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[Campaign update] Petition to clean up southeast Europe’s energy system

By now regular readers of the Bankwatch blog will know that the energy system in southeast Europe is corrupt, dirty and inefficient. But we now have an opportunity to change it.

On 16 October, the region’s energy ministers will meet in Tirana to agree on the revision of the Energy Community Treaty, which has the potential to tighten up environmental legislation, prevent subsidies to dirty energy and increase energy efficiency in the region.

Together with our partners from across the region we are asking the ministers to create a fairer, cleaner and more efficient energy sector by:

  • Investing much more in energy efficiency in homes, to help people reduce their energy bills;
  • Ensuring investigation and prosecution in corruption cases, to encourage responsible new investors;
  • Adopt and fulfill EU climate goals and targets now, with EU funding and support.

Do you live in Albania, Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Montenegro or Serbia? Then support the action by signing the petition!

You can also read more background on the Energy Community on our campaign page.

The Western Balkans and the Energy Union: Will the EU address carbon lock-in beyond its borders?


In a series of blog posts, Bankwatch campaigners and guests are weighing in on the implications that the EU Energy Union, as laid out by Vice-President Šefčovič, could have for each of the countries.

See earlier installations on the Czech Republic, Hungary, Latvia and Croatia and don’t miss the next posts.

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To underline the European Union’s commitment to enlargement towards the Western Balkans region the European Commission and representatives from Germany, Austria, France and Italy meet today in Vienna with EU neighbours from the region to discuss – among other themes – infrastructure, connectivity and regional cooperation.

The European Commission is keen to “better connect the Western Balkans to our own energy systems,” according to a statement by Maroš Šefčovič, vice-president of the European Commission in charge of the Energy Union released ahead of the event. But could this really help bring out the energy transition these countries so desperately need?

A report published today by Climate Action Network (CAN) Europe, aims to shed some light on the implications of the Energy Union Framework for the Western Balkans and proposes improvements to the existing policy tools for effective cooperation between the EU and its immediate neighbours.

And there is need for improvement indeed.

For one thing, the Energy Union’s sheer inception is a bit unfortunate, having resulted from the gas crisis and the conflict in Ukraine and aiming to ensure security of supply. This gives gas a much more prominent place in the package than fossil fuels deserve, and allowed, for instance, for the indigenous fuel formulation to creep into the European Council’s conclusions on setting up the Energy Union. This idea of ensuring energy security through indigenous fuels has opened the door for some of the most polluting and dangerous technologies like coal to continue to be planned with the EU turning a blind eye. It reminds me of the phrase that suicide is a permanent solution to a temporary problem – pretty much like the carbon lock-in the Western Balkans are planning for themselves.

The energy system in this region is currently heavily reliant on coal. About 6 GW of coal power capacity more are planned to be built by 2030, and most of this capacity is to be built in Bosnia and Herzegovina and Serbia. Both countries aspire to become EU Member States in the next decade. At the same time, both countries act as if the EU climate and energy targets did not exist, planning to add over 2 GW of new coal capacity each. Some of these capacities are export-oriented, while existing plants are old and pollute heavily.

A CEE Bankwatch Network analysis released earlier this year showed that if energy export plans of the Western Balkan countries are pursued, they should be coordinated at a regional level; otherwise there is a great risk of stranded assets for the already cash strapped governments in the region, where most of the companies are state-owned.

The benefits of a joint energy market that the Energy Union aims at have been widely discussed, and the prospect of more efficient use of energy, lower energy prices and broader use of renewables should encourage the Western Balkan countries to get their act together and build a cleaner and more sustainable future for the region. But, for this to become reality, the countries should have the same environmental and social standards as the EU, the CAN report rightly points out.

Just to give an example, I am referring to provisions according to which industrial installations, such as coal power plants, must use the “best available techniques” to achieve a high level of environmental protection in order to prevent the danger of emissions leakage. Another example is the legislation on ambient air quality and cleaner air for Europe which defines objectives designed to avoid, prevent or reduce harmful effects on human health and the environment as a whole.

In the meantime, the European Investment Bank is pushing another fossil fuel at the summit, promoting the Transadriatic Pipeline (TAP) as a project currently under appraisal by the bank. While gas is certainly less climate damaging and doesn’t have the same negative health impacts as coal, I cannot understand why there is such a lack of ambition on energy efficiency in the Energy Community agenda.

