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EU funds spending plans in Hungary: the dark side is in the details


A new Bankwatch study, launched last week, looks at how nine central and eastern European countries are set to spend billions of EU funds until 2020 that are meant to transform the carbon-intensive, inefficient energy systems of their countries.

On our blog today, Hungarian campaigner Alexa Botar comments on her findings from Hungary. Stay tuned for other countries following this week.

Find out more at bankwatch.org/enfants-terribles >>

The Hungarian energy system is characterised by very low per capita energy consumption and a relatively high energy intensity. While 2010-2020 forecasts expect overall energy consumption to increase by around 1.6% per year on average and electricity consumption by 2.2% per year, in reality the domestic energy consumption is on a constant decrease by 1,3% per year for the last ten years on average.

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Climate action in EU Cohesion Policy funding for Hungary, 2014-2020 (pdf)
Study chapter | January 26, 2016

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The key strategic document on energy, the National Energy Strategy (NES) claims to promote the transformation of the energy system with modestly progressive aims. In terms of electricity production, the NES prefers the “Nuclear – Coal – Green” scenario, in which the green part has been recently curbed, mainly to justify the viability of the construction of the Paks-2 nuclear power plant. The strategy also wants to strengthen the role of the state, which is contradictory to the country-specific recommendations of the European Commission. Consequently, EU funds, a drop in the ocean for “green energy reform”, are spent in an economic environment that is in contradiction to Commission requirements.

Hungary is dependent on one external supplier for around 80% of its gas and 100% of nuclear fuel supply. The government’s plans for Paks-2 and the South Stream gas pipeline would ensure funding for “dirty energy” from other sources and thereby undermine the transformation of the energy sector to which investments under the European Structural Investment Funds may, even if to a small extent only, contribute.

Climate action allocations

According to the official figure in the Partnership Agreement (PA) between the European Union and the Hungary, one of the central planning documents for EU funds’ spending, Hungary meets the EU-wide target of allocating at least 20% of EU funds spending to climate action (Hungary allocates 20,31%). Energy efficiency receives EUR 1 159 million, which will be of some help but is still insufficient, covering only 42,58% of what Hungary’s National Energy Efficiency Action Plan II deems necessary.

Almost EUR 3 billion goes to climate action in other sectors (incl. low-carbon transport, air quality, nature protection, risk management etc.).

Compared to other central and eastern European countries, Hungary stands out with a high share of cliamte action funding allocated to renewable energies (41%).

Graph: The different types of energy infrastructure investments

Source: Climate’s enfants terribles

Yet, the PA-level allocations for direct investments in renewables EUR 875,9 million cover at best 62,14% of what is needed to reach Hungary’s national renewables target of a 14.65% renewables share by 2020 (our own calculation based on data from a background study to the National Renewables Action Plan by the Hungarian Energy Office and Pylon Kft.)

Other energy-related key features in Hungary’s EU funds’ planning documents include:

Energy efficiency

The government plans to re-allocate funding for energy efficiency from residential housing to governmental buildings. The energy saved by renovating only governmental buildings does not add up to the national housing efficiency target (44.6 PJ/year savings during the 2014-2020 period – our own calculation based on the National Energy Efficiency Action Plan II). Moreover, this re-allocation can have negative social impacts since it reduces incentives for citizens to renovate their houses. Together with increasing end-user energy prices this will only aggravate problems of energy poverty.

Renewable energy

The partnership Agreement claims the exploitation of potentials in solar and wind to be seriously conditioned by technological and market development. But also the obsolete national legal and financial support system of renewable energies is a factor in the slow development of renewable energy use in Hungary. Hungary is lagging behind with planning a renewable energy subsidy system and with calls for proposals for renewable energy production. Unfortunately, solar and “other renewable sources” (including wind) are discouraged due to an insecure investment environment characterised by limited EU funding for citizen and community renewable energy projects, unfavourable feed-in tariffs and a recently introduced solar panel tax.

Incineration

Three Hungarian Operational Programmes (OP), the national planning documents for spending EU funds, support the incineration of waste in various ways, making waste prevention and recycling more difficult. For example, the Environment and Energy Efficiency OP (EEOP) includes a mayor project for treating the Budapest sewage sludge, which may include municipal solid waste co-incineration.

