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Guest post: EBRD justification for supporting coal in Egypt’s cement industry is negligent


Early in 2014 those of us at the Egyptian Centre of Economic and Social Rights (ECESR) working separately on the possibility of coal being imported into Egypt realised that Egypt’s Minister for Industry had organised a meeting with EBRD officials with coal on the agenda. The level of foreign funding that seemed to be popping up from various corners made us very suspicious that the EBRD might jump on the bandwagon.

Initially the main consideration was importing coal to fuel the cement industry, with the second phase to shift electrical power stations to coal use too. As far as we could see however, the initial decision was going to focus on the cement industry. See on the right an infographic we produced on the subject.

Read also

Concrete boots already for new EBRD energy policy? Potential support for Egyptian coal projects attracts criticism
Bankwatch Mail article | May 14, 2014

Infographic

See in full size on ECESR’s website

In response to these rumours, Egyptian civil society organised the first major ‘environmental’ opposition campaign the country has seen. Egyptians Against Coal took action, with CSOs like ECESR as part of the coalition of activists, organisations, groups and individuals interested in preventing coal coming into Egypt. The campaign, since its inception in September 2013, has indeed succeeded in putting across the facts about the health, environmental and economic costs of using coal. What would have been a straightforward task for the cement industry in persuading impressionable officials of the benefits of coal has become a much more drawn-out fight, taking place prominently in the political and media spotlight. In this we have succeeded.

However despite our efforts to date, on 24 April 2014, the Cabinet of Ministers decided to allow the use of coal for the cement industry and electrical plants in one fell swoop. Since then, media and public interest has piqued, with appearances on popular television helping to push the Facebook following of the campaign to over 150,000 people and a trending, ‘no coal Egypt’ hash tag on Twitter in less than two weeks. This week we launched a petition to harness this support and send a message to the new Cabinet set to be sworn in within a couple of weeks following the Egyptian presidential elections.

Except for being the main source of facts, scientific findings and measured criticism of the industry’s intentions for media, public and government members alike, Egyptians Against Coal also must fight on the international and regional fronts.

More than 75 percent of the cement plants are owned by foreign companies, including large multinationals like Lafarge and ItalCementi. IFIs are also interested, the clearest sign coming from the EBRD. With low levels of awareness about IFI operations in Egypt, it is no surprise that the significance of such meetings go unnoticed here, which is where ECESR’s role begins. Writing a cautious letter as to whether EBRD would, or is intending to, fund the switch to coal for Egypt’s cement industry and detailing the negative effects of such a decision, ECESR received a surprising reply. The EBRD unashamedly stated its support for coal in steel and cement industries where there are no economically or technically viable alternatives available.

In response we have put together a detailed technical memo, responding to each and every justification their short letter offered for their investing in coal for cement in Egypt.

Addressing their key points we show that

  • there are economically and technically viable alternatives to meet the fuel demand and needs of the cement industry;
  • their disclaimers of coal for cement being a Best Available Technique (BAT) in the EU was an incomplete slice of the whole picture. BAT’s are one of five principles which rely on the wider regulatory structure available in the EU but certainly not available in Egypt;
  • Egypt’s low Research and Development capacity, low innovation and low institutional capacity make scenarios like those in the Cement Technology Roadmap (pdf), that relies on carbon capture and storage to be implemented in the long term, irrelevant for our country;

Overall what is most worrying about the EBRD’s potential funding coal for cement industries, is the laissez faire attitude the bank has in justifying it. The bank is falling back on generalised arguments that show no consideration of the landscape of our country in any detail. If this had been done the bank would realise the cement industry in Egypt occupies a position akin to a monopoly. Multinational companies use subsidised fuel and electricity at the expense of those who really need it, and make profit margins of up to 70%.

Of course cement is a very important component of Egypt’s development which must keep up with the significant population growth predicted in the coming decades. But all other solutions except coal have simply been left unexplored, including the option to import cement itself. If the EBRD had done a detailed assessment of its applicability in Egypt they would have to conclude there is a powerful business lobby holding a government to ransom over the issue of energy sources. Its main concern is profit, not the ability of Egypt’s currently ailing healthcare system to deal with the fallout or the capacity of the already heavily polluted Nile river to take more badly regulated industrial wastewater and the resulting health and environmental problems across Egypt.