Unfortunately, the current weak environmental legislation of the Energy Community[*] does not create a level playing field between the EU and its immediate neighbours. The Energy Union must find ways to prevent state support in the production of fossil fuel energy and to incorporate external costs into the price of the energy imported into the EU from the Energy Community countries. The EU cannot afford to have newly acceding members holding up progress towards the new 2030 climate goals or watering down future policy making.


* The Energy Community Treaty brings together Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Moldova, Montenegro, Serbia and Ukraine – and soon also Georgia – with the goal of creating a common energy market between the EU and some of its neighbours.

To mobilise investments for energy efficiency, Commission needs to put money where its mouth is


In a press release today, the European Commission expressed great optimism on how the recently agreed European Fund for Strategic Investments (EFSI) will support the Energy Union’s goals to deliver secure, sustainable, competitive and affordable energy to citizens and businesses. Miguel Arias Cañete, Climate Action and Energy Commissioner emphasised the need to boost energy efficiency investments in Europe. He expects the EFSI will transform Europe to the world’s most energy-efficient economy.

Serious doubts however loom behind the Commission’s self-praise about whether the EFSI would be able to deliver this expected transformation. In contrast to the general commitments to prioritise energy efficiency, the earmarking of EFSi Money for energy efficiency measures was rejected during the legislative process – by the Commission president Jean-Claude Juncker’s very own party. Without this earmarking the fund is guided by EU policy objectives as interpreted by the EIB and incorporated in the bank’s policies and procedures against which all EIB projects are being assessed.

An important harbinger of what this might mean in practice is the EIB’s draft Climate Strategy (pdf), published last week. In its current form the strategy, which will be guiding the EFSI climate impacts, does not emphasise energy efficiency more than the bank’s current energy lending policy. Under this current energy policy, energy efficiency investments are below 3% of the overall EIB portfolio across all sectors.

The EIB is unlikely to make a sudden U-turn without clear policy guidance. Also the current rush with getting EFSI spending rolling will not help with directing funds to usually small scale projects that need bundling up.

The initial phase of the EFSI does not suggest a major breakthrough either – at least for central and eastern European countries. Not a single project for the modernisation of the energy sector and for decreasing the energy intensity of the economy was proposed for lower income regions of the EU. Instead, the Dubrovnik Airport in Croatia was proposed for an EU guarantee, which would lock public money in yet another high-carbon infrastructure project.

As much as the strong vocal commitments are welcome, they must be backed with more concrete plans on how to make energy efficiency really come first – before other, carbon-intensive EFSI investments.

Guest post: Croatia and the Energy Union: the European Commission’s unwarranted obsession with gas


In a series of blog posts, Bankwatch campaigners and guests are weighing in on the implications that the EU Energy Union, as laid out by Vice-President Šefčovič, could have for each of the countries.

See earlier installations on the Czech Republic, Hungary and Latvia and don’t miss the next posts.

Subscribe via RSS or email

Similary to Hungary and Latvia, Croatia has recently attracted praise from EC Vice-President Maroš Šefčovič for being on track to meet its 2020 targets for greenhouse gas emission reductions and renewable energy. While this is certainly better than not being on track, to anyone looking more carefully, this is more a sign that the targets are too unambitious than that Croatia is doing particularly well.

Croatia produces around 70 percent of its own gas, but the European Commission still emphasises the need to diversify sources of supply.

Croatia’s greenhouse gas emissions fell by 17.3% between 1990 and 2012. So far, so good. But 16.6% of the reduction took place before 2000, when Croatia was first at war and then undergoing a rapid decline in its industrial sector (pdf). Importantly though, these gains will be in danger if Croatia builds the planned 500 MW Plomin C coal power plant, which would prevent the country reducing its greenhouse gas emissions by 80-95% by 2050 as the EU aims to do.

The EU has the power to prevent this: media reports suggest that the EC is currently assessing a request by the state-owned electricity company Hrvatska Elektroprivreda for a long term power purchase contract for Plomin C. Such a contract should certainly not be approved for projects which are so obviously in conflict with EU climate goals and a positive response from the EU would completely undermine Croatia’s apparent ‘good performance’ on climate targets.

