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The EIB in Greece: by the numbers


Notes:

1. Since 2000 the EIB has financed only one project in the renewable energy sector, EUR 75 mln for windmill construction in 2003.

2. In 2002 and 2004 the EIB lent EUR 1,5 bln for the construction of Olympic Games infrastructure. This is the second largest individual loan for Greece, after EUR 2 bln in EU-funds cofinancing in 2010.

3. Energy investments between 2000 and 2011 totaled EUR 2.7 bln, for projects including gas power plants and pipelines, upgrades and the construction of electricity transmission networks and oil refineries.

4. Between 2000 – 2008 EIB lent EUR 3.163 bln for motorways and related bypasses, 36 percent of its entire country portfolio during the same period.

Between the headlines: EBRD expansion demands policy-driven approach


The European Parliament (EP) yesterday ratified the extensions of the European Bank for Reconstruction and Development’s operations to the southern and eastern Mediterranean – a move that Bankwatch and others have questioned for a number of reasons (see also here and here).

A statement by EP president Martin Schulz on the occasion is worth commenting:

    “The European Bank for Reconstruction and Development, with its strong record and expertise, has a key role to play in matching investment projects with governments’ priorities.”
    (emphasis added)

The highlighted bit touches upon a fundamental question: Is the EBRD a market- and client-driven bank or rather an institution for change that uses banking as its means to achieve that change?

Schulz’s statement certainly suggests the latter, and it should because it is at the heart of any justification for expanding the EBRD’s mandate to the southern and eastern Mediterranean in order “to support democratic reform […] and to respond to the aspirations for freedom […] and empowerment, particularly for women and youth” (G8 Summit of Deauville declaration).

However, the discrepancy between this claim and the EBRD’s factual activities is what Bankwatch has been highlighting repeatedly. Rather than identifying sectors where EU priorities call for a specific approach, we have seen the EBRD opting for what the market would opt for anyway, for instance:

In addition, there is the EBRD’s problematic cooperation with undemocratic regimes and the doubts over its lending to corrupted companies.

In light of this, it will be important to make sure that also the demands that the European Parliament attached to its ratification will be implemented:

    “The representatives of the Union in the governing bodies of the EBRD should encourage the EBRD to foster the transition of the Southern and Eastern Mediterranean towards energy-efficient market economies by means of a feasibility study on the phasing out of fossil fuel lending, including lending for coal mining and related energy production and the transfer of renewable energy and energy-efficient technologies.“ (emphasis added)

    “In carrying out its activities in the Southern and Eastern Mediterranean region, the EBRD should be encouraged to increase coherence with Union policies. (original emphases)

    “Before the EBRD approves, and engages in, a potential new country of operation, it should be required to make a detailed technical assessment of the economic and political conditions existing in the country concerned, including possible transition gaps in that country’s commitment to the principles of multi-party democracy, pluralism and market economics […] The representatives of the Union in the governing bodies of the EBRD should encourage the EBRD to make the preparation of its technical assessments transparent and publicly available and to take full account of the views of the Union and relevant national and international stakeholders.” (emphasis added)

    “With respect of the approval of potential recipient or recipient country status of the countries of the Southern and Eastern Mediterranean, the Commission shall carry out an inter-service consultation and shall consult civil society in an appropriate manner prior to the Board of Governors’ vote on country compliance with EBRD conditions […].” (emphasis added)

The revolution should not be privatised


“What do we want? Public-private partnerships! When do we want them? Now!” – Don’t remember hearing this chant during the Arab Spring protests? Nor do I.

Countries in the southern and eastern Mediterranean region, Egypt in particular, have had painful experiences with privatisation and corruption, resulting among other things in the loss of jobs and incomes for many.

After the Arab Spring saw regime changes in Egypt and Tunisia early in 2011, the EBRD, along with the European Investment Bank was quick to pledge its financial support to further the process of democratisation in the southern Mediterranean.

As part of its preparations to commence larger lending projects in Egypt, the EBRD will hold a consultation meeting with civil society on June 18 about its future operations there. (Meetings in Jordan and Morocco have already taken place, while the meeting in Tunisia had to be postponed).

Sadly, those meetings take place after the EBRD’s shareholders have already approved the creation of a special fund that would allow the bank to invest there. But this is not entirely surprising, considering that both the EBRD’s and the EIB’s competence in supporting democracy in the southern Mediterranean has fundamentally been called into question (and not only by Bankwatch (pdf)).

One aspect I find particularly disturbing in both the EIB’s and the EBRD’s approaches is their (somewhat predictable) emphasis on public-private partnerships (PPPs):

The EBRD’s technical assessment for Egypt (pdf) outlines its intentions to provide technical assistance for PPP legislation and project preparation as well as transport and municipal infrastructure PPP projects.

