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Divesting from coal is not ideology but climate science – a reminder for the EBRD


At about the same time as scientists declared an unprecedented and increasingly dangerous CO2 concentration in the earth’s atmosphere, the Energy Director of the European Bank for Reconstruction and Development, Mr. Ricardo Puliti, warned in an interview with the guardian against an “ideological” approach to financing energy projects that only takes climate change into consideration. Clearly as a reaction to a widespread call to end coal financing, Mr. Puliti specifically ruled out a “No” to coal.

The news has been received with surprise and open criticism not only by environmental organisations. [*] Colleagues here at Bankwatch were particularly astonished by Mr. Puliti’s understanding that what scientists repeatedly called for was “ideological”: to reduce carbon emissions as quickly as possible. (We were also surprised by the claim the EBRD only financed two coal-related projects between 2006 and 2012. A quick look at the database for 2006-2011 – one that includes natural resources projects and is based on Bankwatch’s own methodology – shows 16 coal-related projects worth more than EUR 600 million.) [**]

Yet, Mr. Puliti is not the only one at the bank talking about balancing [the apocalyptic threat of] climate change with other priorities such as security of supply and affordability. We have heard the same repeatedly in the corridors and meetings at the EBRD’s annual meeting in Istanbul last week, which is why it is time to make a few points in reaction:

Ideology vs. science

First of all, intensified efforts to halt climate change are not urged by ideologists, but for decades by climate scientists, on the one hand, and by respected institutions like the International Energy Agency, on the other hand. Bankwatch’s demand to exclude coal projects from the EBRD’s portfolio is informed by these scientific analyses and supported by calls from several other international institutions (including other development banks) for a discontinuation of fossil-fuel subsidies and by the warnings about the economic “cost of inaction”.

Climate science suggests one meaningful target, to keep the rise in global temperature under a maximum of 2 degrees if catastrophic climate change is to be prevented. Seemingly blind to this goal, the EBRD has expressed great satisfaction and pride with ANY contribution to CO2 reductions, even if it enforces the status quo by entrenching coal in the energy mix of countries for decades to come.

A case in point is the Kolubara lignite mine which provides more than half of Serbia’s electricity. The EBRD’s investment will bring estimated emission reductions of 200 000 tonnes CO2 equivalents while the mine’s remaining lignite reserves will produce 540 million tonnes if burned. (Other examples are the Sostanj lignite power plant in Slovenia and potentially a lignite power plant in Kosovo.)

Does excluding coal contradict affordability?

Mr. Puliti suggests affordability as one possible reason to keep coal in the mix. But affordability calculations often favour fossil fuels, because promoters

  • look at a relatively short time horizon, as fossil fuel prices are hard to predict for the life-time of a facility;
  • excludes the related health costs: an estimated price tag of coal power generation is from EUR 15 to 40 billion per year in Europe as a recent report has calculated;
  • counts renewables subsidies, but overlooks fossil fuels subsidies.

Security for whom and what?

A 2012 report by Corner House vividly discusses the pitfalls of “energy security” (and security of supply), both as policy and as rhetoric.

[T]he more that the term “energy security” is invoked, the less clear it is just what is being “secured” as a range of different interest groups use it to signify many often contradictory goals. The multiple meanings of “energy security” are an obstacle to clear thinking and good policymaking. They are also an open invitation for deception and demagoguery, making it easy for politicians and their advisers to use fear to push regressive, militaristic social and environmental programmes.

I’m certainly not accusing the EBRD of demagoguery or militarism, but our experience with the bank has often been that where security of supply is the core justification, alternatives to the damaging energy sources have not properly been assessed.

If you do not change direction, you may end up where you are heading

I have been struggling to understand why in our communication with the EBRD we seldom come to a shared understanding. In the endless policy consultations in which the banks engages us these days, if we get to agree, usually it is an agreement to disagree. In Istanbul we reached one conclusion with the bank’s staff, that perhaps our disagreements have to do with our incompatible definitions of ‘sustainability’. Why else would we consider the Sostanj lignite power plant an outrageous investment that will lock Slovenia into a high carbon future while the EBRD places it under its Sustainable Energy Initiative?

If the EBRD believes in a low-carbon transition and indeed wants to act as a responsible “active citizen” (Mr. Puliti) it should invest in projects that enable the fundamental shifts in industrial, institutional, social and political relationships that are needed in our region for an effective response to the climate threat. Anything less than that will not be fit for purpose.

[*] The EBRD’s Director of Communications stated on twitter that Mr. Puliti has been misquoted in the guardian article, referring, however, to the notion of a possible expansion of coal funding by the EBRD, not the points discussed in this blog post. By the time of publication, no correction has been made on the guardian’s website.

[**] More details, including an outline and explanation of Bankwatch’s methodology can be found in the report Tug of War: Fossil fuels versus green energy at the EBRD

[Campaign update] EBRD still not withdrawing from damaging Ombla hydropower project, NGOs call on bank to heed new evidence


Last weekend in Istanbul, at the annual meeting of the European Bank for Reconstruction, Bankwatch colleagues met with bank staff to discuss, among others, the Ombla hydropower plant project in Croatia. Despite mounting evidence on the project’s irreversible impacts on a protected ecosystem with numerous endemic species, the bank was still unable to confirm that it would be withdrawing from the project.

