Blog entry

Western Balkans decarbonisation is urgent: but the EU enlargement package is still sending mixed signals

As the European Commission published its annual enlargement package this week, all eyes were rightly on its recommendations to open accession negotiations with Ukraine and Moldova and grant candidate status to Georgia. It’s no exaggeration to call this a unique opportunity to inject much-needed dynamism into the enlargement process and honour the enormous efforts the people of these countries are putting into joining the EU.

For the Western Balkans, it felt more like Groundhog Day. Still, despite slow or no progress, the reports for each country represent rare opportunities to get beyond the PR visits and handshakes to see what the Commission really has to say to the governments. And a careful look shows that the messages differ considerably, including on decarbonisation.

Some messages are relatively consistent across the board, for example the need to adopt or update National Energy and Climate Plans, adopt carbon pricing, speed up sustainable renewables development and properly apply EU environmental law. But the coal phase-out only seems to be really taken seriously for Montenegro and North Macedonia. And on gas infrastructure, the Commission fervently encourages projects like the Greece – North Macedonia and the Croatia – Bosnia and Herzegovina Southern Interconnector pipelines, only occasionally remembering to sound notes of caution.

Albania

The Commission rightly underlines that hydropower-dependent Albania needs to continue diversifying its renewables supply and improving its grid interconnections with neighbouring countries, but sounds overly supportive of Albania’s intentions to become gas-dependent by connecting the Vlora thermal power plant with the Trans-Adriatic Pipeline (TAP) and an LNG terminal – a move it says would ‘improve energy security for the country and the region.’

It’s unbelievable that in 2023 the Commission is still supporting new gas infrastructure in a country that is so far gas-free. Albania is uniquely placed to leapfrog straight to electrification of heat and transport – and gas will only hinder this process.

The Commission does note that these plans have raised concerns from civil society. But it only mentions the protection of Vlora bay as an issue, not the myriad other reasons to avoid gas dependence.

Bosnia and Herzegovina

The Commission is clearly critical on coal: ‘Measures to improve security of supply of electricity need to be redirected from coal to renewables,’ and Tuzla 7 ‘may increase the country’s security of supply, but might also significantly prolong dependency on coal which is not in line with the country’s commitments to decarbonisation.’ It also mentions the illegal lifetime extension of Tuzla 4 and Kakanj 5. But it still does not mention Republika Srpska’s continued attempts to push the Ugljevik III and Gacko II new coal plants, nor the need to plan for a phase-out and a just transition for coal-dependent communities.

But on gas, the Commission is extremely supportive of building new pipelines from Croatia – the northern and southern interconnectors – despite admitting that this fossil fuel makes up only three per cent of Bosnia and Herzegovina’s energy supply. In particular, it beseeches the Federation to ‘accelerate the adoption of the law and permit procedures on the Southern Gas Interconnector project, one of the flagship projects of the EU’s Economic and Investment Plan, that will contribute to strengthening the integration into the European gas market and increasing the security of supply.’

The Economic and Investment Plan actually says ‘…the Commission will examine the costs the benefits and the impact of the following priority investment flagships and their corresponding project proposals with a view to taking them forward actively and expediently.’ But no such assessment has ever been made public for this pipeline. The Commission has jumped straight to lobbying for it without providing any evidence that it makes sense. The Commission laments Bosnia and Herzegovina’s heavy dependence on ‘carbon-intensive infrastructure’, but proposes to build some more.

Kosovo

The Commission rightly criticises Kosovo’s coal plants for their failure to comply with the pollution ceilings under the national emissions reduction plan, but its recommendations on coal are quite weak. It recommends continuing the upgrade of the Kosova B thermal power plant and decommissioning works for non-working parts of Kosova A, but doesn’t comment at all on the Energy Strategy’s overblown plans to renovate one or two of the three ancient Kosova A units at a cost of EUR 120 million per unit. It also doesn’t comment on the fact that Kosovo has only set a closure date for one of the Kosova A units (2026), despite the fact the newest one is 48 years old.

Just transition is notably absent from the Commission’s assessment for Kosovo, which is strange because the need for coal will almost certainly decrease before 2030 with the gradual demise of Kosova A, so presumably there will also be a need to support workers and the communities around Obiliq.

