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The ‘do no significant harm’ principle revisited – lessons from Poland for the next EU budget

The Polish Green Network is a member of 15 out of the total 24 monitoring committees of EU funds in Poland. We chair the ‘do no significant harm’ working group at the monitoring committee of the EU’s largest programme (European Funds for Infrastructure, Climate and Environment for 2021-2027 (FEnIKS)) and we coordinated work on the application of the ‘do no significant harm’ principle in the Partnership Agreement Committee 2021-2027. This gives us a unique opportunity to look at the challenges of implementing the ‘do no significant harm’ principle from the perspective of civil society, beneficiaries and the central and regional administrations.

The EU taxonomy for sustainable activities and the  ‘do no significant harm’  principle were primarily designed to explain sustainability principles to investors and were not directly linked to EU funds.  However, this principle was introduced to the Recovery and Resilience Facility and the 2021-2027 Cohesion Policy as a horizontal principle (i.e., it applies to all investments under these instruments). This does not mean the EU taxonomy is fully applied in EU public funding; there is no obligation to demonstrate the positive environmental impact of an investment, but only to examine the risk of causing significant harm to the six environmental objectives.

Moreover, the application of specific  ‘do no significant harm’ criteria, as set out in the EU taxonomy, is not required for EU funded investments. This results in institutions and beneficiaries lacking a uniform understanding of the ‘significance’ of potential ‘harm’. The European Commission has also abandoned plans to publish dedicated  ‘do no significant harm’ guidance for the Cohesion Policy. All this has resulted in a lack of a single, coherent implementation approach to this principle across EU financial streams.

Explanation of the ‘do no significant harm’  principle is included in the Polish Partnership Agreement for 2021-2027 and in the Recovery and Resilience Plan. In practice, the recovery plan and each Cohesion Policy programme are accompanied by a  ‘do no significant harm’  assessment addressing its compliance at the level of types of projects, reforms or investments.  ‘Do no significant harm’ compliance for specific investments and projects is ensured by the adoption of relevant selection criteria and a requirement to produce specific explanations or evidence in the application for funding.

Lessons learnt on the effectiveness and implementation of the ‘do no significant harm’ principle

The introduction of the ‘do no significant harm’ principle raised awareness about EU environmental goals but revealed several weaknesses. Loopholes allowed fossil gas investments to slip through as ‘transition’ projects. Assessments lacked clear standards, resulting in uneven quality and weak verification. Political decisions have further weakened the principle, as some projects deemed essential for EU energy security were exempted from DNSH requirements under the REPowerEU Regulation.

Implementation in Poland pointed to broader regional challenges including unclear and incoherent rules, poor coordination among managing authorities and limited institutional capacity, as an analysis conducted by the DNSH Principle Task Force within the Polish Partnership Agreement Committee for 2021-2027 confirmed. It also confirmed CEE Bankwatch’s findings on this issue: the lack of clear EU guidance and different standards for the application of ‘do no significant harm’ in different financial instruments has led to difficulties in its application. Furthermore, monitoring and compliance varied widely, with insufficient training and expertise.

Despite the obstacles, some solutions in the 2021-2027 programming period showed promise. In Poland, the ‘do no significant harm’ principle was directly incorporated into the Partnership Agreement. As a result, environmentally harmful river regulation projects intended to enable inland navigation became not eligible for funding. The monitoring committee also demonstrated its potential as a forum for collaboration between administrative and non-administrative partners, including civil society.

How to approach the ‘do no significant harm’ principle in the EU budget

Building on the experience of implementing the ‘do no significant harm’ principle in Poland in the recovery plan and 2021-2027 Cohesion Policy, a complex, unified and transparent approach should be applied in the next Multiannual Financial Framework (MFF) for 2028-2034 to address current challenges. The ‘do no significant harm’ principle should apply across the entire MFF and be based on a single, universal guidance, as proposed by the European Commission in July 2025. However, more must be done to ensure the implementation of the ‘do no significant harm’ principle. As European CSOs and Polish organisations demand, this guidance should be supported by sectoral documents containing exclusion lists of investments that cannot be financed due to their clear DNSH non-compliance (this has also been proposed by the European Commission), as well as indicative lists of selection criteria to be used in calls for proposals and evidence to be presented by applicants and beneficiaries.

