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A message to EBRD President Suma Chakrabarti


For a referenced version and a list of signing organisation download the letter as pdf.

Dear President Chakrabarti,

The last time civil society groups met with you in person during the 2013 EBRD annual meetings in Istanbul, we agreed that there would be disagreements ahead. It was a warning not to expect a very ambitious Energy Sector Strategy, and during those two days of discussions, civil society participants heard a number of excuses about why the imperative to end EBRD financing for coal and other fossil fuels could not be realised in our region.

We now turn to you after a week of consultation meetings in Istanbul, Belgrade and Moscow with EBRD staff and other civil society groups, as we believe that some of our concerns deserve your attention. On each occasion participants submitted a petition to the EBRD signed by 16 725 people from around the world, amplifying the call for the EBRD to phase out fossil fuels from its portfolio, beginning with coal. This is a clear sign that interest in and criticism of the EBRD’s energy investments are broader than the few civil society groups that have traditionally shown interest in the bank and its operation. It is also a reminder that the EBRD risks falling behind similar financial institutions on its climate commitments.

Also on our blog

Energy consultations reveal lack of strategic thinking at the EBRD
September 6, 2013

Nordic countries ‘no’ to coal is a glimmer of hope for EBRD energy lending
September 5, 2013

Thousands remind the EBRD that coal is not an option
September 4, 2013

About the process

It is clear that the EBRD is making an effort to go beyond its Public Information Policy in the course of this consultation, and we would like to acknowledge this. In particular groups in southeast Europe have commented that the availability of funds for participation in the consultations was useful. However concerns have been raised about the format of the consultations and the likelihood that the inputs from the meetings will reach the real decision-makers at the bank.

The presence of a senior member of the bank’s Energy and Natural Resources department was a positive sign, yet this was repeated neither in Belgrade nor Moscow. In Belgrade representatives of the Regional Environmental Centre facilitating the consultations committed to sending a text of the comments made during the meetings to participants to ensure that there were no mistakes nor misrepresentations of what was said. We appreciate follow through on this commitment, as past experience shows that inputs can be improperly summarised during EBRD consultations, and this is particularly important given that no senior figures were present in Belgrade and Moscow.

About the strategy

The biggest disappointment about the draft Energy Sector Strategy is its lack of vision and strategic goals linked to long-term forecasts and climate commitments.

Climate change means that global emissions must be cut by 50 to 70 per cent by 2050 and that up to 80 per cent of the world’s known fossil fuel reserves must remain in the ground if we are to stay within the two degrees warming target to sustain our planet. Yet during the discussions in Belgrade it became apparent that the draft strategy is neither based on background projections and scenarios – therefore the bank’s ‘uncertainty’ argument – nor is there a commitment to binding climate targets for the whole of EBRD operations and a projection of what emissions reductions trajectories the countries of operation ought to be following – the ‘no climate deal’ argument. The project-by-project approach prevails, which in practice translates into an appetite for relative efficiency gains that can justify the involvement in even the most controversial of projects, including the Sostanj thermal power plant or the Kolubara lignite mine ‘environmental improvement’ project.

The lack of a strategic approach is bedazzling at a time when warnings about overvalued fossil fuel firms and stranded assets are no longer reserved to climate campaigners. Research from investment banks points to the irreversible trends at play in the market that threaten fossil fuel industries. Analysts are alarmed by the notable decline and stagnation in share prices, credit ratings and the grim growth prospects for the fossil fuels sector, leading responsible investors to decrease their exposure to fossil investments. In this new market context, the EBRD would be way off target if it continues to turn a blind eye to such signals, creating liabilities for the region’s energy sector in which it plays a crucial role.

The EBRD also now lags behind sister institutions like the World Bank and the European Investment Bank, with the latter including an Emission Performance Standard and shadow price for carbon that virtually eliminates support for coal projects. While we note the introduction of a shadow price for carbon at the EBRD, the level at which this price is set is crucial, and yet it is still not available to the public at this late stage in the revision process. The EBRD should take a lead and outdo its peers by introducing an EPS that mirrors those set in shareholding countries like the UK and Canada, or take a step further and introduce an exclusion list like the Nordic Investment Bank.

These are fundamental issues for the new Energy Sector Strategy and need time to resolve, so we ask that you see what can still be done at this stage to ensure that the strategy really is strategic and that it addresses the challenges of climate change with the urgency it deserves.

We look forward to your reaction!

Kind regards,

For a referenced version and a list of signing organisation download the letter as pdf.

A comeback to Polish prime minister Tusk’s backing of coal


This is, of course, the same Donald Tusk that will host the November UN Climate Change negotiations in Warsaw, which are supposed to bring the world closer to a decarbonisation scenario, the only means of steering away from catastrophic climate change.