On gas, the report notes that Kosovo’s new energy strategy does not foresee new gas infrastructure, but this wise move does not attract any recognition from the Commission. On the flip side, the Commission does not comment on Kosovo’s plans for joint gas power plant projects beyond its borders with Albania, North Macedonia, and/or Greece – they are just mentioned in passing, without any warnings on the risks.

Montenegro

The Commission’s clearest messages on coal are aimed at Montenegro:

‘…the ecological reconstruction plan for the Pljevlja coal power plant will not address the core issues. Montenegro needs to step up its efforts to permanently close the plant to meet EU emission standards. Montenegro needs to plan for a just transition in the region, by providing economic alternatives to the communities that will be affected the most by the coal phase-out.’

Such clear language is a rarity in EU enlargement reports, but is much needed as Montenegro has wasted years with ill-advised plans such as Pljevlja II, the Pljevlja reconstruction and the Komarnica hydropower plant, and has needlessly delayed several large-scale solar and wind projects. The longer it procrastinates, the narrower its options become.

But on gas the Commission sends mixed signals. Despite Commissioner Varhelyi’s recent controversial pledge that the EU will help Montenegro build a liquified gas (LNG) terminal at Bar, the project is thankfully not mentioned. In fact, the Commission takes a relatively cautious tone on gas in general, with a reminder that all infrastructure investment needs to ‘comply fully with the EU standards on public procurement, State aid and environmental impact assessment’ and that investments need to ‘address changing strategic priorities, decarbonisation, digitalisation and resilience of transport and energy networks, including prior cost-benefit analyses carried out in line with EU best practice.’

This appears to suggest, in very diplomatic language, that building gas infrastructure in a so far gas-free country might be a bad idea. But this needs to be said much more clearly, especially since the report also mentions the advancement of the Ionian-Adriatic Pipeline, implying that this is somehow a condition for EU accession – which it isn’t.

North Macedonia

Montenegro and North Macedonia are the only countries where the Commission makes recommendations on a just transition for carbon-intensive regions:

‘The Government adopted a Just Transition roadmap and a coordination mechanism for governing and monitoring, in June 2023. The transition towards clean energy should include measures mitigating the negative social and economic impacts of the planned phase-out of coal-fired power plants in the concerned regions.’

This may be reflective of the imminence of the countries’ coal phase-out, but is inconsistent given that coal use will also decline in Bosnia and Herzegovina, Kosovo and Serbia in the next few years because of the age of the coal fleet, coal availability problems and pollution control legislation.

If I were the North Macedonian government, I would really not know what to make of the Commission’s messages on gas. On one hand it is peddling the outdated and evidence-free idea that ‘the distribution of natural gas is advancing, as an intermediate step in the decarbonisation process…’, and praising the oversized Greece-North Macedonia gas pipeline project:

‘The development of a natural gas interconnector between North Macedonia and Greece, a flagship project in the Economic and Investment Plan (EIP) for the Western Balkans, is a priority to enable security of gas supply in North Macedonia and is progressing well.’

In 2021, North Macedonia’s highest gas-consuming year so far, the country used 426 million nm3, yet the pipeline’s initial capacity would be 1.5 billion cubic metres per year. Thus it clearly encourages the country to massively increase its gas use, particularly as the existing pipeline will also continue to operate.

But – finally! – the Commission also remembers to say that ‘As the energy crisis has demonstrated, North Macedonia needs to accelerate its transition towards green energy and reduce its dependence on gas and coal.’ (Our emphasis).

How it can do this by building a pipeline that encourages it to more than triple its gas consumption is not explained.

Serbia

In the energy sector, the emphasis – perhaps expectedly – is reducing dependence on Russian gas. But as works on the new Bulgaria-Serbia pipeline are quite advanced, this short-term focus seems to excessively detract from the longer-term perspective, and decarbonisation is mentioned only very generally, and with no deadlines e.g.:

‘(…) Despite coal shortages which continued in 2023, due to mild winter conditions and winter rainfall, electricity imports ceased. Significant investments in new renewable capacities are needed in order to take forward the decarbonisation of the Serbian economy. (…).’