The EIB has commissioned a study on PPPs in the southern Mediterranean and co-organised a conference on the topic in May 2011, at which the bank and its partners committed to, among other things:

    “Continue providing technical support to help increase the PPP legal and financial readiness of the Partner Mediterranean Countries including PPP policy framework formulation, legal reform, institutional strengthening, and increased capital availability for infrastructure development.” (emphasis added)

So why is this disturbing?

Apart from the fact that these statements were prepared long before civil society groups in those countries were asked for their opinion, and from the problematic results of the past twenty years of privatisation policies, particularly in Egypt, the problem is that public-private partnerships have not proven to be a successful tool for developing public infrastructure – rather the opposite.

A new website that we have prepared in Bankwatch offers a score of analyses and examples for the controversies and even failures that PPPs have come to signify in various countries in the past 20 years.

The reason PPPs looked attractive to European governments a few years ago was mostly due to their promise of ‘build now, pay later’, meaning that governments could initiate lots of new construction projects (and earn public recognition for it), while their unfortunate heirs have to pay the fee to the private companies for the next three decades.

Today, in some countries hit hard by the crisis, the problems with the cumulative burden of PPPs became inescapable:

  • In Hungary, where around 100 PPP projects had been undertaken, the government announced a moratorium on new PPPs and review of existing ones. In Portugal, the same.
  • In the UK, although the coalition government has not yet taken a particular line on the future of PPPs, it has slashed the Building Schools for the Future PPP programme due to its poor value for money, and is undertaking a review on PPPs. Bad publicity from other PPP schemes has not helped the cause either – the collapse of the London Underground PPP, the revelation that the M25 widening had been very poor value for money, the GBP 148 fish and chips from the Treasury canteen and the GBP 900 Christmas tree are just a few examples.

Coming back to the Mediterranean, one of the main demands of civil society groups in the region is that the western countries write off the massive debts clocked up by the former regimes in order to help get the countries back on their feet again. Apparently though, the approach being taken instead is to help the countries – some of which still have illegitimate governments – to clock up new debts, and this time hidden ones that don’t appear on the government balance sheet.

Given the support that PPPs still enjoy in important institutions, our website Overpriced and underwritten – The hidden costs of public-private partnerships explains in more detail what PPPs are and what’s the problem with them. The aim is to help activists, journalists, NGOs and researchers from across Europe and beyond to stimulate a more honest debate about this financing model.

Find the website here.

Hydro power plants endanger the Balkan lynx in Macedonia


Last week I visited the Mavrovo National Park in Macedonia where both the European Bank for Reconstruction and Development and the World Bank are developing hydro power plants. With me was hydrobiology expert Dr. David Pithart of the Daphne Institute of Applied Ecology (CZ).

Worryingly, we found out that the national park authorities are proposing changes of the protected areas in the park that would more easily accommodate hydro power plant development. (This might be an unusual decision for a national park, but it’s no surprise considering the park lacks environmental specialists – most of the 80 staff that need to cover of more then 700 km2 are foresters and administration.)

So what would the construction of those hydro power plants mean for the national park?

The EBRD and Boskov Most

One of the projects in question is the EBRD supported Boskov Most, planned to be constructed in an area that is not only due to become a Natura 2000 site when Macedonia joins the EU, but that is also home to the critically endangered Balkan Lynx (Lynx Lynx Balcanicus). (See also an earlier blog post.) Out of an estimated total world population of one hundred cats, all living in the Balkan mountains, 30-50 live in the Mavrovo National Park.

The project’s impact on those animals has been largely ignored (pdf) in the Environmental Impact Assessment (EIA) for Boskov Most, including the fact that the bio-monitoring of the NGO Macedonian Ecological Society has resulted in lynx individuals being captured on camera right above the Boskov site.

While the EIA has not yet been approved by the Macedonian government, the project sponsor ELEM decided – after criticism by Macedonian nature protection groups – to organise its own bio-monitoring of the Boskov Most area. However, by now, intensive construction works are flooding the area with noise, scaring away many animals and certainly the shy lynx population. (A small hydro power plant (also funded by the EBRD) is being constructed just a few hundred meters away from the Boskov Most site.)

The chance that any lynx would be spotted this year in the area are conveniently low, which would offer ELEM the necessary excuse for going ahead with Boskov Most. But just in case it hasn’t registered yet: Lynx have been spotted in the area already!


A Balkan Lynx which was captured by previous monitoring by the Macedonian Ecological Society in the Boskov Most area.

All this hasn’t stopped the EBRD from approving a loan for the project. Therefore in November last year Macedonian Bankwatch member group Eko-svest filed a complaint that has been deemed eligible by the EBRD’s complaint mechanism and will now be examined in detail.