Designing specific solutions for the ‘do no significant harm’ principle in the next EU MFF for 2028-2034 requires conducting a systemic, in-depth evaluation and verification of the application of this principle in the 2021-2027 Cohesion Policy and RRF across the EU. Member States should be able to use the European Commission’s Technical Support Instrument (TSI) to further operationalise the principle to, for example, explore links between ‘do no significant harm’ and national legislation or to identify good practices. The ‘do no significant harm’ principle should be linked with the partnership principle such that the guidance and related documents are consulted with experts and partners, while working groups programming the next MFF and monitoring committees should be involved in all ‘do no significant harm’ related aspects of their plans and funds. In the next programming period, educational activities about the environment should be strengthened and should include a ‘do no significant harm’ component to build the capacity of institutions and beneficiaries and increase the public’s environmental awareness.

Ukraine Facility’s next chapter: From patchwork to principles

European Commission reports and staff documents on the Ukraine Facility Regulation and Multiannual Financial Framework confirm that the EU’s current ‘crisis response’ approach has led to inconsistencies between internal and external EU policies – from the green transition to the application of international financial institutions’ standards. 

In the next Multiannual Financial Framework, the EU’s financial instrument for Ukraine must be improved by embedding binding climate and environmental safeguards from the outset and preserving funding for democracy, biodiversity, and climate resilience.

Commission lifts lid on Ukraine Facility 

The Commission deserves credit for being candid in its assessment of the Facility’s shortcomings. But recognition must be followed by concrete changes. The Ukraine Reserve represents a once-in-a-generation opportunity – beginning in 2028 – not only to help Ukraine recover from war, but also to anchor its future in democracy, sustainability and EU values.  

In its communication on the 2028–2034 Multiannual Financial Framework, the Commission acknowledges that it treated the Ukraine Facility Regulation as a ‘crisis response-oriented instrument’ designed to absorb the shock of war. Similar to the EU’s other emergency-response instruments, such as the Support to mitigate Unemployment Risks in an Emergency (SURE) and the Health Emergency Response Authority (HERA), the Ukraine Facility Regulation was fast-tracked to deliver urgent funding. 

However, application of this crisis-response strategy has come at the expense of other policy objectives, contributing to what the Commission itself calls a ‘patchwork approach’ to cross-cutting policies, including the green and digital transitions. In its report on the progress towards achieving the objectives of the Regulation, the Commission concedes that the ‘do no significant harm’ principle is applied only ‘to the extent possible’ in wartime, and that the mandatory 20 per cent climate target for the Ukraine Investment Framework will only be assessed at the end of 2027. In this context, the Ukrainian government must develop the necessary tracking systems to ensure reconstruction investments meet evolving sustainability benchmarks.  

Which rules apply? 

In its communication, the Commission also admits that the different rules for internal and external policies have led to ‘double standards’ and a ‘fragmented and overly complex’ financial toolbox. It cites, for example, the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), which operate under different rules depending on whether they are the implementing partners for an internal or an external programme.  

International financial institutions participating in the Ukraine Investment Framework should not apply one set of rules inside the EU and another outside, especially given Ukraine’s status as a candidate country. Harmonised frameworks would enhance legitimacy and ensure a level playing field. 

Accountability and transparency gaps 

This issue is particularly problematic given the current lack of transparency around the Ukraine Investment Framework’s decision-making processes, which remain completely reliant on the policies of international financial institutions. For instance, in cases where urgently needed financing for small and medium-sized enterprises is channelled through Ukrainian financial intermediaries, it is practically impossible to track the final beneficiaries – a gap that must be addressed. 