Biomass

Within renewable energy, the strong focus on biomass is a real threat. It would be important to declare that no forestry- or agricultural waste is used for biomass energy. Fortunately, some safeguards are included in the OPs: The EEOP, for instance declares that biomass energy production will be funded only if it meets sustainability criteria – however, the criteria have not been established yet.

EU funds spending plans in Estonia: The long and rocky path away from shale oil


A new Bankwatch study, launched last week, looks at how nine central and eastern European countries are set to spend billions of EU funds until 2020 that are meant to transform the carbon-intensive, inefficient energy systems of their countries.

On our blog today, Estonian campaigner Kadri Green comments on her findings from Latvia. Stay tuned for other countries following this week.

Find out more at bankwatch.org/enfants-terribles >>

Estonia continues to be one of the biggest emitters of greenhouse gases per capita, mainly due to the carbon and energyintensive oil-shale-based energy sector. Even though the sector provides only 4% of Estonia’s GDP, it is responsible for 78% of Estonia’s CO2 emissions and up to 98% of other emissions to ambient air.

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Climate action in EU Cohesion Policy funding for Estonia, 2014-2020 (pdf)
Study chapter | January 26, 2016

Other chapters, graphs & more

Estonia’s National Energy Strategy 2015-2030 aims to reduce the use of oil shale in electricity production from currently (2012) 81% to below 50% by 2020. The fact that Estonia has succeeded in raising the share of renewable energy in final energy consumption to 26.5% shows the potential. Yet as a Bankwatch analysis launched last week shows, Estonia’s investment plans for EU funding 2014-2020 exhibit little ambition to transform the country’s energy sector to a greener and cleaner one.

Estonia receives EUR 3.59 billion in all the European Structural and Investment Funds (ESIF). However, only 4.78% of this money (EUR 164 million) are planned for investments in clean energy infrastructure (energy efficiency, renewables and electricity distribution), a modest share even compared to other countries in the region.

Graph: Different types of energy infrastructure investments

Source: Climate’s enfants terribles

The situation looks only little better in the transport sector, where 49% of the Cohesion Fund investments will go to road construction. 17% and 14% respectively will be invested in rail and cleaner urban development. This priority setting raises the question as to how it is possible to reduce greenhouse gases by increasing the dependency on fossil-fuel-based transport modes.

Graph: Share of transport modes in total transport funding in Estonia.

Source: Climate’s enfants terribles

Being responsible for more than 60% of public investments in the country (average 2011-2013), Cohesion Policy funding could be considered a gift for policy-makers, offering them the possibility to steer large sums of investments. Yet it seems that Estonia does not have the political will to let go of fossil fuel-based solutions.

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Find graphs, other chapters and more at bankwatch.org/enfants-terribles >>

 

EU funds spending plans in Latvia: What’s hidden behind the ‘green veneer’?


A new Bankwatch study, launched this week, looks at how nine central and eastern European countries are set to spend billions of EU funds until 2020 that are meant to transform the carbon-intensive, inefficient energy systems of their countries.

On our blog today, Latvian campaigner Juris Dilba comments on his findings from Latvia. Stay tuned for other countries following this and next week.

Find out more at bankwatch.org/enfants-terribles >>

More than a half of Latvia’s territory is covered by forests and the country is proud to be one of the greenest countries in the European Union. Statistics on the share of renewables in gross final energy consumption seem to support this “green image” – 37 per cent of energy consumed in 2013 came from renewables. Only Sweden has outperformed Latvia with almost 50%.

Latvia’s large share of renewables has a dark side to it, however. Without access to domestic fossil fuel resources, Latvia’s primary energy production is dominated by biomass. 78 per cent of the renewable energy produced in Latvia comes from fuelwood (2013). And herein lies a potential problem because further increasing renewables in Latvia may not be sustainable if solar and wind are not playing a bigger role.

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Climate action in EU Cohesion Policy funding for Latvia, 2014-2020 (pdf)
Study chapter | January 26, 2016

Other chapters, graphs & more

Money coming from EU Cohesion Policy could help increasing investments in the underdeveloped market for wind and solar energy. But a Bankwatch analysis launched this week of Latvia’s (and other countries’) 2014-2020 investment plans for EU Cohesion Policy shows that the millions of EU money will perpetuate the biomass bias in Latvia.