The evidence against the project is indeed so strong that the EBRD’s non-committal stance led 39 civil society organizations from Croatia and beyond, including Friends of the Earth International, Bankwatch and Justice and Environment to send letters to the Croatian government and the EBRD (pdf) asking them to withdraw from the project on the basis of a new Nature Impact Assessment study.

The EBRD approved a EUR 123 million loan for the project in November 2011, before the project’s environmental impacts had been properly assessed, on the condition that an additional study on the project’s impacts on the Vilina Cave – Ombla Spring protected area was carried out. The results of this research confirm that this habitat is one of the richest in Croatia but also has global significance. In a guest blog here at Bankwatch, Jagoda Munic, President of Friends of the Earth International outlined the research’s findings in more detail, including the long-term and irreversible consequences for the ecosystem.

Yet, instead of recognising that the possible destruction of tens of endemic species should be grounds for withdrawing from the project, the study concludes that the project will go ahead, just with some mitigation measures added (more details on this are also in Jagoda’s blog post).

According to Croatian law and the EU Habitats Directive, under these circumstances, the project would be able to go ahead only if it was of overwhelming public interest and would bring enormous social and economic benefits. However, there is no convincing evidence so far that the Ombla hydropower plant would do so. (It should also be noted that the nature impact assessment study commissioned by project sponsor HEP, the Croatian state-owned electricity company, was not carried out according to the procedure stipulated in the Nature Protection Act.)

With the evidence on the project’s harmfulness now as clear as it is likely to get, the EBRD must use the opportunity and withdraw from the project – before commitments have gone as far as with the Sostanj lignite power plant in Slovenia where withdrawal may have become impossible due to contractual obligations.

* Campaign updates are a new feature on the Bankwatch website intended to highlight news from projects we monitor as well as from our member groups and partners.

Fair treatment is a long time coming at Serbia’s Kolubara lignite mine


Last month a team of international journalists, invited by Bankwatch and Serbian member group CEKOR, visited the Kolubara mining basin. We met with local inhabitants of Radljevo at the perimeter of the Tamnava West field.

Inhabitants explained their situation, told us how they suffered from the mining operations and how they were waiting for years for a fair compensation that would allow them to resettle. But a fair compensation was never offered. Some families moved (without payment) when things became unbearable. Others did not relocate. Now they face lack of drinking water, air pollution and vibrations day in day out that crack their houses’ walls. They live just 200 meters from the field that was expanded also thanks to a 50 million euro loan from the EBRD in 2003. Many issues remain unresolved, but the EBRD so far has pushed all responsibility away.

You can read an account from one of the journalists at the guardian’s global development website and Bankwatch’s media officer published her own impressions in Issue 56 of the Bankwatch Mail quarterly. (You can sign up for email delivery here).

Yet as sad as these accounts are, they can only give but a glance of how the situation of families in Kolubara really is.

Consider this, after our departure Vitomir Simić, the man portrayed in the guardian article, sent me several documents that prove that their house was foreseen for expropriation already in 1984 when the Tamnava West mine was merely in preparation to be established. When almost 20 years later Vitomir and his family had to leave their uninhabitable house with cracked walls, the mining company did not re-compensate them and since then hasn’t shown any signs to do so.

Or the case of Milan Simić: His family lost more than 2700 apple and pear trees, 13 hazelnut trees, 560 plum trees, 24 cherry trees and more. There is now a 50 meter deep mining pit, where once their farmland was. They asked for 10 000 euros compensation for their trees. Yet, during our visit, Milan, whose son still lives in the house with his wife and son, showed us a court decision that says he is not entitled to compensation, because the family allegedly grew the trees and fruits merely to increase their land’s value and hence the expropriation sum.

The ruling shows how powerful and pervasive the interests of the project promoter EPS, Serbia’s state electricity company, are in Kolubara. All of the mentioned trees were planted in fall 2003 and spring 2004 when the expropriation plan for the Tamnava West field expansion was not defined. It took another two years that the family learned, in 2006, that their land was to be expropriated.

These are all very old cases. These people wait for fair treatment longer than the EBRD even exists. Still the bank has not learned from them and trusts that resettlement issues related to the mine have been resolved sufficiently. The EBRD should finally open its eyes and ears wide to learn about the impacts of coal mining in Kolubara and in extension, of its own loans that continue flowing to EPS and Kolubara.

Guest post: Development banks and the Arab Spring, new report takes stock


Remember the Arab Spring, the wave of popular revolts that hit several Arab countries in 2011. They initially resulted in the ousting of cruel dictators and brought about impressive political changes. Following these events, the European Union decided to change its approach to the region and to channel in more resources from international financial institutions (IFIs) such as the European Investment Bank, the European Bank for Reconstruction and Development and the International Monetary Foundation.