This lack of transparency is not an isolated issue: our recent monitoring revealed major shortcomings in the environmental and social impact assessment carried out for the EBRD-backed flagship wind power plant in Volyn. Other recent EBRD projects have applied derogations and invoked business confidentiality clauses to justify the late disclosure of information, preventing interested parties from engaging and providing input on potential environmental and social risks.  

The ongoing context of war further limits the extent to which civil society and other stakeholders can engage in public consultations on such projects. According to the Commission’s Ukraine 2025 Report, ‘efforts are needed to set up the legal framework of the partnership principle, requiring the involvement of relevant regional and local authorities, public authorities, socio-economic partners and civil society in all programming stages, preparing the ground for future cohesion policy in line with the European Code of Conduct on Partnership’. 

From Facility to Reserve, but design flaws remain 

This is the backdrop against which the EU is now proposing the Ukraine Reserve – a new instrument of up to EUR 100 billion over seven years from 2028. The Reserve is supposed to finance both Ukraine’s accession process and its long-term reconstruction. Yet there is no sign it will address the structural shortcomings of the Ukraine Facility. Unless designed differently, it risks becoming another reactive, fragmented tool – big on volume but short on accountability, transparency and strategic focus. 

While the Reserve will cover both the accession process and longer-term reconstruction and the ‘full respect of the merit-based process’ stays the underlying principle for providing financial and policy-based support to candidate countries, there are numerous concerns related to the overall design of the instrument, that lacks strong safeguards, democratic oversight, earmarked targets in democracy building, biodiversity and climate-resilient investment principles in the use of these funds.   

The Commission’s new regulation proposal establishing horizontal rules for EU programmes and activities, including those related to Ukraine, sets out provisions linked to horizontal principles such as ‘do no significant harm’. The proposal requires programmes and activities, ‘where feasible and appropriate’, to apply this principle and respect working and employment conditions ‘in line with the principles of economy, efficiency and effectiveness’. 

However, the proposal also allows for exemptions where application of the ‘do no significant harm’ principle may not be feasible or appropriate, citing ‘crisis situations, including emergencies arising from natural catastrophes, or other reasons of overriding public interest’. Given Russia’s ongoing full-scale military aggression against Ukraine, the Reserve will likely fall under this exemption.  

Global Europe’s Ukraine gamble 

Complicating matters, the application of horizontal principles under the Commission’s new proposal for the Global Europe instrument – which tracks EU spending and results in areas such as climate and the environment, social policies, and gender equality – might be affected.   

Under the existing Global Europe instrument, the collective 30 per cent spending target for climate and the environment is calculated across the entire instrument, rather than separately for the Ukraine Facility and the Reform and Growth Facilities for the Western Balkans and Moldova. Moreover, under the new Global Europe instrument, this 30 per cent target may not even be guaranteed. This uncertainty risks undermining the momentum generated by civil society in support of Ukraine’s ‘build back better’ approach and the consistent application of the ‘do no significant harm’ principle in reconstruction projects. 

For the Reserve to be credible and effective, it must include strong safeguards and democratic oversight, supported by mechanisms that ensure genuine and meaningful consultation. These measures are critical for ensuring that EU support not only meets Ukraine’s immediate needs but also strengthens the country’s long-term sustainability and accession process. 

Replicability gone wrong: Demolition of cultural heritage and environmental risks at EBRD project in Kazakhstan

The EBRD’s Almaty Airport Expansion Project, ​​funded with the participation of the International Finance Corporation (IFC), was signed in 2021 in order to build a new international passenger terminal to address growing traffic needs. Local activists have for years raised concerns about the project’s harm to cultural heritage – the historical 1947 VIP Terminal building. The building had the status of protected cultural and historical heritage of local significance and was slated to be relocated in the project description. According to the complaint filed by the environmental organisation Green Salvation, the USD 55 million project has caused irreparable damage to the historical and cultural heritage: instead of relocation, the historical building was demolished in November 2022. This was done despite a resolution from the Almaty City Hall requiring the relocation of the building, since the demolition of protected cultural and historical heritage in Kazakhstan is prohibited by law. The company also ignored public concerns raised at the original public hearings. 