As for Croatia’s renewable energy record, the country has a long tradition of using hydropower – in 2005 around 33 percent of the country’s electricity was generated from mainly large hydropower plants. Wood biomass has long been used for heating as well: in 2005 it made up 11 percent of Croatia’s total energy consumption.

However other forms of renewable energy have been slow to get going due to administrative complications. In recent years wind energy has finally taken off, and by the end of 2014, 346.5 MW was installed. Yet the government is still preventing the development of the wind and solar PV sectors by placing extremely low caps on the amount of capacity eligible for feed-in tariffs in the country’s 2013 Renewable Energy Action Plan until 2020. The quotas set out for solar PV (52 MW) and wind power (400 MW) have already been filled, effectively braking further development until unless a new Plan is developed. Solar thermal is also underused compared to the obvious potential in this very sunny country.

State-owned electricity company Hrvatska Elektroprivreda, which even after liberalisation still dominates Croatia’s electricity market, has not installed a single megawatt of wind power nor solar power, instead pushing antiquated, environmentally harmful and risky projects like the recently halted Ombla hydro power plant, the Kosinj hydropower plant, and the Plomin C coal plant.

Against this background, crediting Croatia with a ‘strong performance’ in the area of decarbonisation sends the wrong message that the government has done its bit. Incentivising community-based energy projects, raising the PV and wind quotas and providing financial support and grid access for small producers are measures that still need to be taken for an Energy Union that “will ensure that Europe has secure, affordable and climate-friendly energy”.

If every residential building in Croatia was well insulated and had solar collectors and solar PVs on the roof, and heating from heatpumps or energy efficient biomass boilers became widespread, how much would we still need to care about where gas imports come from?

But what about the rest of the assessment? What are the areas where the European Commission sees need for reform?

Vice-President Šefčovič rightly points to the need to improve energy efficiency, especially in buildings and transport, and points out that Croatia’s efforts for regional cooperation on electricity generation adequacy will be more cost-effective than a national approach. But the rest of the assessment – as is all too common from the European Commission these days – is fixated on gas.

Croatia produces around 70 percent of its own gas, but the European Commission still emphasises the need to diversify sources of supply. It is true that Croatia was one of the affected countries during the 2009 Ukraine-Russia gas disputes, but surely this is a reason to lessen dependence on gas per se, not just on Russia? It’s not as if the alternative sources of gas are any better – Azerbaijan, Algeria, Libya, Nigeria…

If the EU was to join up its thinking a little more, it might find that the gas issues can be solved through the energy efficiency issues it mentions, in combination with the renewable energy issues that it doesn’t mention. If every residential building in Croatia was well insulated and had solar collectors and solar PVs on the roof, and heating from heatpumps or energy efficient biomass boilers became widespread, how much would we still need to care about where gas imports come from?

Latvia and the Energy Union: biomass is a blind spot


In a series of blog posts, Bankwatch campaigners are weighing in on the implications that the EU Energy Union, as laid out by Vice-President Šefčovič, could have for each of the countries.

See earlier installations on the Czech Republic and Hungary and don’t miss the next posts.

Subscribe via RSS or email

The establishment of the Energy Union was featured high on the agenda of the Latvian Presidency of the Council of the EU. For Latvia, it offers a broader European framework, in particular in the context of energy security and energy sustainability. These two aspects are likely to be main policy targets in the upcoming Energy Development Strategy 2014-2020, the document that outlines Latvia’s goals for the energy sector.

Commission Vice President Maroš Šefčovič’s assessment (pdf) of Latvia’s performance highlights the country’s positive performance on two dimensions of the Energy Union – energy efficiency and de-carbonisation.

Energy efficiency

The document does mention that energy efficiency in residential buildings still has untapped potentials, which really is a diplomatic way of hinting at the very poor efficiency (far below EU standards) of many buildings across the country, most of which were built in the Soviet era. The Buildings Performance Institute Europe estimated (pdf) that 43 percent of homes in Latvia are dwellings with leakages and damp walls and that 35% of households cannot afford adequate heating.

No surprise then that both the current and future Energy Development Strategies for Latvia place energy efficiency measures in residential buildings like renovation and insulation as one of the top priorities.

When it comes to allocating real money, however, the government’s plans are much less ambitious.