The IFIs had longstanding relationships with the Arab countries. When a new wind started blowing they were willing to change their narrative but not necessarily their methods. The positive aura of change might have left most of the Arab countries but the IFIs have not. We think that the Arab Spring is worth an evaluation of the EU’s engagement in the region, and tracking the records of development banks in the Middle East should be a key priority.

The role of development banks

Read more

The Great Middle East Beanfeast – How ‘Development’ Banks are Using Public-Private Partnerships to Carve Up the Arab Spring Countries (20 page report, pdf)


Not a silver bullet for public infrastructure. Our website Overpriced and underwritten exposes the hidden costs of public-private partnerships.

Our latest report “the great Middle East beanfeast” is a first attempt in that regard. Anders Lustgarten, the author of the report, investigates the role of the development banks in Egypt and how they responded to the Arab Spring. The report reads as a fierce critique to the policies of liberalisation and privatisation promoted by those institutions in Egypt and in the MENA region (Middle East and North Africa). It also targets the use of Public Private Partnerships (PPPs) and what we call the “financialisation of development finance”.

These development banks betray the spirit of the Arab Spring by the financial mechanisms they use, Lustgarten argues. While the slogan of the Arab Spring was ‘bread, freedom and social justice’, the policies and financial mechanisms used by the development banks mainly bring about the opposite.

PPPs, one of the priorities of the European Investment Bank when it is active in the region for example, are a tool to shift public assets into private hands. The list of privatisations under the Mubarak regime is impressive. It has been much contested and successfully challenged in court. Extensive recourse to private equity and the use of financial intermediaries typically benefit a small elite and subject the economy increasingly to the whims of the financial market. The increasing role of the private sector decreases the ownership of civil society and undermines the ability of the state to redistribute wealth. In brief, these were not exactly the aspirations of the Tahrir demonstrators.

Before and after the Arab Spring – a different approach?

Moreover, the author shows how the EIB and the World Bank were deeply entangled with the pre-Arab Spring dictatorships. The EIB has a significant track record of supporting the Mubarak regime for instance, lending nearly €4 billion to Egypt in the decade preceding the Arab Spring. In the whole MENA region, the EIB invested €15.5 billion in the same decade, twice as much as in any other region outside Europe.

So when those institutions now refer to “democratic development of the region”, it must be remembered that they loaned more under the old dictators’ regimes than to any other regime, and they used the same justifications to do so than as they use now. For instance, a 2004 joint financial package for the MENA region between the EIB, World Bank and EU Commission claimed that it “will be used to lend support to institutional and economic reform, human rights and democracy projects, the fight against poverty and education and training”.

More on the launch debate that included a discussion on the use of the term “development mafia” on the original Counter Balance blog post

Guest post: New studies fail to prove that the Ombla hydroplant is fit for EBRD financing


When the EBRD prematurely approved the Ombla hydropower project in November 2011 – before the project’s environmental impacts had been properly assessed or publicly consulted – it did so on the condition that the project promoter, Croatian electricity company HEP, carried out an assessment of the project’s impact on flora and fauna of the Vilina Cave – Ombla Spring protected area. This assessment confirms that the site in question is among the most diverse such habitats in the country.

The research shows that the construction of the Ombla hydropower plant would have irreversible and long-lasting impacts on the Vilina Cave – Ombla Spring system and could permanently destroy habitats that are set for protection as part of Croatia’s future Natura 2000 network and already form part of the country’s National Ecological Network. While some mitigation measures exist for certain individual species, the effectiveness of these measures are unknown, and no mitigation is possible for habitats as a whole.

Read more

Full comments on the nature impact assessment for the Ombla hydropower plant (pdf) by Zelena akcija/FoE Croatia

Croatia’s Ombla HPP project comes under scrutiny after NGO complaint – EBRD (Bankwatch in the media)

Ombla hydropower plant, Croatia (Project background)

To be more specific, in the study altogether 68 cave species were identified, of which almost all are endemic to the Southern Dinaric region in southern Croatia and Western Bosnia, and many are endemic to the narrower region around Dubrovnik . The study finds as many as 14 species are endemic to the Vilina Cave – Ombla Spring site alone.

However, rather than admitting that potentially wiping out tens of endemic species and destroying critical habitats means the project cannot go forward, the assessment concludes that the project will go on, garnished with some almost laughable ‘mitigation measures’ such as making a new concrete cave for some of these extremely choosy species to live in.

Such damage might, according to Croatian law and the EU Habitats Directive, be justified – but only if the project is of overwhelming public interest. If the project brought exceptional economic and social benefits, then it could potentially go forward in spite of the damage to the environment. However the Ombla hydro plant looks set to bring neither, and in fact a leaked 2011 study by EBRD-hired consultants suggests just the opposite.

With the damage that the Ombla project will have on critical natural habitats, along with its questionable economics and the skewed consultation process to date, it is high time for HEP, the EBRD and the Croatian government to finally look at the evidence and stop pushing the Ombla hydropower plant forward.

Read more

Read Zelena akcija/FoE Croatia’s full comments on the nature impact assessment for the Ombla hydropower plant:
Download as pdf