Tusk added that renewable energy sources, which are now required by EU standards to be a part of the country’s energy mix, will be limited to the extent that is acceptable to the European Union, and at the same time that EU funds for Poland would be invested in coal mining technologies and equipment.

While the speech was certainly meant for a domestic and industry audience, Brussels ears hopefully heard it and contrasted it with other statements from Polish authorities who are promising to show true climate leadership during the Warsaw conference.

Yet what kind of leadership on climate can a country provide if it focuses its energetic sector on coal and shale gas, the dirtiest forms of energy, and if it seeks to limit to a minimum investments in renewables?

Poland, of course, is known in Brussels for its retrograde stances in climate. Last year, the country blocked a European Council endorsement of long term (2050) climate targets for the EU. All eyes are now on Poland to see its stance on current debates about 2030, whose outcomes are expected to be announced soon.

Poland is the biggest beneficiary of EU funds, while being one of the smaller contributors to the common pot. European money, of course, comes together with furthering European objectives, such as ambitious renewables targets or even the EU goal of decarbonising the European economy – still not cast in stone, not in the least because of Poland.

Using EU money to promote coal at a time when most of Europe (and not only) is starting to say no to coal is brave, to say the least.

And the EU would be well advised to keep an eye not only on use of EU funds for coal but also on how Poland uses European money meant for renewables.

According to Poland’s renewable energy strategy, renewables should constitute 15 percent of the energy used in the country by 2020. Up until now, Poland has been generally on track with meeting this target (the share of renewables was 8.3 percent in 2011 and 11.45 percent in 2012), but almost half of this „renewable” energy is in fact coming from combustion of biomass in co-firing plants (coal and biomass). So even in the small section of the energy sector dedicated to renewables, coal is sneaking in.

That Poland wants to play a dirty energy game is one thing, but that it wants to do that on EU money while messing up with EU climate plans and while also pretending to be a leader on climate issues in relation to UN processes, is a whole different type of game.

If the Poles manage to get away with this, that would be an extraordinary feat. But a dangerous one, mind you.

As for Mr. Tusk, the benefits of coal mining and exploitation are hardly as impressive as he claims, and if he wants to be a responsible leader, he must inform his citizens correctly.

For instance, the Prime Minister claims that continuing to invest in coal mining is important in order to preserves job in the mining sector, which currently amount to 120,000 in Poland. But he fails to explain as well that as many as 57,000 jobs could be created with each billion of euros invested in renewables, as a European Parliament report shows.

While speaking about the benefits brought by coal, Mr. Tusk willingly ignores the costs. According to a report by HEAL published this year, PLN 34 billion (EUR 8.2 billion) are lost yearly in Poland as a result of diseases caused by coal pollution. In addition, about 3 500 premature deaths, about 1 000 new hospitalisations, and 800 000 lost working days each year are caused by the coal industry in Poland.

These are the things we all have to speak about when we consider what kind of energy mix we want for our country. Polish leaders should realise that for the sake of their people and stop using Brussels funds to go against EU objectives.

New arrests link corruption with land expropriation at Serbian Kolubara mine


Recent developments in Serbia forebode gloomy times for the country’s energy company EPS. After the European Bank for Reconstruction and Development’s confirmation on Friday that it has given up the Kolubara B lignite power plant project, Serbian media reported on Monday that police had arrested several individuals connected to the EPS-owned and EBRD-financed Kolubara lignite mine.

Among the arrestees are former director of the Kolubara Mining Basin Nebojša Ćeran and former financial director Ljubisa Nekic and businessman Radoslav Savatijević. They are suspected of fraud in land expropriation proceedings around the Kolubara mine.

Although the arrests are recent, the issue has been in the public eye for some time, not least as Minister of Energy, Development and Environmental Protection Zorana Mihajlović highlighted already in January that Kolubara is “mired in crime and corruption”. She explained that, among other forms of corruption, Radoslav Savatijević, member of the Managing Board of EPS was given EUR 1.2 million by the board as compensation for his house in the village of Vreoci, that was to be expropriated as room was being made for a new strip mine. The value of the house was appraised at an astonishingly high EUR 3.4 million.

She noted that the advance payment was made based on the EPS board’s decision, without a decision on expropriation, and based on a directive written by then Director General of the Mining Basin Kolubara Nebojša Ćeran. She also stressed that Savatijević’s house was in fact located far from the second priority zone, and that it would not be up for demolition for at least the next seven years, if ever, and that Savatijević did not have the house registered as his address of residence, and thus should not be eligible for expropriation compensation.

Land expropriation and corruption have been two recurring themes at the Kolubara mine for several years now and Savatijević’s case indicates that they are closely connected.