ECESR’s correspondence with EBRD on this issue is available in English and Arabic here: http://ecesr.org/en/?p=421803

Balkan lynx stage protest at annual meeting of European Bank for Reconstruction and Development

A delegation of 20 lynx from Mavrovo National Park in Macedonia today occupied a corridor in the Polish National Stadium in Warsaw, where the EBRD Annual General Meetings are taking place 14-15 May.

Their message: “EBRD, don’t finance the Boskov Most dam, as it will destroy the forest in which we live and eventually kill us.” The 20 delegates from Mavrovo Park constitute almost half of the little over 50 lynxes which still survive in the park today (the Balkan lynx is an endangered species).

At the stadium, the tiny lynxes held banners which said “I need a lawyer!”, “Extinct is forever”, “EBRD, don’t jinx the lynx”.

Participants in the annual meetings, including EBRD staff, representatives of governments and business, took pictures of the lynx which they deemed “adorable” and, most importantly, heard their story.

The lynx are now returning to Macedonia with the hope that the EBRD will make the right decision on Boskov Most: withdraw financing.

Images from the protest action

See more images on flickr

Funny business at EBRD meeting: sustainability champion Garanti fancies coal


As a child, I was never very good at understanding idioms. I would always have a completely different interpretation than the rest of my friends, much to their amusement. I was convinced, for instance, that “one hand washes the other” means exactly that you have to use your clean hand to wash the dirtier one, and so, on average, one hand is always cleaner than the other.

I had a flashback of this literal interpretation when I read that the Turkish Garanti Bank is one of this year’s winners of EBRD’s Sustainability Awards, which will be presented tomorrow in Warsaw at the bank’s annual meeting. In the announcement, the EBRD recognised Garanti for “its leadership in addressing key sustainability issues within its activities”.

I found this quite surprising and imagined this must be Garanti’s somewhat clean hand, since my most recent memory of the bank’s name was in relation with the SOCAR Aegean Refinery and a “secret” 1350 MW coal power plant, which shows a mixture of business interests, coal development and neglect of local health concerns in Turkey, and where Garanti Bank is part of the consortium of lenders which would power the EUR 5 billion project. (Even more conflicting with sustainability principles is the fact that this gigantic oil project to which Garanti is considering financial support, is conflicting with a genuinely green one – a geothermal-solar hybrid 50 MW power plant – which was granted an operation licence one year prior to the one that SOCAR holds.)

But even if I accepted that this case might be an exception, a look at Garanti’s track record of financial support to the coal sector puts the bank’s dedication to “addressing key sustainability issues” seriously into question:

  • Zetes 1 – on the Black sea coast – a 160 MW coal power plant which started operation in 2010, and was the first phase of a USD 1.6bn coal-fired project, financed largely by Turkish banks including Türkiye İş Bankası’ndan and Garanti Bank. It should be of great interest to a bank which is awarded a sustainability title that there is no ash landfill at the ZETES 1 and 2 plants, although this was a precondition in the Environmental Impact Assessment, and that local water contamination is present and easy to observe even to an untrained eye, due to leaking ash, water treatment plants in the existing mine area, coal transportation infrastructure and the storage of ash. (See Bankwatch’s study Black clouds looming (pdf).) Still, Garanti Bank together with IşBank are the main financiers for the development of the ZETES 2 and ZETES 3 coal plants, projects riddled with local opposition and legal battles over the EIA.
  • In its Stock report (pdf), Garanti proudly presents its contribution to fossil energy production in Turkey: “Garanti continued supporting the energy sector investments through its participation as mandated lead arranger in the financing of a 600 MW import coal thermal power plant investment and a 270 MW indigenous coal thermal power plant investment.”

The EBRD has committed to support sustainable energy and investments to strengthen the competitiveness of the Turkish economy through support for Turkish financial institutions. One of the key partners in this endeavour is Garanti Bank. Yet, while the EBRD has reviewed its energy policy and will scrap most assistance for coal-fired power plants, the flagship Turkish bank is among the main actors in the development of future coal power generation in the country.