In total 17,20 per cent (EUR 755 million) of Latvia’s EU Cohesion Policy investments in the 2014-2020 period are dedicated to climate change objectives (an average share for central and eastern Europe). But these numbers include a range of investments and sectors. The EUR 26,6 million that are slated for renewable energy (compared to EUR 70 million in 2007-2013) are without exception supporting biomass. Wind, solar and other renewable energy sources go away empty-handed.

Graph: Split of renewable energy sources by technology

Source: Climate’s enfants terribles

The Latvian Renewable Energy Federation has urged the government (pdf) to develop comprehensive strategy to use the potential of wind and solar energy in Latvia thus giving a significant input in national energy security. And last year`s Strategic Environmental Impact Assessment of Latvia’s Energy Development Strategy 2014-2020 points out that an increase in the consumption of renewable energy may intensify logging and have a negative impact on the sustainable development of the forest sector and bio-diversity. An audit of the company Latvia’s State Forests (which owns a half of all Latvia’s forest) by the State Audit Office concluded in 2014 that the company’s forest management policy violates sustainable forest production.

While the forest area in Latvia is not shrinking and forest resources continue to expand, the assessments above indicate that Latvia’s faith in biomass may turn out to be a problem in the future, especially with the Government of Latvia hesitating to support a more balanced renewables sector.

Energy efficiency

In the new EU Cohesion Policy programming period 2014-2020, the Ministry of Economics plans to invest EUR 150 million in the promotion of energy efficiency in residential buildings. The Ministry of Economics estimates that 1,800 residential buildings will be renovated and insulated as a result of these investments. This makes up just 4.7% of the entire residential buildings stock (38,000) and is insufficient compared to the poor situation in residential buildings.

Housing stock accounts for almost half of all energy losses in Latvia (pdf). More than 60% of the housing stock across the country was built in the Soviet era and has very low energy efficiency performance. The Buildings Performance Institute Europe estimated (pdf) that 43% of homes in Latvia are dwellings with leakages and damp walls and that 35% of households cannot afford adequate heating.

Transport

Total direct EU Cohesion Policy investments in the transport sector make up EUR 1.3 billion, which accounts for 30% of all funds. More than half of these (EUR 654.5 million) will be invested in reconstructing and building roads.

Graph: Share of transport modes in total transport funding in Latvia

Source: Climate’s enfants terribles

Although meeting greenhouse gas emission reductions is a declared strategic objective of EU Cohesion Policy investments in the transport sector in Latvia, the Operational Programme itself, one of the key documents defining how EU funds are spent, stipulates that one of the targets of road investments is to increase traffic intensity.

The green veil behind which these investments hide is very thin indeed.

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Find graphs, other chapters and more at bankwatch.org/enfants-terribles >>

 

Bring on the money, don’t ask for results. EU funds spending plans in the Czech Republic


A new Bankwatch study, launched this week, looks at how nine central and eastern European countries are set to spend billions of EU funds until 2020 that are meant to transform the carbon-intensive, inefficient energy systems of their countries.

On our blog today, Czech campaigner Ondrej Pasek comments on his findings from the Czech Republic. Stay tuned for other countries following this and next week.

Find out more at bankwatch.org/enfants-terribles >>

The Czech Republic has the fourth highest per capita greenhouse gas emissions in the European Union and exports 20% of its mostly coal produced electricity. The country is a perfect example to illustrate the findings of Bankwatch’s new report “Climate’s enfants terribles”, namely that EU funding in new Member States fails to systematically address one of the main challenges of our time – climate change.

The Czech Republic’s official documents and EU funds’ spending plans include references to common EU objectives, including those related to climate change. Its EU funds budget fulfils EU requirements, procedures were followed. And still, the carbon intensity of our economy will most likely not change much.

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Climate action in EU Cohesion Policy funding for the Czech Republic, 2014-2020 (pdf)
Study chapter | January 26, 2016

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Take renewable energy as an example, a sector which is going through rapid developments in neighbouring countries and offers enormous potential for innovation and cost decreases. But this potential is completely undermined in the total allocation for EU funds in the Czech Republic: out of a total EUR 22 billion only EUR 52 million, or less than half a per cent, is allocated to renewable energy sources.