As Bankwatch and others have reported, locals who are living in horrible conditions next to the mine (and don’t have Savatijević’s connections), complain about delayed, insufficient or no compensation at all for their damaged properties.

Neither are the arrests now the first case of corruption in Kolubara. Dragan Tomic, former director of the Kolubara coal mine in Serbia and four others have been charged with of abuse of power and of damaging the Kolubara budget 2004 and 2008. They allegedly signed a series of contracts with Inos sirovine Lazarevac through which Inos purchased 5.8 million kilograms of scrap metal from Kolubara at prices ranging from 30 percent to 56.25 percent of actual market price, causing around USD 650 000 damage to Kolubara’s finances.

Together with 27 others, in April 2012 Tomic was also charged with embezzling USD 11 million from Kolubara between 2006 and 2007. Tomic allegedly paid private companies for unnecessary mining equipment and services. Kolubara was overcharged for the number of hours put in by the private companies, and Kolubara executives did not follow appropriate public procurement procedures.

The EBRD has so far distanced itself from these issues. In its communication with Bankwatch, the bank has insisted that the problems with resettlement and corruption did not occur within any EBRD-financed projects and that sufficient action had been taken to ensure that such malpractice would not happen again. (We beg to differ.)

Yet, these things have been happening during the EBRD’s long-term co-operation with EPS, especially at the Kolubara mining basin. Since 2001 the bank has been involved with the Serbian energy quasi-monopolist and has since then approved five loans for EPS, three of which for Kolubara (Emergency Power Reconstruction Project, EPS Power II, Kolubara mine environmental improvement project).

In light of the diverse and increasingly numerous allegations of corruption at Kolubara, the EBRD needs stop putting too much trust in EPS and start taken its own additional measures to examine management practices at the mine.

Of horses and roads – protests in Ukraine highlight lack of safety


There is a joke about Ukrainian roads in which a German, a Pole and a Ukrainian person are being asked which country has the worst roads. The Ukrainian immediately suggests Poland, making the Pole wonder: “Why is that? Do you have such good roads in Ukraine?” To which the Ukrainian replies: “We have no roads in Ukraine.”

Roads in Ukraine do exist, but many are in urgent need of repair and upgrade to European safety standards. A good thing then that European multilateral banks can finance these works and bring “European standards” with them, right? Not exactly, unfortunately, as protests in Kiev have highlighted this week.

On Monday, under the eyes of a big number of media representatives (see images below), villagers and activists demanded from Ukraine’s state-owned road company Ukravtodor to create safe conditions for pedestrians along the M06 Kiev-Chop road.

Activists with toy steering wheels were running in front of Ukravtodor’s office, colliding with surprised passers-by. The action was to demonstrate the everyday life in the village of Bolyarka where one can be hit by car at any moment when going to the shop or to work – because people in Bolyarka have no choice but to walk on the street with cars and heavy trucks speeding by.

The street passing through Bolyarka is the M06, a crucial connection between Kiev and the West that has been upgraded with the help of almost half a billion euros from the European Bank for Reconstruction and Development and the European Investment Bank. While the upgrades have increased driving comfort and allowed higher speed, the Kiev-Chop road has not become safer, especially not for local villagers. In Bolyarka the situation is especially dire:

  • Pedestrian pavements are missing and villagers are forced to walk on the road itself as heavy trucks speed by at 120 km/h (regardless of the 60 km/h speed limit).
  • No traffic lights have been installed.
  • Horse driven carts cannot safely cross the road – this in a village where half of the population are farmers and rely on horses.
  • The private property of villagers has been damaged due to faulty drainage construction.
  • Some children stopped going to school because the school is standing across the road and it is too dangerous to cross the road twice a day.

Last year, after Bankwatch member group NECU brought the situation in Bolyarka to the attention of the EBRD (pdf), the bank conducted a safety audit not only of Bolyarka and other villages that we had identified but of the entire M06-road (pdf). The audit’s result confirmed the lack of safety.

A year later, the situation remains unchanged. The only concrete measure taken to create safer road conditions in Bolyarka was the reduction of the speed limit from 90 to 60 km/h. (Even though drivers keep speeding at 120 km/h as villagers told me.) Other than that, Gulsan, the contracting firm that built the road, is refusing to finish pedestrian crossings because Ukravtodor owes Gulsan money. And the EBRD seems to be incapable of putting enough pressure on Ukravtodor to make sure pedestrian crossings, sidewalks and the necessary conditions for horse carts are being created.

Instead, the EBRD hired consultants to train local communities to coexist safely with the road. The results: about 300 people in Bolyarka received two small reflecting signs to warn car drivers and farmers were handed “high-visibility jackets” with reflectors along with information leaflets on road safety.