Unfortunately I am not able to attend the award ceremony tomorrow. I would be curious to hear the acceptance speech that Garanti Bank’s representative will give. The last statement I read from the Project Financing Manager of Garanti Bank was that

“[…] coal prices decreased while natural gas prices increased. […] for the time being we estimate that coal-fired power plants will be ahead of the natural gas plants in merit order in the future. […] in general the focus will be on the coal”.

Will the bank dirty the EBRD’s sustainability awards with such statements tomorrow or announce a U-turn towards renewables energy efficiency? Now that would be a bold coming out.

New online toolkit to help tackle the Kings of Coal in southeast Europe and Turkey


See the new toolkit at kingsofcoal.org

In Turkey and the Western Balkans, decision-makers are still convinced that coal is the next big thing. Turkey is planning to build no less than 75 new coal power plants with around 37,000 MW capacity, making it the fourth most prolific country after China, India and Russia.

The Western Balkans’ planned 6185 MW of new coal plants (pdf) might seem puny in comparison, but for these relatively small countries, the projects represent a direct clash with their future EU obligations to reduce greenhouse gas emissions and decarbonise their energy sectors by 2050.

Many of these power plants (and other projects not related to coal) are likely to receive financing from public and commercial lenders. For those opposing the projects knowing how to communicate with the (potential) financiers and companies is an important advantage, which is why Bankwatch has prepared the toolkit Kings of Coal that provides easy access to this knowledge – with a focus on those actors most likely to be active in Turkey and the Western Balkans.


(Link to video: http://youtu.be/JpGz32jrwac )

The usual suspects have (almost) left the coal game

For almost two decades we’ve been working in Bankwatch to prevent harmful impacts from projects financed by the likes of the EBRD, EIB, and EU funds. One of their major steps forward last year was a virtual halt to financing for coal power plants by these banks. They have also been joined by numerous other institutions like the US Exim Bank and Nordic Investment Bank, and governments including the US, UK, Scandinavian countries and Netherlands, providing hope that coal may finally be on its way out. [*]

Certainly, in the EU, the situation on the ground looks reasonably promising: A report by Poyry consultants last year concluded that no new coal plants are likely to be built in Germany, Spain and the Netherlands in the foreseeable future.

And in the US, Sierra Club has tracked a remarkable 183 planned coal plants that have been defeated since 2002. Bad economics, health impacts and community resistance have proved to be a fatal mixture for these projects.

Even China, long known for its rapid construction of new coal plants, is finally showing signs of slowing down after the numerous ‘airpocalypse’ episodes of recent years. A recent Greenpeace analysis (pdf) found that China’s new coal control measures imply a reduction in coal consumption of approximately 655 million tonnes by 2020, compared with business-as-usual. This translates into an estimated reduction in CO2 emissions of about 1,300 million tonnes – almost enough to put China in line with a global trajectory of limiting climate change to 2 degrees centigrade.

But decision-makers in Turkey and the Western Balkans apparently haven’t read the writing on the wall.


(See and share more images below.)

Communicating with banks and companies – a necessary skill set for campaigners

Opposition to coal in the region is increasing, but what presents a particular challenge for campaigners – along with the resistance to change by most decision-makers on energy issues in the region and rampant corruption in the energy sector – is that the money for these projects is coming from various banks and export credit agencies from countries including China, Japan and the Czech Republic, which are quite different to the institutions traditionally monitored by Bankwatch, and in some cases much more difficult to communicate with.

With this in mind, we’ve put together the Kings of Coal website which explains how to contact the investors behind a project, which policies guide their decisions and how best to contact and influence them. The website is available in English, Serbian and Turkish and covers selected companies and banks from around the world. Although it focuses on the coal sector in southeast Europe and Turkey we believe it will also be useful to campaigners in other sectors and other regions too.

We’ve tried to present the information in as user-friendly way as possible, including the possibility of creating a custom-made dossier in which you can select the banks and companies you’re most interested in and then get a dossier on them sent to you automatically by email.