Some important issues are mentioned, such as the need to remove the new coal plants from Serbia’s draft spatial plan, to improve environmental inspection and law enforcement and increase capacity to manage integrated permitting processes. The need for carbon-pricing instruments in light of the forthcoming Carbon Border Adjustment Mechanism and phasing out coal subsidies are also underlined.

But other issues such as the closure of the subsidy-guzzling Resavica coal mines, the need to close the illegally-operating Morava power plant, and the need for a clear coal phase-out timetable overall are not even mentioned. Just transition is barely mentioned, with acknowledgement of the ongoing work on a Just Transition action plan due to be adopted by December 2023. No further recommendations are provided on how to ensure support for workers and communities in mining regions, despite the urgency of dealing with Resavica.

Sustainable and just decarbonisation is urgent

Reading the reports, one gets the impression that the Commission doesn’t really believe in decarbonisation in Bosnia and Herzegovina, Kosovo and Serbia, and this is why it doesn’t push them to decide on closure dates for illegally-operating plants or to properly plan an overall coal phase-out and just transition measures. Or it might be that the governments lobby to water down the reports and muddy the waters about their commitments.

But whatever the reason, the time for mixed messaging and diplomatically skirting around issues is over. Decarbonisation is urgent. Due to coal supply issues and technical problems at coal plants, there is an increasing threat that it will be an uncontrolled process, which must be avoided.

It is high time to stop being distracted by gas and concentrate hard on energy efficiency, heat pumps, improving distribution grids and building suitably-sited solar and wind.

To keep homes warm in the Western Balkans, look beneath the surface

Many towns in the Western Balkans rely heavily on fossil fuels to keep residents’ homes warm during the winter. To put things in context, fossil fuels account for 97 per cent of the total fuel used by district heating systems in the region. Meanwhile, investment in home insulation and sustainable renewable sources for district heating continues to lag. To make matters worse, national and municipal decision makers are increasingly falling back on outdated and unsustainable solutions, which typically involve the addition of coal, fossil gas and large-scale biomass or waste incineration.

But there are much more effective ways to keep homes warm. One of the most promising approaches is geothermal energy. According to the International Renewable Energy Agency (IRENA), the global deployment of geothermal energy for heating and cooling has been growing at a rate of 9 per cent per year, a trend that is set to accelerate in the coming years. There is every reason for countries in the Western Balkans to take advantage of this global energy transition.

In Szeged, Hungary, local policymakers have long recognised the myriad benefits of geothermal energy for heating. Several years on since they embraced their local renewable energy source, over one-third of the heating supply in the town now comes from geothermal sources.

‘I don’t know why other cities don’t care about it. It directly affects our lives,’ says Sándor Nagy, deputy mayor of Szeged, in Bankwatch’s new documentary Clean Heat.

Countries such as Bosnia and Herzegovina (BiH), Albania, Serbia and North Macedonia possess enormous, untapped potential for geothermal energy, particularly in the context of district heating. Thus far, however, many governments in the region have been hesitant to harness this capacity, largely due to the extensive research and technical preparations required.

BiH is one country where investments in geothermal can make a huge difference in addressing issues like air pollution. The government is planning to shift many of the district heating systems currently running on fossil fuels to forest biomass which is unsustainable. Yet, research has shown that around a quarter of BiH’s territory has geothermal potential.

Cities such as Tuzla, Kakanj and Sarajevo need to prioritise improvements in building energy efficiency, laying the groundwork for the installation of fourth-generation district heating systems. In parallel, local authorities should map and develop the potential for geothermal and solar energy, given that these sources of energy can be locally owned and are able to effectively meet heating demand. Research indicates that these three towns have deep geothermal water heating potential ranging from 27 degrees Celsius (°C) in Tuzla to 58 °C in Sarajevo.

Unfortunately, bad practices abound. In Tuzla, for example, city officials are planning to supply the district heating network by burning large quantities of unsustainable biomass and waste, which would considerably aggravate air pollution in the city.

But the city has far more sensible alternatives at its disposal. As an analysis by Bankwatch revealed in 2021, it is entirely feasible for the city to transition from coal-based district heating – currently supplied by the Tuzla power plant – to geothermal and solar-based energy sources supported by technologies such as heat pumps and seasonal heat energy storage.