The complaint alleges there has been frivolous interpretation of national law and an application of arguments based on international conservation charters and IFC performance standards rather than national legislation to justify decisions regarding this project. The commissioned cultural heritage study for the EBRD project was not based on national legislation but rather independent analysis and international documents. In fact, some of the arguments and terminology on which the study based its evaluation did not apply to Kazakhstan’s laws at all. For example, the study refers to ‘replicable cultural heritage’ in order to justify only partial preservation of the VIP terminal building, but ‘replicability’ or any related concept or term is nowhere present in Kazakhstan’s national legislation on protected cultural heritage. 

The airport company claimed that the local government supported the idea of preserving only key structural elements of the building. The Almaty City Hall resolution, dated 11 November 2020, ordered to ensure integrity and safety of the cultural monument during the process of relocation. Nevertheless, despite clear inconsistencies and public criticism, the historical building was demolished in November 2022.  

Consequently, Almaty environmentalists ​have ​sent requests to the EBRD and the Almaty International Airport, organised advocacy meetings and engaged in litigation at the municipal level in order to clarify the legality of the demolition of the historical building. In the end, Green Salvation was unable to identify any valid documents related to the relocation process. This lack of any evidence of relocation monitoring reports indicates a failure to properly preserve the building or its original elements.  

Seeking accountability, environmentalists submitted a formal complaint to the EBRD’s IPAM and requested a full compliance review and thorough investigation of this case. Green Salvation alleges there has been a violation of the EBRD’s Environmental and Social Policy in relation to compliance with the national law, potential environmental harm and destruction of cultural heritage, as well as failure to ensure access to information and meaningful public participation. The organisation hopes that a fair investigation will prove wrongdoing, ensure accountability and provide fair remedy. The monitors are also advocating for strengthening of the bank’s policies in relation to heritage protection, responsible risk and impact assessment procedures, meaningful engagement with the public, as well as upholding commitments to national laws.  

In September 2025, an additional USD 60 million loan to the Almaty Airport Expansion Project was proposed and is pending approval by the end of the year. Formally aimed at improving the original project, the additional funding came as an unpleasant surprise to the monitoring organisations, which have been flagging the above-mentioned violations as well as risks connected to the airport company’s failure to establish a sanitary protection zone (SPZ) around the active airport. Despite their steady engagement with the bank and the airport company, the local monitors were not informed about or invited to the public hearings related to the proposed extension project. The EBRD originally stated it would step out of the project unless specific conditions, including establishment of the SPZ, were ensured. In this situation it remains unclear why the bank refused to adhere to this condition and instead proposed further funding. 

The EBRD should carefully consider all implications of this project and the alleged violations by their client under the ongoing compliance review before making a decision on extended funding and further participation. 

Biodiversity loses out in Hungary’s recovery and resilience plan

Back in 2020, the EU proclaimed that the 2021–2027 Multiannual Financial Framework would mark a turning point for nature. In May of that year, the European Council agreed that at least 10% of the total EU budget expenditure should contribute to halting and reversing biodiversity loss. This same ambition was meant to infuse the EUR 672.5 billion Recovery and Resilience Facility, the centrepiece of the EU’s post-COVID-19 stimulus.  

EU Member States were explicitly instructed to align their national recovery and resilience plans with the EU Biodiversity Strategy for 2030, which calls for 30% of land and sea to be placed under protection along with an annual EUR 20 billion for nature. Yet in Hungary, the ambitious goals of the Recovery and Resilience Facility were narrowed into a single, solitary conservation project – one that’s recently been scrapped. 