These measures seem almost laughable compared to the danger on the street and the money involved. On average, one cyclist and five pedestrians are being killed in accidents every day in Ukraine, and almost all of these accidents happen on highways. (In light of this it would have been no surprise had the people from Bolyarka turned up with a pile of horse manure to remind Ukravtodor of the situation in their village.)

A lessons for the EBRD to take from this is that in order to provide added value by introducing European safety standards it needs to better monitor the implementation of its projects (especially after receiving warnings from civil society) and accordingly put more attention on the interests and safety of local people.


Energy consultations reveal lack of strategic thinking at the EBRD


During this week’s EBRD consultation meetings on its new energy sector strategy it is becoming increasingly clear that the bank’s draft document can hardly be called a real strategy for it is lacking in solid analysis on what climate change means for investments in its region of operations and how the bank should react to this.

Climate change means that global emissions have to be cut by 50-70 percent by 2050 and that up to 80 percent of declared fossil fuel reserves have to stay in the ground. Yet, EBRD representatives at Wednesday’s consultation in Belgrade revealed a worrying lack of projections, scenarios, assumptions about greenhouse gas emissions reductions by the countries. Similarly there are no assurances in the draft that the bank will help EU accession countries to meet EU decarbonisation policies, and no analysis of the danger of fossil fuel investments becoming stranded assets.

In summary, instead of being guided by a real strategy, the EBRD is set to continue financing everything on a project by project basis – which in turn often means “if it’s bankable, it’s fine”. And that means coal, oil, and (shale) gas as well.

While EBRD representatives at the consultations have tried to play down the bank’s involvement in coal projects, the new draft policy would still allow controversial projects like the already-approved Sostanj 6 in Slovenia to be repeated, and makes no attempt to limit the bank’s support for coal mining projects.

However, there is new hope for increasing pressure on the bank at international level is coming from a growing number of countries announcing that they will work together to limit public coal financing, which follows the EIB and World Bank’s recent virtual withdrawals from coal lending. At the same time also civil society in the bank’s countries of operation is demonstrating the need for the EBRD to stop financing fossil fuels, starting with coal – on Monday in Istanbul, on Wednesday in Belgrade and today in Moscow (see below).

There are in fact so many compelling arguments against coal that it is hard to fathom why a European public institution would allow itself to finance the dirtiest of all fossil fuels for another five years, potentially pumping hundreds of millions of euros into projects that will pollute the air and endanger our health for several decades and crowd out financing for much-needed demand-side energy efficiency projects.

That civil society organisations in the countries where the EBRD operates don’t agree with this approach was demonstrated again today in Moscow, where activists, dressed up in miners’ helmets and T-shirts with slogans like “coal free EBRD” and “coal kills”, handed over a box symbolising the 16 725 people who had signed the petition for a coal free EBRD.

The action provoked a long discussion and the EBRD’s staff had to admit that environmental concerns were dominating the consultation meeting.

We will see how the bank now takes on board these concerns, but until the energy sector strategy has been finalised, we will continue to put pressure on the EBRD to take climate change seriously, and get out of fossil fuels, starting with coal.

Nordic countries ‘no’ to coal is a glimmer of hope for EBRD energy lending


These are truly exciting weeks for climate campaigners, especially those targeting development banks and other international lenders. After Barack Obama all but ruled out U.S. public financing of overseas coal plants and the World Bank and the European Investment Bank followed suit with restrictive criteria for coal in their energy lending policies, we hear now that Nordic countries have joined the U.S. initiative.

In a joint statement with the United States, Denmark, Sweden, Finland, Norway and Iceland yesterday declared the following (emphasis added):

As part of our commitment to accelerating the transition to low-carbon energy systems worldwide, the leaders of Denmark, Finland, Iceland, Norway, and Sweden will join the United States in ending public financing for new coal-fired power plants overseas, except in rare circumstances. We will work together to secure the support of other countries and multilateral development banks to adopt similar policies.

This announcement could hardly have been more timely. With the European Bank for Reconstruction, another European lending institution is currently revising its energy lending – only that the EBRD so far did not indicate significant restrictions on coal investments.

All six countries issuing the statement are shareholders of the EBRD, with the U.S. holding the single biggest share. The statement therefore offers us an indication that not only climate campaigners will call for a #coalfreeEBRD (see for example yesterday’s action), but that also in the bank’s internal decision-making process a coalition of countries may advocate for such a move.

How the internal struggles within the EBRD will turn out remains to be seen. Climate campaigners all the while will keep reminding the EBRD of these latest developments and the increasing pressure it is facing when considering support for coal.