Elsewhere, the city of Banja Luka, which has already pioneered the use of shallow geothermal heat pumps, could benefit even more from a massive geothermal reservoir in its immediate vicinity. Geological tests have revealed the existence of a hot water lake at a depth of 2000 to 3000 metres, with a temperature of about 100 °C, right below the city. And yet municipal decision makers chose to build a 49-megawatt (MW) biomass district heating facility, which ended up struggling with fuel supply. In fact, in 2021 and 2022, the city had to subsidise Eko Toplane, the local heating provider, with EUR 3.5 million. Then, in 2023, after the company doubled its credit debt compared to 2020, it raised heating prices for end consumers.

Bosnia and Herzegovina should seize the opportunity to harness geothermal sources to secure its energy independence and meet the country’s heat demand. By intensively applying energy efficiency measures in combination with the use of geothermal heat pumps, a significant share of the Western Balkans’ heat energy needs can be met by 2050.

The innovative systems introduced in Szeged and in many other municipalities represent a major step forward. Their experience can be beneficial for many Western Balkan towns as they end their dependence on fossil fuels. The transition to geothermal in district heating systems requires not only substantial investment, but in some cases also the installation of equipment to capture methane emitted during the process. The experience in cities that have already started this transition shows that EU financing can be leveraged to cover a significant proportion of these expenses.

But action can no longer be delayed. As Tamas Medgyes, chief operating officer at Szeged’s district heating company Szetáv, says in our documentary Clean Heat: ‘The costs of a geothermal project are paid upfront, but the costs of fossil fuel projects are paid for by generations to come.’

Skopje’s five-year subsidy saga has left residents with uninsulated homes

In North Macedonia, local authorities are the key actors for the realization of energy efficiency goals in the residential sector, the largest final consumer of energy. Several authorities have already set up a subsidy scheme for retrofitting of existing residential buildings. For instance, the Centar municipality in Skopje has already had few calls for energy-efficient insulation of residential buildings in the central area of Skopje, but the results remain questionable.

The plan

In the public call from 2018, supported with financial resources from its budget, the municipality covered up to 70 percent of the total value of the energy-efficient multi-apartment residential building façade for each approved application. Out of 65 applications received, 26 buildings were approved, and were planned to be retrofitted within two years, according to media reports.

The reality

However, the results are far from those projected, with only one building retrofitted in five years. Despite this, the municipality published another public call this year in May with the same aim, clearly stating that with the publication of this new call, the one from April 2018 becomes invalid, as do the obligations deriving from it. This resulted in disappointment among the other selected applicants, who ended up without insulated homes.

An apartment owner living in one of the remaining 25 buildings who haven’t received new façades shared their frustrations with Bankwatch, requesting anonymity:

‘In May 2023, we were surprised to see a new public call on the Municipality’s website, when we still haven’t got a new façade. Until then, we were under the impression that retrofitting was still ongoing and that it was just a matter of time when we would be next. We were in disbelief when we found out that only one building has been retrofitted, out of 26 approved, since 2018! We feel like our time was wasted and are very much discouraged from applying for other subsidies of this kind.’

Local authorities must be leaders in implementing energy efficiency measures, not bystanders

It remains to be seen what exactly went wrong in this case, and we plan to investigate the issue in more depth in the coming months. But undeniably, sham measures that don’t fix people’s problems only cost them time and money, simultaneously contributing to greater distrust in government bodies and institutions.

In fact, municipalities must be the leaders in boosting energy efficiency measures, especially in the residential sector, and according to North Macedonia’s Energy Efficiency Law, they have a legal obligation to prepare an energy efficiency programme every three years. The development and implementation of these programmes remains a serious challenge in the country – a fact also noted by the European Commission. Some local authorities haven’t even developed such programmes, and those that have been done are of poor quality. Most often, the programmes do not contain the required elements given in the Energy Efficiency Law, or the identified measures are unrealistic, resulting in ineffective implementation.

Furthermore, as highlighted in June 2023 by the State Audit Office, most municipalities do not prepare implementation reports on their energy efficiency programmes and do not keep separate records to measure the efficiency of the implemented projects and the savings achieved.

