A herd of white elephants is approaching the EU’s neighbours

Today marks the last day of a public consultation on priority energy infrastructure projects under the Energy Community Treaty. Yet, 20 of the 26 projects put forward by the Western Balkans, Moldova, Ukraine and Georgia rely on fossil fuels – a clear no-no if the countries plan to align with the EU’s decarbonisation goals.

18 of the proposed Projects of Energy Community Interest (PECIs)¹ and Projects of Mutual Interest (PMIs) consist of gas infrastructure and 2 are oil projects – some rehabilitation of old pipelines but mostly construction of new ones, expected to be commissioned in the next 3-5 years. The remainder are electricity transmission lines.

If the EU and its neighbours are on their way to decarbonisation by 2050, why are they still planning so many fossil fuel projects?

As last year the European Investment Bank (EIB) – the EU’s financing arm and the world’s biggest lender – announced it will bar funding for gas and oil at the end of 2021, sending a signal to all other international financial institutions, the list of potential PECIs bears a striking resemblance to someone committing to go on a healthy diet, but spending the last month before that eating junk food.

Of course, the comparison is only fair to some extent, as a person’s diet choices only affect their own health, whereas a regional increase in gas and oil infrastructure affects all of us, who suffer the consequences of climate change while also bearing the costs of these projects, paid for with public money.

Already in 2016 Oil Change International calculated that no more fossil fuel infrastructure can be built if we are to meet the goals of the Paris Agreement. The potential carbon emissions from the oil, gas, and coal in the world’s operating fields and mines would already take us beyond 2°C of warming, and even excluding coal, the reserves in currently operating oil and gas fields would take us beyond 1.5°C. 

Yet, the PECIs list includes projects which, if realised, would contribute to gasification of countries like Montenegro or Kosovo, that currently have very low use of gas in their energy mixes and are not connected to international pipelines. Additional investment in gas infrastructure, even when it is only for diversification of supply sources, is more likely to serve as a distraction from investments in renewable energy, energy savings and solutions such as heat pumps than to support them. According to the 2019 Carbon Budget, the global increase of greenhouse gas emissions is currently driven by gas and oil projects, so connecting completely new countries to gas pipelines at this stage is very much the same as allowing them to build new coal-fired power plants.

New gas projects are the wrong direction

Two of the five questions in the public consultation questionnaire refer to the projects’ contribution to decarbonisation of the energy sector by 2050 and to better integration of renewable energy in the market. In Bankwatch’s submission, we argue that the projects represent the exact opposite of those. 

Estimates of exactly how much gas contributes to climate change are continuously being revised upwards and depend on the Global Warming Potential assigned to methane as well as on assumptions about the extent of fugitive emissions during gas extraction and transportation. One estimate cited in the EBRD’s Energy Strategy is that in the best case, gas combustion saves a maximum of 30% of greenhouse gas emissions compared to coal, hardly an advantage worth investing hundreds of millions of EUR for. 

Regarding household heating, gas is likely to partly displace existing wood use, whereas using wood more efficiently and complementing it with solar thermal and heat pumps would better promote the efficient use of renewable energy. 

For electricity, intermittent renewable energy is not likely to be better integrated by the use of gas. Most of the Western Balkan countries have high shares of existing hydropower that can be used for balancing intermittent renewables, and gas is likely to be uncompetitive for power generation in the coming decades.

In the Western Balkans, there is a significant difference from EU countries with regard to gas: it is not a question of when to phase out an existing source of energy, but of making massive new investments in the opposite direction of where we want to be. The EU must not encourage this in any way.

EU decarbonisation policy needs to be coherent – and that means no new gas

In recent years, EU member states’ proposed Projects of Common Interest (the process which the Energy Community has adapted) have  also been riddled with critique over being way too reliant on gas infrastructure. A study by industry consultants Artelys warns that there is a risk of €29 billion being wasted on 32 mostly “unnecessary” gas projects.

The EU Ombudsman is looking into whether the European Commission has committed maladministration in failing to ensure an adequate climate impact assessment for the PCI fossil fuel project lists chosen so far. Therefore, our ask to the Energy Community is to ensure that a thorough GHG emissions assessment is carried out for any gas projects being seriously considered as PECIs or PMIs. 

Europe’s attention now should be clearly focused on how the economic recovery will be designed. This is crucial in determining the long-term pathways for emissions and whether the Paris Agreement’s 1.5˚C limit can be achieved. A recent analysis by Climate Analytics points to strong economic and climate change advantages if governments adopt green stimulus packages in response to the COVID-19 pandemic.

The countries of the Energy Community Treaty need to realise this on time, before they lock themselves into a carbon and debt trap.

¹ Regulation (EU) 347/2013, as adapted for the Energy Community in 2015, establishes rules for identifying projects of Energy Community significance, called Projects of Energy Community Interest (PECIs) and Projects of Mutual Interest (PMIs). These projects will benefit from 1. streamlined permitting procedures within Contracting Parties – in case the Competent Authorities are put in place, 2. where applicable, from cross-border cost allocation.