A token gesture for nature: The Hanság wetland project 

When Hungary submitted its first recovery and resilience plan in May 2021, its almost complete neglect of biodiversity was shocking. Across 10 central and eastern European countries, a measly 0.26% of the total EUR 87 billion Facility grant was earmarked for biodiversity measures. In Hungary, that sliver – EUR 6.4 million – went to just one project, dwarfed by the EUR 456 million allocated to water management. 

That sole project centred on the Hanság, a lowland basin in northwestern Hungary spanning between 400 and 700 km2 – once one of central Europe’s largest contiguous wetlands. But after two centuries of agricultual drainage, the Hanság is now a series of fragmented wetland habitats. 

The project manager – the Fertő–Hanság National Park Directorate – had planned to reverse this decline in several of the basin’s key protected areas, some of which had already been restored, the most famous being the Osli marsh, a 500-hectare refuge where nature is now thriving. The project aimed to build on this success by restoring water retention across 5,000 hectares of Natura 2000 sites. By renovating roughly 75 km of canals, repairing several sluice gates and rebuilding weirs, the plan was to mimic natural flood pulses and support the return of reed beds, wet meadows and stretches of open water. 

These efforts would have supported priority species like the white-tailed eagle, Eurasian bittern, otter, and fire-bellied toad. Once restored, the wetlands would also have created a buffer against the increasing risk of drought, preventing the impacts of further drops in groundwater levels on nature and local communities. 

The winter 2022 edition of the national park’s magazine, Kócsagtoll (Egret Feather), celebrated the securing of a EUR 7.2 million funding call for the project through the Recovery and Resilience Facility, with park director Matthaea Kulcsárné Roth noting that an intervention of this scale would not have been possible without the support of the Facility. Construction had been slated to take place between 2024 and 2026.  

A restored alder bog in the Hanság wetlands (photo: Zsuzsanna Ujj).

Cancellation without explanation 

Regrettably, in early 2025, Hungary quietly tabled a major revision of its recovery and resilience plan that ditched the Hanság project entirely. And although the water management component still exists, funds for biodiversity submeasures have disappeared. As things stand, the European Commission has yet to approve the implementation of Hungary’s legislative reforms in several key areas. This means the disbursement of Hungary’s allocations under the Facility – a EUR 5.8 billion grant and a EUR 4.8 billion loan – has practically stalled. 

In this uncertain funding environment, the Hanság project was among the first projects to be abandoned. The cancellation of funds leaves the Hanság wetlands exposed to climate- and human-induced habitat decline, along with the loss of vital ecosystem services. The national park’s annual report reveals the encroachment of invasive goldenrod – a fast-spreading meadow plant – the disappearance of grasslands and peat ecosystems, and a reduction in groundwater levels. Key species, such as the strictly protected European mudminnow, remain in grave danger. 

Why is biodiversity losing the funding race? 

The Hanság project is a textbook example of the structural flaws in how EU money is allocated: the pressure to spend quickly creates a funding environment in which complex and sophisticated nature-based projects lose out. Wetland restoration requires hydrological modelling, long-term monitoring and adaptive management – processes that can take 5-to-10 years to complete. By contrast, energy projects like solar farms and grid upgrades can deliver measurable results within 18 months, with clear performance indicators. 

Crucially, funds for biodiversity under the Recovery and Resilience Facility are not ring-fenced, leaving the 10% biodiversity target reliant on political goodwill rather than serving as a legally binding obligation under the Facility Regulation. In practice, this means Member States can reallocate expenditures at will – as demonstrated in Hungary, where EUR 6.4 million in essential biodiversity funding has been diverted to general energy and water-management measures. 

National priorities trump EU strategy 

Hungary’s government has consistently prioritised large-scale water infrastructure – over soft, landscape-scale conservation. The cancellation of the only habitat-restoration project in Hungary’s recovery and resilience plan is not an isolated failure; it’s a symptom of a broader structural problem. 