So please, do take a look and share the link or the materials below with your colleagues. And if you need any further information or have any comments, contact us at kingsofcoal [at] bankwatch.org.


[*] Coal is far from being out of the door already, however, since all of the mentioned institutions that have restricted their support for coal power plants have not ruled out coal mining from their lending.

Visuals

Please feel free to share these images:


Bigger size on flickr

 


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10 years since EU accession: less than we hoped for


Europe’s coming out of the economic crisis is murky, far-right parties across the continent are about to make significant gains in the upcoming elections for the European Parliament, and Russia is wreaking havoc at the EU’s eastern borders. Nostalgia for a European Union of the past is not uncommon: we miss the visionary politicians that founded the Union, we decry the destruction of what used to be “social Europe”.

In central and eastern Europe, we face similar problems as the entire block: most countries in the region have been hard hit by the European economic crisis; mainstream political parties have lost the trust of the electorate and fringe candidates – often with populist and even far-right stances – are gaining ground; pessimism about the direction in which our countries are headed is high, as is skepticism towards the EU.

Unlike ten years ago, we cannot hope any more that EU membership alone will do away with all our problems.

Our region has benefited enormously from joining the EU. Freedom of movement, access to labour markets in Western Europe, and easier access to educational opportunities in other countries are just some examples. We have received important sums of cash from the European budget too: Poland alone, the biggest beneficiary, has had a net benefit of 60 billion euros from EU funds since it started the accession process. Our infrastructure has improved, environmental protection standards raised, corruption issues have been brought to light, and our societies are more liberal. There are many distinctions among our countries, but we might be able to agree on these effects.

It’s probably also true that most of us would have expected more out of being members of the European Union. We would have wanted to see even less poverty in our countries, much less corruption, much better functioning economies, a better performing political class and media, less misery overall, and much clearer visions of sustainable future for our societies.

So why didn’t we get as much as we dreamed out of the EU? Not an easy question, but two things can be pointed at: we in the CEE have not tried hard enough; and the EU receiving us was never the unambiguously benign force we had imagined it to be.

At Bankwatch, colleagues from CEE countries are monitoring how the EU budget funds made available to our countries are being spent, particularly when it comes to climate and environment impacts. Right as we are marking this 10 year anniversary, our governments are negotiating with Brussels their national strategies for how to use money from the EU over the next seven years. A big chunk of the over 320 billion euro Cohesion Policy funds from the EU budget will come to CEE. In these negotiations, we can observe at play the two factors described above.

Our governments do what they can to get big allowances out of the EU, so as to have money to implement the infrastructure projects that would keep countries “modernising” and them in power. But when it comes to implementing the EU objectives that come linked to the money, such as making our economies more sustainable and less resource intensive, we see often more lip service and less internalisation of European values. We’re a bit like bad students who don’t really engage with the topics – read, don’t do a lot of reflection on what Europe really is and where it is going – but learn a few paragraphs by heart to pass the exam.

We see it with the national spending plans: the strategies were done without proper participation of interested citizens, even though that was a Brussels requirement, and without proper mainstreaming of the climate and environmental objectives of the EU. All national plans start with lip service to the values of participation, environmental protection, and commitment to the EU values, but the fine print shows it’s a lot of business as usual: big strategic decisions made far away from the citizens and benefiting more the bigger economic players than the long-term well being of our societies. Our governments are failing to develop long-term strategies for decarbonisation, in line with the general EU direction, and instead hope to be able to keep improvising.

Those national spending plans, despite their failings, will eventually be approved by Brussels – after interventions by the European Commission. And herein lies the responsibility of the EU welcoming us too. The EU is a complex animal juggling diverse interests, and some of these go against the stated European values. Lobby by big fossil fuel companies can be very effective in Brussels and capitals of member states. So to some in the EU it will be acceptable that CEE governments don’t quite care about the citizens or about the climate. Or at least they won’t be bothered by it.

We’ll be all quite ok with the compromise. Our governments will present to us the acceptance by Brussels of the national spending plans as a victory, and the money will roll in though we won’t be able to spend it all because we haven’t properly implemented the EU norms and because those in charge of implementation still won’t have all the needed expertise and honesty. And, ten years later, when we again celebrate our EU accession, we’ll probably say the same bitter “we could have done much better”.