Interestingly, the country’s National Renewable Energy Action Plan [1] includes an estimation of installed capacity expected from each renewable energy technology in the Czech Republic to meet the EU’s binding 2020 target of a 13% renewable energy share. In the EU funds allocations, however, supply of wind and solar generated electricity is not at all included.

Graph: Share of renewables in the 2020 target versus the share of financial allocations for renewables

Source: Climate’s enfants terribles

On a positive note, energy efficiency receives almost 2 billion Euro, an unprecedented level of support. Yet, current estimates of the Ministry of Industry and Trade, which produced the graph below, say this will not suffice to bring about the amount of energy savings that our economy desperately needs.

Graph: Calculation of annual savings contributing to the overall target and the deficit of savings due to the late start of the Operational Programmes.

Source: Climate’s enfants terribles

Not only has the disbursement of funds started late, but the requirements the beneficiaries need to comply with are not leading them to fully use their efficiency potentials. Nor is it ensured that subsidies for private enterprises will create additional savings, going beyond the measures these companies would realise anyway.

The dissonance between declared objectives and the reality of low-carbon measures is however best shown in the area of air-pollution prevention. One of the principles for EU funding is to support low-carbon transition in all of the areas of interventions, not only in those directly financed under this objective. In reality, in the Czech Republic as well as in some regions in Poland, households are incentivised to buy new sources of energy using the most carbon intensive fuel of all – coal. And the incentive is not a mild one – 70% or more of the cost of the coal boiler is covered by the subsidy.

While the Czech government is careful to comply with all formal rules, the European Commission as well as the net contributors to the EU budget should look carefully at the real results and systemic changes in the countries and sectors they effectively finance.

According to a scenario outlined in the Czech National Energy Policy, the energy consumption will not decrease over the next twenty years and CO2 emissions in 2040 will still be at 50% of the 1990 level despite the country’s spending plans for EU funds. In that case, EU funds will have failed to facilitate a low-carbon transition. No amount of funding for energy efficiency will undo that.

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Find graphs, other chapters and more at bankwatch.org/enfants-terribles >>

Notes

1. https://ec.europa.eu/energy/sites/ener/files/documents/dir_2009_0028_action_plan_czechrepublic.zip

 

What EU money can’t buy: Poland’s green energy transition just out of reach


A new Bankwatch study, launched today, looks at how nine central and eastern European countries are set to spend billions of EU funds until 2020 that are meant to transform the carbon-intensive, inefficient energy systems of their countries.

On our blog today, Polish campaigner Julia Krzyzkowska comments on her findings from Poland and its regions. Stay tuned for other countries following this and next week.

Find out more at bankwatch.org/enfants-terribles >>

Set to receive as much as 80 billion euro in total from the different Cohesion Policy Funds until 2020, Poland remains the biggest EU funds beneficiary. It’s hard to overstate the significance of EU-funded investments for the Polish economy.

With increased investments in public infrastructure and support for businesses since joining the Union in 2004, the quality of life of many Polish citizens improved significantly. Poland has become a poster child for macro-economic development, with the economy growing even through the years of the financial crisis. Much of this growth is owed to financial transfers from the European budget, with EU funds amounting to more than 50 per cent of public investments between 2009 and 2013.

Yet spending EU money has not always gone hand in hand with the pursuit of European laws – particularly those regarding climate and energy commitments. According to a 2013 study by Client Earth, only one out of eleven EU climate and energy directives was transposed on time in Poland. While benefitting from billions of euros in financial transfers, Poland has opposed any European attempt at more ambitious climate action, and continued to lend political and financial support to coal-mining and fossil fuel-based energy generation at home.

A Bankwatch analysis launched today of Poland’s (and other countries’) 2014-2020 investment plans for European Regional Development and Cohesion Funds paints a disappointing, though not entirely unexpected picture. Despite the European Commission’s efforts to put environmental sustainability and climate change mitigation at the core of its Cohesion Policy regulations, the situation on the ground is far from ideal, and the current national investment plans for EU funds will rather sustain Poland’s current resource-intensive development model and its heavily coal-dependent economy.