In 2024, the European Court of Auditors noted that EU green spending is often disconnected from actual costs and results. To prevent a repeat under the 2028–2034 Multiannual Financial Framework, the EU must adopt legally binding, ring-fenced biodiversity spending targets. Once allocated, funds must not be diverted. Mandatory ex ante biodiversity audits should also be conducted before any plan is approved. Without such safeguards in place, the EU’s 2030 pledge to protect 30% of the region’s land and restore 25,000 km of its rivers will remain mere rhetoric. 

But there are signs of hope. After a century of absence, two crane couples have decided to nest and raise their chicks in the Hanság once again – a clear result of the national park’s tireless efforts. Yet the Hanság’s dry creeks during summer months provide a stark warning: biodiversity cannot compete in an open market for EU funds. It must be guaranteed a seat at the table – before the last crane flies away. 

Bird’s paradise (photo: Zsuzsanna Ujj).

Sofia’s burned lesson: Why the Western Balkans must ditch waste incineration

Sofia’s experience – an eight-year battle that led to the Bulgarian capital abandoning a major waste-to-energy project in 2023 – serves as a stark warning for other cities in the region, including Tuzla, Kakanj, Sarajevo and Podgorica. 

Sofia’s failed incinerator project, halted due to documented health risks, unavoidable carbon dioxide emissions and crippling finances, demonstrates a critical truth: Waste incineration deepens dependence on a carbon-intensive economy, generates toxic residues and diverts crucial funding away from real, circular solutions. Unfortunately, these effects are all too visible across the Western Balkans. 

Debt, toxins and missed EU targets 

The push for incineration in the Western Balkans comes at a time when the region is moving towards a regulatory cliff edge. The EU’s Energy Efficiency Directive mandates that by 2030 at least 50 per cent of energy in the district heating sector must come from renewable energy or waste-heat sources. Yet today, a staggering 97 per cent of district heating in the region still relies on fossil fuels.  

The Energy Community will soon transpose these binding obligations, posing an existential threat to the dozens of district heating utilities in Serbia (59) and Bosnia and Herzegovina (32), among others. By 2028, they will need to radically transform their energy mix – a near-impossible task if they lock themselves into new, long-term incineration projects that rely on co-burning waste – a process that destroys resources and fuels carbon dioxide emissions. 

And the financial lock-in is no less severe. Incinerators shackle cities to decades of debt to repay their high capital costs, all while producing toxic ash that requires its own specialised and costly landfill. 

Incineration versus recycling 

Critically, the incineration pipeline directly undermines the Western Balkans’ legal obligations under the EU accession process. To align with the Waste Framework Directive, countries must achieve a 50 per cent municipal waste recycling rate by 2025. However, the region is already far behind. According to the Organisation for Economic Co-operation and Development, recycling rates in the Western Balkans remain critically low, with Bosnia and Herzegovina at 2.2 per cent, Serbia at 3 per cent and Kosovo at 2.5 per cent; data for Albania, Montenegro and North Macedonia are either missing or outdated. Separately, estimates from the Regional Cooperation Council place Albania at 18.5 per cent, while other Western Balkan economies remain below 5 per cent.  

Investing in incineration creates a built-in incentive to burn recyclable materials simply to ‘feed the furnace’, actively working against the need to scale up recycling. It also locks Western Balkan countries into a high-emissions waste management system that makes achieving their 2025 and 2030 recycling targets practically impossible. 

Incineration pipeline crisis 

Despite these warnings, the Western Balkans are charging ahead with a dangerous pipeline of incineration projects, often in the face of public opposition. One example comes from Bosnia and Herzegovina, where Elektroprivreda BiH announced plans to conduct a co-combustion test using two per cent refuse-derived fuel at the Tuzla and Kakanj thermal power plants, which would have seen 100 tonnes of refuse-derived fuel or solid recovered fuel burnt alongside coal over two days. Following a stormy reaction from citizens and municipal representatives, the test was temporarily postponed, though the utility reportedly intends to try again.  