Yet it could go another way too: it could be that this 10 year anniversary makes some of us in CEE reflect more and decide to use the opportunities provided by the EU more intelligently. That, faced with the aftermath of the economic crisis, the pressures of climate change and the challenges of social problems we need to resolve, more of us in both eastern and western Europe will get serious about the need to find truly sustainable paths for the entire continent.

The case of a ‘secret’ coal plant in Turkey suggests a polluted future for the country


Traveling back from a fact-fining mission in Turkey in March, I was just boarding the plane leaving Istanbul when I received an email announcing the EBRD’s withdrawal from the controversial Socar STAR refinery and coal power plant project in Aliaga.

Aliaga in western Turkey is a city already now plagued by countless highly polluting facilities, including the country’s largest oil refinery. According to locals, 8 out of 10 people in the village have some form of cancer, and even 2 year old children have died from throat or lung cancer. With a Board decision expected in early April, our mission to the project site in Turkey was to collect evidence and arguments for stopping the project altogether or at least the financial support from public banks.


The Aliaga industrial zone. (See more images in the slideshow below.)

Of course, as much as we celebrated the news that the EBRD’s loan was canceled, there’s a myriad of reasons why such a project should not be taken on by any financial institution – particularly one that announced tight restrictions for coal lending less than half a year ago. Even though the European Bank for Reconstruction and Development (EBRD) motivated its withdrawal with differences in the policies of the various lenders involved it is quite easy to notice why the Socar STAR project would not pass the EBRD’s conditions for financing coal.

Coming soon: New website for coal campaigners in Turkey and the Balkans

Because of some investors’ undiminished appetite for financing coal power, Bankwatch will publish a multilingual website next week that explains how to contact the investors behind a project, which policies guide their decisions and how best to influence them.

KINGSOFCOAL.ORG

The skeleton in the closet

In 2010 the project company Aegean Refinery STAR Rafineri A.S. (“STAR”) [1] received a pre-license to start developing a $5.5-billion project involving the construction of a greenfield refinery in Aliaga as well as a ‘secret’ 1350 MW coal plant associated with the Socar refinery, but not included in the environmental and social impact assessment (pdf) for the project.

While the coal plant is essentially an integral part of the refinery project, the environmental and social impact assessments have been separated, and the coal plant has been excluded from the due diligence on the refinery project. The coal plant is meant to have two phases to construct a facility with a total capacity of 1350 MW, and two separate EIAs have been done so far. These EIAs were contested by local opposition (the Ege Environment and Culture Platform), and consultation meetings about the EIAs were canceled due to protests. The approval of the EIA for phase one has been challenged in court, and the approval of the EIA for phase two is pending.

Geothermal David versus oil Goliath

Another dirty secret that the oil giant would like forgotten is that in 2009, so a year prior to its own pre-license, the local renewables energy company Buhar Enerji had obtained a license to develop a 50MW hybrid geothermal-solar power plant. As designed now, the refinery and coal power plant would restrict access to a valuable geothermal energy resource. The geothermal reservoir is owned by the Turkish state and Buhar Enerji has been granted a 30-year operating license at least one year prior to that for the refinery. The EIA makes no reference to the geothermal reservoir and no stakeholder consultations have been held on this topic.

Adding value to the project behind the scenes, Socar has undertaken heavy excavation works between August 2011 and February 2014 (carried out by a construction company owned by the son of Aliaga mayor).


The Socar excavation works may have already destroyed the geothermal source. (See more images in the slideshow below.)

Buhar Enerji has managed to get a court investigation underway that notes that excavation works of the refinery are continuing in the absence of a legal construction permit and proper health conditions for workers. Currently the excavation works contract has been terminated and a local prosecutor has opened a court case against the mayor’s son (reported in the Aliaga Express newspaper).

Even though receiving an operating license a year before STAR, the small renewables venture was first sued by Socar, which argued that the tender result was invalid. While the court rejected Socar’s request, Buhar Enerji in its turn challenged the refinery’s license itself, the EIA, and has also submitted a complaint to the EBRD’s Project Complaint Mechanism.

