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EU leaders support green energy campaign: The European Council calls for phasing out fossil fuel subsidies


One of the agenda points of Wednesday’s meeting of the European Council concerned Europe’s energy market. The summit’s conclusions (pdf) contain a number of interesting provisions, but one of them is particularly interesting in light of Bankwatch’s ongoing campaign to end the EIB’s fossil fuel lending.

The conclusions read (emphasis added):

As regards action taken to facilitate investments, priority will be given to:

[…]

(c) the revision by the Commission of state aid rules to allow for targeted interventions to facilitate energy and environmental investment, ensuring a level playing-field and respecting the integrity of the single market;

(d) phasing out environmentally or economically harmful subsidies, including for fossil fuels;

[…]

To end fossil fuel subsidies is a call that has been made now by a number of institutions and experts. Such a call coming from Europe’s political leaders in the European Council, and set explicitly in the context of exiting the economic crisis is still notewothy. Difficult economic circumstances are often rather taken as an excuse to continue financing allegedly “cheap” energy sources (coal and other fossil fuels).

As Bankwatch and other organisations have been arguing, targeted investments in renewables and energy efficiency can provide economic stimulus and create jobs. This is what public banks should be focusing their energy lending on as we are trying to illustrate in our new interactive infographic on the EIB’s beneficial and harmful energy lending.


(More details and a pdf version of the infographic are on our website.)

With the European Council’s conclusion, another political heavy weight can be added to the list of institutions that are calling for an end to public financial support for fossil fuels.

The EIB and other public banks must stop subsidising dirty energy, especially coal as soon as possible or it will continue inhibiting its own efforts to help create a clean and green European energy market.

Energy efficiency becoming more central to future EU spending in the Czech Republic – thanks to NGO calls


In recent weeks a promising response has emerged to one of the top demands from Czech NGOs engaged in the current programming process for future EU spending in the country. In April, the first draft of the Operational Programme Environment was disclosed for public consultations – it contains a new priority spending axis named ‘Energy savings’, included now in addition to those that had been previously announced by the Czech authorities.

This is a welcome move from the Czech Ministry of Environment, recognising the still drastically high levels of wasted energy use that pervades the Czech economy and society in general. According to Eurostat, the Czech Republic continues to require twice the amount of energy per unit of economic outcomes than the EU average.

This introduction of a separate priority axis, though, is just a first step towards fully realising the economic and climate potential of reducing our energy consumption.

Under the new priority axis, EU public financial support will be available for the thermal insulation of public and residential buildings, small renewable sources of heat and innovative technologies such as heat recuperation. A necessary precondition, however, to fully realise the high potential for heat savings in buildings remains – adequate levels of funding.

Greening EU funds to exit the crisis


More on our campaign

The Centre for Transport and Energy and Hnuti Duha-Friends of the Earth, Czech member groups of Bankwatch, are proposing an allocation of CZK 10 billion (EUR 400 million) a year for this purpose.

Our estimation of absorption capacity is in line with energy consultancy Porsenna’s estimation of CZK 500 billion being required to achieve economic efficiency potential in residential buildings by 2030 – the 25 percent public financing rate involved works out at CZK 7.81 billion (EUR 312 million) a year.

The Ministry of Environment has also weighed in with its calculations – a recent presentation given by vice-minister Tomas Podivinsky estimates the necessary public finance for energy renovations of residential buildings alone at CZK 250 billion over the next 30-40 years. That is, roughly CZK 8 billion (EUR 320 million) a year via public money sources.

The scale of the necessary investment level for energy efficiency in the next seven year period should be seen in the context of the overall Czech allocations, expected to total CZK 500 billion.

If the necessary ambition on energy efficiency is to be allowed to breathe, then around 15 percent of the total Czech EU pot needs to be devoted to this sector. A significant figure, then, but not a major leap into the dark when you consider energy efficiency’s deep cross-cutting benefits: reduced bills for homes and business, a lot of new jobs and big cuts in emission levels. And the ambition, crucially, must be to include both public and residential buildings full square in the priority spending axis – unfortunately there are signs that the Czech plans as currently conceived will not give enough priority to residential energy efficiency.

Another necessary element for proper energy renovations is the appropriate establishment of strict efficiency criteria which will ensure that funds are invested in line with the EU objectives – energy savings – and not just into plain refurbishment with low efficiency ambition.

Insufficient parameters for thermal insulation in EU funded projects was specifically criticised by the European Court of Auditors (ECA) at the beginning of the year. According to the ECA’s findings, member states used finance reserved for energy efficiency measures to simply upgrade their real-estate: “A more important consideration than energy efficiency was the need to refurbish public buildings.”, the ECA report conludes.

Funding in the new programming period must be set in a way so as to compel beneficiaries to achieve efficiency parameters more ambitious than current legal requirements. We believe that beneficiaries who opt for higher efficiency rates and install renewable sources should receive a motivational premium.

Practical examples of what can be achieved are out there.

Energy renovations carried out on pre-fab estates in Brno-Liskovec, for example, have shown that it is possible to achieve annual heat consumption as low as 40 kWh/m2 with only thermal insulation in typical communist-era ‘panel’ blocks – this is a much lower rate than required by the low-energy standard (50 kWh/m2).

Equally, the EU funded energy renovation of a school in Prague-Slivenec achieved 89 percent energy savings, with final annual heat consumption of 21 kWh/m2. Technologies typical for passive buildings, such as forced ventilation with heat recuperation, used in this renovation dramatically improved air quality in the classrooms. School children in Slivenec now appreciate the benefits of EU funding for energy efficiency, as this video clip illustrates.

Other than the successful NGO demand for a separate priority axis for energy efficiency, the Ministry of Environment has also accepted several of our other key demands. Departing from original plans, future EU funds in the Czech Republic will not now finance the production of bio-fuels. And in another improvement, EU support for water sewage treatment will be eligible in small communities, not only in those with over 500 inhabitants as previously planned.

All the same, the Czech programming process contains a number of problematic aspects that remain on our radar. Not least of which is the proposal to keep EU financing open to waste incinerators.

EU funding for these highly controversial waste ‘solutions’ has been perhaps the greatest single fiasco in the Czech Republic’s current 2007-2013 financing period. Not a single crown out of their huge allocation for 2007-2013 has been spent as a result of various controversies and local community/NGO campaigning.

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.