The World Bank and the Lukovo Pole Water Regulation and Renewable Energy Project

While the Boskov Most project has been approved (pending the complaint review), that isn’t yet the case for the other project we visited, the Lukovo Pole Water Regulation and Renewable Energy Project for which a World Bank loan is scheduled for approval in autumn 2012.

According to the World Bank’s own documentation, “The project area lies in a sub-alpine landscape of considerable natural beauty with diverse fauna and flora and a relatively unspoiled landscape.”

Apart from driving bulldozers into that unspoiled landscape, the project involves a number of problematic aspects:

extensive hydrological engineering in this high-altitude valley, including construction of a large dam and a 20km long diversion channel to transfer water from the Mt. Korab watershed to the reservoir;

As the Macedonian energy utility ENEL has pointed out: The terrain’s geological conditions make it “most often not appropriate for construction” due to danger of “landslides, unsteady sides, leaking of materials, permanent presence of waters”. Substantial adjustments (read: interferences with the unspoiled nature) are therefore necessary, such as excavations down to the rock foundations (approximately 4m deep), surface and underground drainage and more. [1]

During the massive construction of of canal and service roads, we can again expect substantial disturbance that would push out the Lynx population – at a time when other areas that are suitable for the Balkan Lynx also suffer similar disturbances.

The constructions will be an additional pressure on an area that includes one of the last virgin forests in the park and mountainous streams that will loose most of their water.

Loss of water – a problem for both projects

The loss of water is a problem for both hydro power plants and a particularly serious one: Some of the already existing dams in the park do not allow for the biological minimum of water in the streams. The park’s flora and fauna is already now basically being left to dry by the park management.

This will only be aggravated if Boskov Most and Lukovo Pole will be built, since the proposed levels for the minimum discharge are so low that they would most likely result in practically dry river beds and loss of habitats for freshwater life.

We hope that the World Bank environmental specialists will have more courage than their EBRD colleagues to reject a project that so clearly damages critical natural habitats.

P.S.: Ironically, when we asked for permission to visit the Lukovo Pole location it was not only denied but the authorities deemed it necessary that their several staff members monitor our presence. We do believe that some of the areas should remain strictly protected zones, but that should apply to bulldozers as well as to environmentalist.

Notes:

1. Dam Lukovo Pole and Intake of Corab Waters, ELEM, Development and Investment Department, February 2010.

Fossil fuels rebranded as low-carbon also in Cohesion Policy discussions


For almost two years now, I and my colleagues at Bankwatch have been working on turning the next budget of the European Union into an instrument for addressing some of the key challenges we are facing in Europe today: creating jobs that last, switching to consuming less and cleaner energy, a more restrained use of finite natural resources.

Being who we are, an organisation based in central and eastern Europe, we have focused particularly on our region which has some of the greatest investment needs and transformational potential in Europe. Consequently we have concentrated on Cohesion Policy, the second largest expenditure line in the EU budget, trying to show that smart investments in green energy, transport and waste solutions can decidedly help our region in moving towards low carbon economies and creating jobs.

Time and again, we encountered that governments in our own region can be among the most reluctant partners for change, with politicians being trapped in a logic where economic growth reigns supreme, neglecting the dangers of ecological, economic and social disaster.

Poland has been one of the most active ones in this regard. Over the past year, we have seen Poland blocking repeatedly various attempts made by European leaders to take positive steps on combating climate change. Polish leaders cannot accept the idea that the country could move forward without coal (or, perhaps, they cannot extricate themselves from the long arms of the Polish coal lobby?).

When it comes to the next Budget (around one trillion euros to be spent in 2014-2020), last year the Commission presented a proposal that we half-heartedly welcomed as it was calling for the spending to be in line with EU 2020 objectives on decarbonising the European economy. The money put aside exclusively for green measures we thought was not enough, but the Commission proposal was overall a good start.

Since then, however, instead of seeing European decision-makers working hard to improve this proposal, we have witnessed them taking it down, step by step. First, the heads of governments meeting in the Council moved away from the Europe 2020 strategy’s climate commitments by emphasising the member states’ own priorities should give the direction of future investments (pdf) (for instance in the subtle but decisive language in Art 10, p.10). But, in a way, as I wrote above, we had expected that.

More frightening is that recently even the European Parliament seems to be rather pursuing national interests than European ones on this matter. (We could usually count on the parliament to be more aware than some eastern European governments of the need to take strong environmental action immediately as well as of the importance to be as inclusive as possible in decision-making.)

In the REGI committee of the parliament, the body that will effectively determine the final decision of the whole parliament on the next Cohesion Policy, the main direction of discussion has been set by an opinion drafted by Polish MEP Olbrycht. Olbrycht suggests that oil and gas infrastructure should be built with money specifically proposed to be set aside for green, i.e. low-carbon measures.