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Climate action in EU Cohesion Policy funding for Poland, 2014-2020 (pdf)
Study chapter | January 26, 2016

Other chapters, graphs & more

Things (EU) money can’t buy

With an ageing and increasingly obsolete fleet of coal power plants and an energy intensity of the economy that is twice as high as the EU’s average, Poland today faces growing problems with energy security and air pollution caused by both industrial and household fossil fuel energy generation. Billions of euros of European money could be the impulse to replace chimneys with innovative, low-carbon solutions. But for that, we need political will. And equally important, we need clear guidance and careful oversight from the European Union.

Yet as the Bankwatch study shows, Poland’s plans for spending its 80 billion euros favour high-emissions transport over low-carbon solutions, hard infrastructure over natural methods of climate adaptation, and a traditional, centralised fossil fuel-based energy system over smart, distributed solutions where energy efficiency is always put first and citizens can actively participate in shaping the energy market.

Graph: Investment areas of EU Cohesion Policy funds in Poland

Source: Climate’s enfants terribles

The cycling path to low-carbon development

The potential is there. Following the EU-mandated division of funds, the “shift to low-carbon economy” is an investment priority included in each of the 16 regional strategies to receive financing from the European Regional Development Fund. Almost 9 billion euro has been allocated to finance interventions primarily in the sectors of energy and low-emission public transport.

Graph: Allocations under Thematic Objective 4: ‘shift to the low-carbon economy’

Source: Climate’s enfants terribles

There is no doubt that this amount of public financial support will help leverage significant investments – but to move away from fossil fuels, the emphasis should be put clearly on energy efficiency, clean energy technologies and smart distribution. Instead, public transport infrastructure, will consume 45% of total allocations. While recognising the importance of clean public transportation for the development of Polish regions, such division of funds is pitting different priorities against each other, shifting the focus from transforming Poland’s obsolete energy system to purchasing fleets of low-emission buses or tramways. In some regional strategies, paving foot and cycling paths will receive more funding than investments in renewable energy.

More than semantics: low-carbon vs. low-emission

Across all official documents, the Polish translation and equivalent of ‘low-carbon’ is ‘low-emission’ – a move which seems to be indirectly legitimising the continued use of more efficient and less polluting fossil fuels, under the umbrella of sustainable energy solutions. This shift goes deeper, shaping attitudes towards climate-friendly changes in the economy and contributing to Poland’s stubborn reliance on coal.

While the National Action Plan for renewable energy (pdf, pl) estimates that approximately 6.2 GW of additional renewables capacity is necessary for Poland to reach its Europe 2020 renewables target, Polish programming documents aim at approximately only 960 MW of new capacity supported through EU funds. This number is not just unambitious – it can very well be a big missed opportunity for the Polish regions.

Małopolskie and Podkarpackie regions will use their regional funds to directly pay for coal, by offering financial support for replacing old individual coal-burning stoves with new, more efficient and less polluting coal-based installations. The rationale here is the urgent problem of air pollution in those regions. The source of money will be an EU funds investment priority on air protection measures. 40% of the money spent on burning coal in individual stoves will fall under the climate action earmarking.

Residential buildings left out in the cold

The building sector is the single most energy-consuming area of the economy, responsible for approximately 40% of final energy use. The total allocation to energy efficiency in buildings at EUR 2.1 billion is sizeable and significantly higher than the EUR 500 million earmarked for this purpose in the previous period 2007-2013. However, leaving aside the fact that experts estimate that tens of billions are needed for modernising Poland’s housing sector, the arguably biggest potential for energy savings will remain largely untapped even with the 2.1 billion available.

Residential housing is responsible for approximately 30 per cent of all energy consumption of the Polish economy. Despite the potential to achieve significant savings and curb energy poverty through energy efficiency measures in residential houses, Poland allocates only approximately EUR 788 million compared to EUR 1.3 billion for improving energy standards in state and municipality-owned buildings, whose share of energy consumption is no higher than 10 per cent. Even worse, there are no EU funds allocated to retrofit Poland’s five million single-family dwellings, which amount to approximately 80% [pl] of all residential buildings in Poland and house more than 40% of the population.