The improper implementation is mostly due to a lack of qualified human resources responsible for energy sector projects and activities. In most cases, job positions covering energy efficiency haven’t been created or filled yet. If the capacity of a central municipality to manage an energy efficiency subsidy scheme results in only one building retrofitted in five years, we clearly can’t expect much from smaller local authorities.

Strengthening municipal capacities – It’s a must!

On 3 October, 2023, the Parliament adopted a Draft Law on Amendments and Additions to the Law on the Development Bank of North Macedonia proposed by the Ministry of Finance. The amendments enabled the establishment of an Energy Efficiency Fund with initial capital in the amount of EUR 5 million provided by the World Bank under the ongoing Public Sector Energy Efficiency Project. An additional EUR 10 million in green bonds were secured for the fund aimed at green projects, which in the future will be replenished from other sources for green investments. Legal entities and individuals in the country will receive support in the form of extended loans, issued guarantees and approved grants under the Energy Efficiency Fund.

This is indeed a step in the right direction of fulfilment of the established decarbonization goals of North Macedonia, determined in the National Energy and Climate Plan. The Energy Efficiency Fund will bring greater access to funds and a stronger responsibility for authorities to push forward the efficient use of energy in all relevant sectors. Thus, it is of utmost importance for local authorities to strengthen their administrative capacities with qualified and professional personnel who will create and implement realistic energy efficiency programmes.

Local authorities must strengthen inter-municipal cooperation as well, exchanging experiences and good practices. Moreover, monitoring and reporting the results of the implemented measures must become a regular practice within municipalities, since it not only helps with tracking the effectiveness of the measures and the savings achieved, but also shows greater transparency and accountability of managing public money.

The Montenegrin mountain town pursuing sustainable district heating

Coal and wood heating no longer an option

Located 1,456 metres above sea level, Žabljak is the highest urban settlement in the Western Balkans, surrounded by the natural beauty of Durmitor National Park, a UNESCO World Heritage Site. The town is also the leading winter resort in Montenegro.

Due to its mountainous location, temperatures often fall below freezing during the winter months. However, Žabljak has no central heating system in place, which means that most households rely on firewood or coal for heating. This results in annual carbon dioxide emissions of about 1,121 tonnes. In terms of the cost of heating, burning wood and coal is generally the cheapest option in Montenegro. But the energy crisis in 2022, along with the resulting volatility in the national and regional energy markets, put decision-makers in Žabljak on red alert.

To put things in context, in 2021 the average price of heating wood was EUR 35 per square metre (m2) and pellets EUR 180 per tonne. By 2023, however, prices had surged to EUR 80 per m2 for wood. A year earlier, the price for pellets had reached as much as EUR 320 EUR per tonne. With heating demand in Žabljak now at 7,728 megawatt hours per year, this lack of stability has put the local economy and communities at risk.

A town with high ambitions

Back in 2019, the European Bank for Reconstruction and Development carried out a pre-feasibility study for a district heating development in Žabljak based on biomass and oil. But Žabljak Municipality had greener plans in mind. Determined to cut greenhouse gas emissions and improve energy efficiency, they want their district heating system to be powered by more sustainable and climate-friendly renewable energy. And so, Žabljak has turned to Actionheat.

Funded by the European Commission, Actionheat is a project that aims to accelerate the deployment of heating and cooling systems in cities across the European Union and the Western Balkans by facilitating the planning stage. Actionheat is set to provide Žabljak with much-needed technical assistance pre-feasibility . The municipality is now actively exploring more sustainable ways of optimising the district heating and cooling infrastructure in the region. They’ve decided to switch from fossil fuels to renewable sources, primarily harnessing solar energy alongside energy-efficient and energy storage technologies. This shift also involves a significantly reduced share of biomass compared to the previous proposal.

Renewable beginnings

The project kicked off this autumn with a meeting involving Bankwatch, Žabljak Municipality and the developers of an energy planning tool called Thermos. This open-source software visualises thermal energy demand in the form of automated maps, allowing users to compare a range of beneficial and cost-efficient options for heating and cooling distribution systems.

During the meeting, participants discussed ways of optimising network distribution, supply and demand estimates, supply parameters, and the reduction of emissions. They also explored the potential for carrying out a financial study and implementing a training programme to ensure accurate planning and the efficient use of resources.

The next steps will involve developing the training programme and collecting the additional data needed to make sure Žabljak’s district heating and cooling project is a success.