EUR 150 million of EU Cohesion funds are slated within the next five years for renovation and improvement of energy efficiency in 1800 residential buildings. This makes just 4.7% of the entire residential buildings stock (38 000). To increase this potential, the government should promote and support financing models like Energy Performance Contracting that can facilitate private investments in energy efficiency measures in residential buildings.

Another problem is that the current energy efficiency policy does not mention the accessibility of such measures for those who are considered energy poor and cannot afford proper heating.

Ongoing efforts to increase energy efficiency in residential buildings have so far brought little to any benefit for Latvia’s energy poor. And the Energy Union strategy in its current form does not promise to address energy poverty as a structural issue in a way that could shield vulnerable citizens through social policies.

Dependence on Russia

Latvia’s energy dependence on Russia is (unsurprisingly) the most politicised aspect of the Energy Union in Latvia. According to the national statistical bureau [lv], in 2013 gas provided 70 percent of Latvia’s secondary energy production (electricity and heat). All of that gas is coming from Russia. Energy security therefore is a key challenge for the country.

At the same time, Latvia’s gas market is fully controlled by the monopoly Latvian Gas (owned by the German E.on – 47%, Gazprom – 34%, and Iteria Latvia – 16%) which imports only Russian gas and which has so far successfully lobbied against opening the market (postponed until 2017).

However, national policy aiming at energy security has for a long time remained uncertain and hesitant, and was marked by efforts to build an energy policy in partnership with Russia. With the conflict in Ukraine, however, politicians in Latvia have become more wary of the dependence on Russia and Šefčovič may have run into open doors in Riga.

Renewables dominated by fuelwood

Renewables provide for 35 percent of energy consumption in Latvia (2013). This puts Latvia on the second place in Europe (after Sweden) and it is likely that Latvia will reach its 2020 target of a 40 percent share of renewables. Latvia’s government likes to use this argument to demonstrate that our country is a European leader in climate action. But is this really so?

Without access to domestic fossil fuel resources, Latvia’s primary energy production is dominated by biomass and hydropower. 78 percent of the renewable energy produced in Latvia is coming from fuelwood (2013). (Due to its availability, wood has traditionally been an important resource in Latvia.) 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.

Apart from the threat to biodiversity that logging can entail, cutting trees and burning them to produce energy has two negative effects. It reduces the available capacity to store carbon from the atmosphere (carbon sink) and releases the CO2 that was captured by the tree. The term renewable energy is therefore rather misleading in this context. Sustainability is something different.

In Latvia, the main provider of fuelwood, the joint-stock company Latvia’s State Forests, owns almost a half of all Latvian forests. An audit of the company by the State Audit Office concluded [lv] last year that the company’s forest management policy violates sustainable forest production. Also this year’s Environmental Impact Assessment [lv] of the Energy Development Strategy 2014-2020 emphasises that an increase in the consumption of renewable energy may intensify logging and have a negative impact on biodiversity.

It seems that these aspects have not been considered in talks about the Energy Union and Latvia’s performance and opportunities in the energy sector. Yet, to make sure Latvia’s energy path does not lead into a dead end for sustainability, the Energy Union should become a vehicle that navigates through all aspects of a sustainable energy sector.

[Campaign update] Ombla hydropower plant nature impact assessment rejected

The Croatian Ministry of Environment and Nature Protection has refused Hrvatska Elektroprovreda (HEP)’s nature impact assessment for the Ombla hydropower project near Dubrovnik. In its decision (pdf), published on 28 July, the Ministry cited significant negative impacts on preserving the integrity of the Ecological Network (Croatia’s part of the Natura 2000 network), “which cannot be excluded, in spite of mitigation measures”.

The move comes more than two years after the EBRD withdrew from financing the 68 MW underground hydropower plant. HEP attempted to push on with the project, but after negative submissions to the public consultation on the nature impact assessment by local people, NGOs including Bankwatch member Zelena akcija/Friends of the Earth Croatia, and expert bodies like the State Institute for Nature Protection and Croatian Biospeleological Society, the Ministry has put a stop to the project.

Whether this will be the end of this economically and ecologically risky hydropower plant only time will tell, but for now, we can raise a glass for the preservation of the Ombla’s complex ecosystem.

* Campaign updates on the Bankwatch blog highlight news from projects we monitor as well as from our member groups and partners.