Graph: Energy efficiency allocations according to type of beneficiary


Source: Climate’s enfants terribles

Based on its comprehensive analysis, the Bankwatch report draws a simple conclusion. Just as money must always follow political decisions to make them reality, even billions of euros in investments will not be enough to bring about the transformation of an energy system without a strong foundation of political commitment to climate action. This commitment is still missing in Poland – and it seems to be one of the few things that money cannot buy – putting the clean energy transition just out of reach.

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Find graphs, other chapters and more at bankwatch.org/enfants-terribles >>

 

Misuse of EU funds holds back Europe’s clean energy transition


This article first appeared on Euractiv.com.

Many hailed the Paris Agreement (pdf) as a turning point in the global efforts to tackle climate change. More than anything, this landmark consensus first and foremost adds urgency to Europe’s responsibility to decarbonise its energy system. Nowhere is the problem more acute than in the countries of central and eastern Europe (CEE), whose energy systems are some of the dirties and inefficient in all of the EU.

EU funds, the main source of finance for infrastructure development, have the potential to be a primary driver for such change. They could help CEE countries rid themselves of fossil fuels-based energy by 2050, accelerate the uptake of renewable energy and boost much needed energy efficiency measures.

But for now, just as the Earth registered the warmest year on record for the second consecutive year, this important avenue of funding appears to be going in the wrong direction. Our study released today (26 January) looks at €178 billion in EU Cohesion Policy 2014 -2020 spending plans for Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Romania and Croatia, and finds that governments there are completely overlooking the climate crisis.

On average a mere 7% of these countries’ entire EU Cohesion Policy funding is being allocated for clean energy (i.e. energy efficiency, renewable energy sources and intelligent energy distribution), and CEE governments’ appear hell bent on perpetuating expensive and unsustainable energy mixes, dominated by fossil fuels.

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Climate’s enfants terribles

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EU leaders have repeatedly vowed to phase out fossil fuel subsidies, but both direct and indirect EU support is set to continue financing coal and gas projects.

Investments in coal-burning boilers are a case in point, as shown in the Cohesion Policy Funds programming documents of the Polish regions of Małopolskie and Podkarpackie, as well as the Czech Operational Programme Environment. These are not the only ones. Additional information we have obtained indicates that other regions in Poland – namely, Dolnośląskie and Śląskie – plan to negotiate financing for coal boilers to be included in their EU-funded investment strategies.

In most countries of the region, biomass is the main renewable energy source supported by EU funds. In Latvia and Estonia it is the only one. Often biomass energy projects are funded without the necessary safeguards to ensure the sustainability of the fuel source. Worse still, some intend to use biomass and coal in tandem, which counts as support for renewables, even though it prolongs the lifetime of fossil fuels-based energy production in the most unsustainable way.

In addition, big infrastructure projects, especially in the transport sector, see millions of euros in public funds spent on roads, while ignoring the detrimental health, social and environmental repercussions of such projects.

When we presented our findings at DG Regio’s dialogue with stakeholders (pdf), we were told “you might have the wrong figures”. Yet our comprehensive analysis of countries’ Partnership Agreements and Operational Programmes challenges the Commission’s argument (pdf) that “sustainable development and climate change concerns have been mainstreamed” in those same spending plans. This claim is not evidence-based, to keep the official jargon.

We believe EU funds can help foster a decentralised and decarbonised circular economy that would allow CEE countries to make a substantial contribution to Europe’s long-term energy targets. But given the current, business as usual trend, these countries will undoubtedly lose much of that transformative potential.

When EU money is used for the wrong ends, such spending undermines the joint European effort to address both the climate crisis and promote prosperity, European tax payers cannot ignore this, and neither can the European Commission.

Today’s decisions about energy infrastructure investments in CEE will have implications for generations of Europeans and the entire Union. The billions in EU money these governments receive come with a responsibility to all European citizens. Governments of the region must end their countries’ addiction to fossil fuels and instead use this money for facilitating what is essentially an inevitable energy transition.

For its part, the European Commission needs to seize the opportunity that is the upcoming midterm review of the EU budget to ensure that funding extended to CEE countries is used to help meet – not undermine – European efforts to combat climate change. Europe simply cannot afford treading the same, outdated energy path.