Setting an inspiring example

Žabljak is showing how even the smallest municipalities can implement decarbonisation plans by working together and making the best use of their resources. It’s also a welcome reminder for all stakeholders – from planners and technicians to local officials and community members – that shifting heating systems away from fossil fuels is entirely feasible.

By exploring renewable energy alternatives such as solar and energy-efficient technologies, municipalities can reduce their impact on the environment and attract investment from partners committed to sustainable development. Initiatives like Actionheat demonstrate the wealth of innovative options available. All that’s required is the courage and determination of decision-makers to lead the way.

The European Bank for Reconstruction and Development must do more to safeguard biodiversity in its new environmental policy

In times of accelerating mass extinction of wildlife, recent years have finally seen increasing global attention to the issue. In December 2022, the Kunming-Montreal Global Biodiversity Framewo rk set global targets for 2030 including bringing the loss of areas of high biodiversity importance close to zero; restoring at least 30 per cent by area of degraded ecosystems and ensuring that at least 30 per cent of land and sea areas are effectively protected. Not only do we have to stop destroying nature, we also need to restore it where it is already degraded.

Yet international financial institutions such as the EBRD have found even the first step – halting biodiversity loss — difficult. For this reason, a group of nine international environmental organisations and experts has recently submitted a set of recommendations on stepping up biodiversity protection in the Bank’s safeguard policies, currently under revision.

No loss, full stop

The Bank’s current safeguard polic y aims only at ‘no net loss’ of biodiversity, which is to be achieved by means of a ‘mitigation hierarchy’. This aims to first avoid creating environmental or social impacts from development activities, and where this is not deemed possible, additional measures must be applied that would minimise, mitigate, and as a last resort, offset any remaining adverse impacts.

So ‘no net loss’ means that if biodiversity loss happens in one place, it can be offset somewhere else. But the Kunming-Montreal targets show that this is not good enough, even in theory. We need to keep the biodiversity we still have, and restore degraded habitats.

Moreover, reality has shown that offsetting rarely, if ever, works, and the European Investment Bank (EIB) closed the door on biodiversity offsets in its 2022 safeguard standards. The Amulsar gold project in Armenia and Shuakhevi hydropower plant in Georgia are just two examples of EBRD projects with inappropriate and unsuccessful biodiversity offsetting measures.

No loss of biodiversity per se must therefore be the primary objective of the EBRD’s policy on nature conservation. There is no more time for far-fetched experiments like offsetting.

Critical habitat rules must be watertight

One of the chief areas to avoid building in, according to the EBRD’s policy, is critical habitat, which is defined, among others, as consisting of highly threatened or unique ecosystems or habitats of significant importance to endangered, critically endangered, and endemic species.

According to the criteria from the Bank’s environmental and social policy, projects should not be carried out in such areas unless a number of strict conditions are fulfilled. There are positive examples, such as when the EBRD decided not to finance the Neretvica hydropower plants in Bosnia and Herzegovina due to the presence of species such as white-clawed crayfish that signalled the area as a critical habitat.

But there are also too many examples where the Bank allowed damage to areas fulfilling the critical habitat criteria, such as the Vrući stream near the Adriatic Metals mine, also in Bosnia and Herzegovina, and the Zarafshan and Bash wind projects in Uzbekistan, where the nesting habitats of several pairs of the Endangered Egyptian vulture and saker falcon were not considered critical habitat.

Too often, the ‘avoid’ part of the EBRD’s mitigation hierarchy is neglected, or conflated with minimising and mitigating the damage, both in critical habitats and elsewhere. And in countries with poor environmental governance such as most of the ones that the EBRD works in, that’s an important difference, as mitigation measures are too often not applied in reality.

For these reasons, we’re calling for more habitat types to be included under the definition of critical habitat, for vulnerable and near threatened species to be included, and for more clarity on how critical habitat assessments must be carried out.

All proposed protected areas must be adequately safeguarded

The EBRD’s current policy includes rules for areas that are legally protected, internationally recognised, or proposed for protection by national governments, to prevent project impacts from compromising their integrity or importance. So it does take account of the fact that not all valuable areas are legally protected, but it also leaves a loophole for cases where a protection proposal has been made by a body other than the national government.

