Yugoslav Republic of Macedonia (FYROM) is engaged in accession talks with Brussels, while Serbia and Kosovo have come to an agreement that could pave the way for their own EU membership. But, says Gallop, “it is business as usual when the institutions should be steering the countries towards clean energy.” The EU, she adds, should be working with the banks to lead the transition to greener and more efficient energy.

Investments, she continues, last for “a minimum of 40 years”. It is, she says, “the public who pay for these mistakes.” In order to “make space for other kinds of investments, the IFI’s need to use the power that they have; the power to say ‘no’. They really need to prioritise energy efficiency, especially in the residential sector, which has hardly been touched.”

Also speaking at the launch of the report, Garret Tankosić-Kelly, of SEE Change Network, said that the EU’s accession gaols need to be “more energy-orientated.”

“Banks owned and controlled by the EU are making the kinds of investments that are going to make it harder, not easier, to join the EU.” Currently, he says, investments in energy in the region shows “no relation at all” to the EU’s energy ambitions, such as the 2050 targets.

“It will be the European Union, and its citizens, that is going to foot the bill to undo these mistakes.”