At the regional level, the scale of the planned shift is alarming. According to an analysis by Deutsche Gesellschaft für Internationale Zusammenarbeit, the Western Balkans has almost no significant refused-derived fuel or solid recovered fuel production capacity. Only two mechanical–biological treatment plants currently produce refused-derived fuel or solid recovered fuel – one in Bosnia and Herzegovina and the other in Serbia – each with limited capacity. 

By contrast, the region’s cement sector is already demanding exponentially larger quantities of alternative fuels. Bosnia and Herzegovina, for example, has started importing refuse-derived fuel from Italy, Austria, Croatia and Slovenia to meet this growing demand. This mismatch demonstrates that large-scale incineration requires the burning of mixed municipal waste, directly sabotaging circular economy goals. 

A circular approach to waste management 

The solution is not to burn, but to build. Sofia’s Han Borgov biological waste treatment plant showcases a viable, circular alternative. Instead of an incinerator, the city has invested in decentralised composting and small-scale anaerobic digestion. The plant’s two combined heat and power units (with a total capacity of 855 kilowatt electrical) uses the biogas it produces to generate electricity and heat. The facility also produces 12,000 tonnes of compost every year, distributed free of charge to citizens for gardening and reforestation.  

Small-scale biogas systems like this can be environmentally sound provided certain conditions are met: feedstock is collected locally within 5 to 10 kilometres, no crops are grown solely for biogas production, energy is used on-site, and compost and liquid outputs are handled safely. When managed properly, such systems can convert local organic residues into energy and compost without the pollution and long-term costs of large-scale incineration. 

Approximately 100 kilometres south of Sofia, the Bulgarian town of Blagoevgrad is applying a similar approach, putting sustainability into action with a nearly 16,000-tonne-per-year anaerobic digestion plant. Once operational, the facility will process separately collected food, garden and wood waste, serving around 100,000 residents across five municipalities. The plant will produce biogas for electricity and heat to power its own operations, and produce roughly 5,100 tonnes of compost annually, turning local biowaste into useful products rather than sending it to landfill. These examples show that small-scale, locally integrated systems can manage organic waste without the pollution and long-term costs of incineration.  

Fund the future, not the furnace 

Public money in the Western Balkans must be urgently redirected. Instead of funding polluting incinerators, governments, banks and EU institutions should prioritise investments in sustainable renewable energy sources for heating, alongside energy-efficiency technologies. This is the only viable pathway to meet EU directives, protect public health and build a resilient, circular economy.  

Albania’s Skavica dam can’t get off the ground – time to finally cancel it!

Two seemingly unrelated pieces of news have appeared regarding Albania this autumn. On 4 November 2025, the European Commission’s Enlargement Package, which shows progress towards EU membership, was published, stating that ‘The environmental risks of the Skavica hydropower plant project to ecosystem and local communities persist’.

A week earlier, an investigation against the deputy premier and infrastructure minister Belinda Balluku by Albania’s Special Structure Against Corruption and Organised Crime (SPAK) became public. The investigation is for violating tender rules, linked to the construction of a road in 2020.

Minister Balluku has also been one of the loudest supporters of the Skavica dam, a highly damaging project that would flood the Dibër valley, impact up to 15,000 hectares of land, displace several thousand people and bring the Balkan lynx to extinction.

Among others, she was at the signing ceremony of the contract between US construction giant Bechtel and the Albanian Power Corporation (KESH) for project documentation and preparatory works after a special law was adopted in the Albanian Parliament in 2021. The law chose Bechtel for the design and construction of the project – without a tender. But even this high-level political support has not been enough to get the project off the ground.

Environmental impact assessment rejected

After the initial contract was signed with Bechtel, the Skavica project looked like it was being fast-tracked. The technical investigation, building access roads for construction and project documentation were done relatively quickly and an environmental impact assessment (EIA) was submitted on 1 March 2023 to the National Environmental Agency (NEA). From January until July 2023, the NEA and KESH engaged in a process to address missing information and documents. However, according to the Albanian government, KESH’s application was rejected:

‘Conclusively, the subject has not completed the necessary documentation within the 15-day deadline, resulting in an automatic rejection of the application by the system. For this reason, the subject needs to restart the procedures from the beginning’, states the government’s report to the Bern Convention.