An example is the Dzhankeldy wind project in Uzbekistan, financed by the EBRD and other multilateral development banks, half of which is currently being built within the borders of the Kuldzhuktau sanctuary proposed by a UNDP project.

The updated policy therefore needs to acknowledge sites proposed for protection by scientific bodies or international non-governmental organisations, such as Emerald sites and Key Biodiversity Areas, even if they are not yet legally protected or proposed by national governments.

Putting the ‘E’ back into EBRD

All around the world, projects must avoid compromising the integrity, conservation objectives and/or biodiversity importance of protected and internationally recognised areas. The EBRD recognises that local legislation does not always ensure this, and this is why it has its own policy. However, in reality, EBRD-financed projects outside the EU are still subject to laxer rules than those within the EU.

One such example is the Corridor Vc motorway Mostar South-Buna section in Bosnia and Herzegovina. A poor-quality biodiversity assessment was undertaken on the basis of highly inadequate fieldwork. An Appropriate Assessment, as stipulated by the EU Habitats Directive and the Bern Convention, should have been carried out but was not – apparently because Bosnia and Herzegovina has not protected the Buna-Bunica river habitat. This makes no sense, as the species present must be protected irrespective of the site’s legal status, and it implies that governments can just save themselves the bother of assessing impacts by failing to fulfil their obligations.

In principle, the Appropriate Assessment is already an obligation under the EBRD’s environmental and social policy, as it states that the Bank — a signatory to the European Principles for the Environment — is ‘committed to ensuring that projects are structured to meet EU environmental principles, practices and substantive standards, where these can be applied at the project level, regardless of their geographic location.’

This clearly includes the Habitats Directive, which can be applied both to Emerald sites under the Bern Convention, and to potential Natura 2000 sites. However, due to poor implementation, this obviously needs to be made more explicit in the updated policy.

Get the basics right

The EBRD has sometimes displayed ambitions to promote ‘nature-positive’ economies, but this feels a bit like trying to run before being able to walk. Some of the environmental damage caused by its projects is due to poor implementation and enforcement of its existing policy, but there is no doubt that the rules need to be tightened as well. The most valuable contribution the Bank can make at this point is therefore to ensure its clients cause no loss to biodiversity, among others by strengthening its environmental and social policy.

Why we’re taking legal action on renewables permitting

In December 2022, the Council of the European Union adopted a fast-track regulation to speed up renewables deployment. Although it gives solar and heat pumps a useful boost, it also undermines EU environmental and public consultation rules by the back door.

We therefore asked the Council to carry out an internal review of the regulation, but it refused. Together with ÖKOBÜRO, we are therefore challenging this decision at the European Court of Justice.

Renewables acceleration is crucial – as are public participation and environmental safeguards

A ramp-up of sustainable renewables is much needed, to tackle both climate change and dependence on Russian gas. The EU is making progress, but clearly needs to do more. It’s been estimated that 41.4 gigawatts of solar photovoltaics were installed across the EU in 2022 – an increase of 47 per cent compared to 2021.

But this has to be properly balanced with nature protection. 81 per cent of the EU’s habitats are in a poor or bad condition, and renewables are not automatically sustainable: when inappropriately sited, any technology can cause harm. Croatia, for example, is currently subject to infringement proceedings for failing to properly assess the impacts of wind farms on Natura 2000 protected areas, and the Malko Tarnovo photovoltaic plant was built in the Strandzha Nature Park in Bulgaria on a drained wetland!

The EU’s definition of renewable also includes inherently high-impact energy sources like hydropower and – under certain conditions – forest biomass.

It’s also been proven again and again, that the more the public feels excluded from decision-making on new infrastructure, the more they reject it. Studies on barriers to renewables therefore underline the need to improve public participation, not undermine it.

Environmental safeguards undermined by the back door

EU environmental law helps to find a balance between our various needs, making sure that in tackling the climate crisis, we don’t create other problems such as destroying natural areas. It also guarantees the right to public participation in environmental decision-making, which is enshrined in the Aarhus Convention.

In May 2022, the European Commission presented its proposals to update the Renewable Energy Directive as part of the REPowerEU initiative, which in themselves undermined environmental legislation. But the Council did not want to wait for the legislative process to be completed, and on 22 December, adopted Regulation (EU) 2022/2577, without any input from the public or the European Parliament.