This is as absurd as it sounds and it is an example of how member states’ priorities – here the retrograde stances of fossil fuel friendly Warsaw – can thwart any wider European common interest.

It is also alarmingly in line with the EU’s recent moves to rebrand gas as a green energy.

It is very worrying to see such developments. There is still time for decision-makers in Europe to look carefully at the possible negative consequences of using the next EU budget intelligently. If such proposals that are undermining common climate efforts are not kicked out, then we are effectively hammering a nail in our own coffins and we might as well accept the idea that disastrous climate change is upon us and we have taken no step to make Europe more resilient.

The many faces of coal subsidies. A glance at Romania.


Preliminary figures from the International Energy Agency’s upcoming World Energy Outlook 2011 show that “Global carbon-dioxide (CO2) emissions from fossil-fuel combustion reached a record high of 31.6 gigatonnes (Gt) in 2011.” (That, for the sake of completeness, includes a decrease in Europe by 69 megatonnes, albeit with Europe struggling to avoid recession this is hardly an achievement to celebrate.)

Already in January, the IEA stressed one of the obvious available strategies to finally reduce CO2 emissions by suggesting a phase out of fossil fuel subsidies – a move that recently also the leaders of the G8 countries have recognised as a necessity.

Fossil fuel subsidies can come in various forms and have become increasingly complex. They offer the fossil fuels industry a strong competitive advantage over renewable energy sources, that only receive a fraction of the amount in subsidies.

This imbalance is perfectly being illustrated by the deals of energy company Enel in Romania. Romania is considered to have the highest potential for wind energy in the region, but renewable energy sources (other than hydro) are so far hardly part of its energy mix.


Source: enerCEE

As for Enel, it ensured support from the European Investment Bank for the construction of three on-shore wind farms with a total capacity of 258 MW. So far, so good. Yet, this is overshadowed by two planned coal-fired power plants with a capacity of 800 MW each, for which Enel is also set to receive financial advantages (not from the EIB).

(Enel is being heavily criticised for making new coal power plants an essential part of its energy portfolio. A recently launched international campaign has staged a protest last month in front of the company’s headquarters.):


The picture was taken at a demonstration in Rome on April 30.

Tax exemption for the Galati coal-fired power plant

The Galati power plant is planned to be constructed in the Galati tax free zone, which initially wasn’t designed to incorporate industrial activities. On Enel’s request, however, Romanian authorities changed the spatial plan, allowing Enel to import coal (from Ukraine and South Africa) without paying customs.

What’s more, the coal will most likely be used in both Galati and Braila power plants (see below), located only 20 km away from each other. Enel has really brokered a pretty good deal here, saving custom tax for a double capacity of imported coal.

Obviously this offers the company a considerable advantage. It will not only strengthen Enel’s position but, more importantly, it artificially increases the competitiveness of coal on the Romanian energy market – at a time when the opposite should be done to support renewable energy production.

Braila Power: a coal-fired power plant as an investment in de-carbonisation?

The Braila coal-fired power plant is one of the investments with which Romania’s government wants to offset the free CO2 emissions allowances it applied for within the EU’s Emissions Trading System (ETS).

The idea behind free allowances is certainly to help the eligible countries in transitioning to a greener energy sector. By delaying the full effect of a price for CO2 emissions until 2019, so the theory, the free allowances free up money for investments into the de-carbonisation and diversification of the electricity production.

Countries, among them Romania, therefore had to submit a national plan of these very investments as part of their application for free allowances. The problem with Romania’s application is that the whole idea is being hijacked because the government’s national plan foresees almost only investments in fossil fuel facilities, one of them being Braila Power. (Apart from contradicting the idea to de-carbonisation the energy sector, Braila is not even eligible to be included in the national plan as our study from February (pdf) has shown.)

This controversy is not exclusive to Romania, but has been identified also in the Czech Republic (pdf), while the Polish plans are a proper farce in themselves.

When the European Commission decides on these applications in July it really should put an end to this and not allow these countries to lock themselves in to a dependency on coal for the next 40 to 50 years.

The outcome

Whether or not one wants to define the case of Braila as a subsidy, together with the customs exemption in Galati they would ensure significantly lower costs for Enel in producing energy, while spewing about 9 000 megatonnes of CO2 per year into the atmosphere for the next 45 to 50 years.

Whatever the exact way that fossil fuel production is granted an advantage, it always obstructs a concerted effort to bring about a shift in the energy sector away from carbon-intensive to renewable sources.

Fossil fuels dominate the market because of the inertness of big players, including energy companies, governments, as well as private and public banks, that don’t want to abandon their profitable business, business as usual.

It’s time to phase out fossil fuel subsidies. Now!

Update, May 30: The paragraph mentioning EIB investments has been amended to clarify the bank is not involved in Enel’s the coal-fired power plants in Romania.