As of November 2025, KESH has not re-applied for a full EIA process with the environment agency.

Access roads abandoned

July 2022 October 2025

Our visit to the dam site in October 2025 showed that after access roads were built and geological surveys were carried out in early 2022, highlighting serious problems for dam construction, nothing has been done. There were no workers nor security guards, the vegetation was recovering and the access roads were becoming inaccessible due to lack of maintenance.

A local person from Fushë Çidhën, a village of 200 houses, 90 per cent of which could be flooded if the Skavica dam is built said: ‘Bechtel people were in the region 3 years ago, there is almost no talk about the project since then. Back then, and even now, people can’t openly speak up against the project because they are afraid the government might take away their social assistance that is vital for their survival’.

Another person from the Dibër district’s main town, Peshkopi, added: ‘The project seems to be stopped, not a priority. There are no talks about it, not even in the government. Nevertheless, the government might still try to build the dam and the local people should not only be supported to stop it, but also to develop ideas for tourism and agriculture development as a good and sustainable resource for their wellbeing.’

Investment banks not interested in the project

In January 2025, the Albanian government informed the Bern Convention about the potential lenders for the construction of the Skavica hydropower plant, including the World Bank, the Multilateral Investment Guarantee Agency (MIGA), UK Export Finance (UKEF), and the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC). As part of its progress report on the case file, the government reported that KESH had engaged a financial adviser, Ernst & Young, to assess the project’s financial and economic feasibility and to support discussions with potential lenders.

We sent letters to the World Bank, UKEF – which organised a Skavica Supplier Fair in 2022 – and the US Development Finance Corporation (DFC) which was mentioned by the Albanian government as a potential lender in 2021.

The World Bank and DFC’s responses confirmed that the banks are not currently considering the project, while UKEF underlined that the fact it organised a fair associated with the project was ‘in no way a guarantee of UKEF support for the Skavica hydropower plant’.

These responses show that funding is far from secured. Moreover, as resettlement costs are uncertain with most of the houses in the Dibër district without property documents, the real cost of the project is anything but predictable.

It’s the right time to abandon the project and protect the Dibër valley

As we warned in 2022, the Skavica dam is the last thing Albania needs. With construction costs rising to over USD 1.5 billion, its EIA rejected, the Constitutional Court highlighting the lack of public consultations and a lack of support from the EU and international financial institutions, it’s the right moment to cancel the project.

Bechtel’s selection without a tender practically guarantees that the dam would be overpriced, and it can only be a matter of time until the project attracts SPAK’s attention, if it hasn’t already.

Recent studies have shown that the Dibër valley and the Upper Black Drin deserve to become internationally-recognised protected areas. The alluvial forests along the Drin are the largest in Albania. With the forests in the region recovering quickly from previous clearances, Dibër could become the greenest district in Albania. The variety of protected species and the mosaic of natural and seminatural habitats make the area an ideal candidate site for the Emerald and Natura 2000 networks – Europe’s networks of protected areas.

It will only get harder to build new hydropower plants in the future, due to higher construction prices, annual precipitation decrease, Dibër’s unique biodiversity and public resistance. With dozens of guesthouses and tourism development initiatives appearing in recent years, the government should finally end the suspense about the region’s future and choose the path of small-scale sustainable development.

 

The project benefits from the support of the Donors Initiative For Mediterranean Freshwater Ecosystems.

This document was produced with the financial assistance of the Donors Initiative For Mediterranean Freshwater Ecosystems. The contents of this document are solely the liability of CEE Bankwatch Network and under no circumstances may be considered as a reflection of the Prince Albert II of Monaco Foundation or Donors Initiative For Mediterranean Freshwater Ecosystems’ position.