It used an emergency legal clause to do so – Article 122 of the Treaty on the Functioning of the European Union. This is meant to allow the Council to take economic measures if severe supply difficulties arise, notably in the energy sector.

In our view, this Article cannot be used to change environmental legislation. The Treaty is quite clear that most environmental rules must be adopted using the usual legislative procedure involving the European Parliament. This makes sense, otherwise the Council can undermine any piece of legislation it doesn’t like.

Damaging and counterproductive changes

The regulation not only undermines environmental law and public participation, but in our opinion it won’t significantly speed up permitting processes. It creates clashes with existing environmental safeguards that are likely to increase legal uncertainty and court challenges.

‘Overriding public interest’

The regulation introduces a confusing ‘presumption’ that renewable energy projects are of ‘overriding public interest’. Most such projects do not need this label anyway, because they would not cause significant damage to Natura 2000 sites or high-quality rivers. In other words, this provision only helps the most damaging projects in the most sensitive areas to get approval.

Such exceptions were already allowed under the Birds, Habitats and Water Framework directives after a careful case-by-case assessment, but the point is they should be exactly that – exceptions. This rule turns the concept on its head and makes exceptions into the rule. It also encourages Member States to approve projects in the EU’s most environmentally sensitive areas, contrary to the logic of using built-up areas first.

The irony is that it is unlikely that the assessment process will be speeded up. Assessments still have to be carried out for projects significantly harming Natura 2000 sites or high-quality rivers and the authorities also still have to ensure that other conditions are fulfilled, such as the absence of suitable alternatives. So the main change is that this ‘presumption’ stacks the cards in favour of investors and makes public consultations on exceptions unlikely to be meaningful.

Exemptions from environmental assessments

The Regulation also allows projects situated in designated renewables areas to be exempted from carrying out environmental impact assessments (EIA), as long as the plans for those areas have been subject to a strategic environmental assessment (SEA).

Again, many renewable projects anyway do not need EIAs. Such an assessment is needed only if they may cause significant environmental damage. So this provision is also helping more damaging projects to get approved more quickly.

In many Member States, the EIA process is also the only chance the public has to have its say on individual renewables projects, so by skipping the environmental assessment, the public is also denied its right to be consulted.

The regulation doesn’t explain how to guarantee compliance with the Aarhus Convention if no public consultation is carried out on the EIA. SEAs are a completely different concept, and are carried out for plans or programmes. In no way can they replace EIAs – that’s why there are two different directives, serving different purposes.

Without EIA-related public consultations, governments will have to think up some other method of public participation, so it is not clear how this will save time. We are afraid that in reality, the public will be shut out of decision-making, increasing public opposition and leading to lengthy lawsuits, rather than speeding up the process.

Some low-hanging fruits have still not been picked

While we all agree on the need to reduce needless delays in project development processes, this is not the same as weakening environmental standards. There is no excuse for pitting climate action against biodiversity. Both are crucial for our future, and they have to be tackled together.

What makes the emergency regulation’s back-door attack on nature all the more frustrating, is that many low-impact opportunities for renewables still have not been utilised. As well as measures to increase energy efficiency, rooftop and brownfield solar and heat pumps in particular are no-regrets investments that should be top priority. Suitably-sited solar and wind, and low-emissions geothermal, are also key.

The European Commission only published a Solar Strategy last year, and surprisingly, it only expects to make solar on new residential buildings mandatory by 2029. France has introduced a law requiring car parks with 80 or more spaces to be covered with solar panels within five years – but why is this not required across the EU?

Pandora’s box is already open

As civil society groups warned while the emergency regulation was being developed, not only is it harmful in its own right, but it sets an unacceptable precedent. The updated Renewable Energy Directive recently adopted by the European Parliament also contains similar provisions, as does the proposed Critical Raw Materials Act, which would allow so-called ‘strategic’ mining projects to be considered of overriding public interest.

It is much, much harder to recover safeguards than to lose them, but we cannot stand idly by. We need to stop this dismantling of environmental law using all the tools at our disposal, and our lawsuit is but one step in this long and difficult fight.

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