So far, despite Socar’s heavy maneuvering at governmental level (see below), the outcomes are encouraging: the STAR refinery’s opening date has been pushed back to 2017, although most observers believe 2019 or 2020 are more likely.

The “SOCAR Law”

A law passed in February 2014 makes it quite obvious that the Turkish government is intervening to resolve the four-year-long legal dispute between Socar and Buhar Enerji – in SOCAR’s favor. The act, called the “SOCAR law” by Turkish media, gives a panel of three government ministers the right to cancel geothermal licenses that interfere with infrastructure or energy projects “in consideration of the public good and the needs of the economy.”

Invoking an allegedly ‘greater national purpose’ to push through big projects against the interest of locals or other stakeholders is something we have seen in other projects as well. Very often, however, vested interests are closely connected to those projects.

The Investment Incentive Scheme and its perverse effects

In early 2013, Turkey introduced an investment scheme to incentivise the coal power sector with the doubtful logic of justifying these “[a]s a part of its energy diversifying efforts” (Source).

The Turkish government has granted developers a very favourable form of corporate income tax allowances through investment participation rates, exemptions from customs duties and VAT, and support for employers’ contributions to insurance premiums. Investors that use domestic sources of coal to generate power have “the right to benefit from Region-5 level support instruments [2], the second most beneficial in the whole regime, regardless of the actual investment location (Source).

In other words, you don’t necessarily need to prove that there is a real need for the electricity you produce, to enjoy the benefits of being an energy producer in Turkey.

Moreover, the government also helps by providing favorable terms for the allocation of state-owned land near domestic lignite production sites or can expropriate privately owned land for energy generation projects which are considered of national interest.

There was something else….Oh, yes, the people!

Following intense public protests in the Aliaga-Izmir region in the early 1990s, plans for intensive industrial development were dropped by the local government. In the same year, Turkey’s Supreme Court forbade any further industrial development in the region due to the already high pollution levels at the time.

Although the Decision has not been revoked, the industry claims that the technology has improved and that pollution levels and health and environmental risks are much lower.

Outlook

After both the EBRD and the World Bank’s International Finance Corporation (IFC) announced their withdrawal from the planned USD 150 million loans each, SOCAR Turkey’s chief executive told Reuters that the firm had agreed with a commercial bank over fresh financing of $500 million to replace the EBRD and IFC loans. He refused to name the commercial bank, but sources close to the deal said it was Turkey’s Denizbank, owned by Russia’s Sberbank.

Other important players that would still power the project with significant amounts of money are the Italian UniCredit Bank, more precisely their German subsidiary, HypoVereinsbank, with the pivotal role of financial advisor and Deutsche Bank.

The export credit agencies involved are the U.S. Ex-Im Bank, the Japan Bank for International Cooperation, Export-Import Bank of Korea, and those of Italy, Canada and Spain.

Because there are still some investors with an undiminished appetite for financing coal power, Bankwatch will publish a multilingual website next week (focused on the Western Balkans and Turkey) that explains how to contact the investors behind a project, which policies guide their decisions and how best to influence them.

See it next week at KINGSOFCOAL.ORG

Slideshow

See this set on flickr >>

Notes

1. In 2007, when the Azeri state Oil Company “SOCAR” purchased the Petkim petrochemical plant from the Turkish Government, a star was born – Aegean Refinery STAR Rafineri A.S. (“STAR”), a joint stock company incorporated under the laws of Turkey. The joint venture is now 81.5% owned by SOCAR TURKEY Enerji A.S. (100% subsidiary Aerbaijan’s oil company) and 18.5% owned by TURCAS Rafineri Yatirimlari A.S (99.6% subsidiary of Turcas Petrol A.S.).

2. Region 5 and 6 (out of six regions altogether) are the least developed regions in Turkey and accordingly receive the most investment incentives. For more information see detailed information on the web site of the Investment Support and Promotion Agency of Turkey: http://www.invest.gov.tr/en-US/investmentguide/investorsguide/Pages/Incentives.aspx