Blog entry

Seven years after joining the EBRD’s Green Cities programme, is Yerevan’s green future going up in flames?

In August 2016, Yerevan became the first city to join the EBRD Green Cities programme, signalling its commitment to environmental sustainability. To address pressing issues related to air quality, green spaces, energy, transport and waste management, the city finalised its Green City Action Plan (GCAP) in October 2017. In recent years, EcoLur, Bankwatch’s Yerevan-based partner organisation, has been monitoring progress and the persisting issues that have yet to be addressed.

The first of the Green Cities, but not the greenest

On 3 March 2023, EcoLur hosted a roundtable titled – The Right of Citizens to Live in a Clean and Healthy Environment – to present the findings of their report on the implementation of Yerevan’s Green City Action Plan. The event brought together representatives from Yerevan Municipality, the Armenian Environment Ministry, civil society organisations and experts, who discussed the progress and gaps remaining in the implementation of Yerevan’s Green City Action Plan.

Roundtable The Right of Citizens to Live in a Clean and Healthy Environment. Photo: CEE Bankwatch Network

During her opening speech, Inga Zarafyan, President of EcoLur, highlighted the positive steps taken in Yerevan’s Green City Action Plan, particularly with regards to energy efficiency. However, she acknowledged that obstacles had accumulated over the years, hindering the implementation of other crucial components such as air quality, green zones and waste management.

‘When we analyse the shortcomings, we should understand what we can do to make Yerevan a truly green city and to ensure favourable living conditions for future generations,’ she said.

Under the Green Cities programme, the EBRD has allocated funding to Yerevan for three projects:

In 2017, the EBRD provided a USD 80 million loan for the ENA – Modernisation of Distribution Network project. The total cost of the project is USD 200 million.
In 2021, the EBRD provided a USD 60 million loan to fund the second phase of the project, the ENA Investment Program. The total value of the project is USD 148 400 000, including up to USD 20 000 000 in syndicated funds.
In 2021, the EBRD allocated EUR 20 million to Yerevan Municipality for the Yerevan Bus Project. The total cost of the project is EUR 25 million.

Prior to the GCAP, in 2015 the EBRD invested EUR 8 million in the Yerevan Solid Waste project, which was also provided with a loan from the European Investment Bank (EIB) and a grant from the EU’s Neighbourhood Investment Fund. However, the EUR 27.4 million project is currently being revised and has not yet been implemented. Lastly, the EBRD, together with the EIB and the EU, invested more than EUR 55 million in three phases of the Yerevan Metro Rehabilitation project in 2010, 2012 and 2015.

Falling short on air quality, green zones and waste management goals

According to EcoLur’s findings, air pollution in Yerevan has increased due to excess levels of dust and nitrogen dioxide. ‘Yerevan has failed to reach the mid-term targets for air pollution reduction outlined in Yerevan’s Green City Action Plan,’ said Victoria Burnazyan, EcoLur’s Vice-President and author of the report.

Fire at the Nubarashen landfill. Photo: EcoLur

When it comes to waste, the situation in Yerevan is not much better. Despite the EBRD, the EIB and the EU committing a combined EUR 27 million for the modernisation of the Nubarashen landfill in 2015, the Armenian capital still lacks a sanitary landfill that meets EU standards. In addition, no waste processing plant has been constructed. As demonstrated by the recent fire, the current landfill poses a threat to the safety, health and environment of Yerevan’s residents.

Referring to the issue of greening, Burnazyan added: ‘Yerevan has lost a significant amount of its green areas. Today, we don’t have enough open space for large-scale planting.

As forest lands are being cleared for construction, the restoration of forests in the capital is becoming increasingly difficult, if not impossible.’

The World Health Organization recommends that cities provide each person with a minimum of 9 square metres of urban green space. Unfortunately, Yerevan Municipality has failed to reach the target set in the Green City Action Plan, which aimed to allocate more than 8.5 square meters of green space per person by 2022. The city centre has only 3 square metres of green zone available per resident.

Regarding transportation, Burnazyan noted that Yerevan is importing a new line of large modern buses, which will increase the city’s transport fleet by around 45 per cent. However, there is still no unified electronic ticket system in place. Compounding matters, much of the public transport system in Yerevan remains inaccessible to people with disabilities, as well as older persons and parents with strollers, despite repeated investments by the EBRD and the EIB in Yerevan’s metro system.

During the discussion, Nune Sakanyan, President of Women in Climate and Energy, emphasised the need to incorporate a gender perspective when thinking about modernising public transportation. In this instance, it is not just about providing employment opportunities for women in the transport sector. As we have seen in Tbilisi, there is also an urgent need to assess and minimise the safety risks for vulnerable groups who use public transport, including women, minorities and people with disabilities.

Yerevan’s residents must be involved in shaping the city’s future

From Bankwatch’s experience, urban development plans and strategies are usually well-designed, but problems arise during the implementation phase. For this reason, we strongly recommend that the EBRD and other funding institutions, together with their local partners, provide more opportunities for civil society to participate in the planning and monitoring of projects, particularly during the implementation stage. To that end, residents need clear, reliable, transparent and accessible information on urban development.

‘Experience has taught us that programmes are better planned and implemented when there’s a higher level of transparency and public participation,’

said Fidanka Bacheva-McGrath, Strategic Area Leader at CEE Bankwatch Network. ‘The EBRD insists that Green City Action Plans should be owned by the local authorities. But that’s not enough. Residents must also take ownership. To green our cities successfully, the public deserves to be informed and actively take part in every stage. Only through these contributions can we improve our homes, workplaces, schools, streets and public transportation systems.’

In response to our collective call for better transparency and participation, Yerevan Municipality has committed to establishing a Green Development platform by the end of 2024, which will provide complete and comprehensive information on environmental issues. Hopefully, the platform will enable citizens and stakeholders to actively engage in Yerevan’s decision-making processes and contribute to the development of effective environmental policies and programmes in the future.

Towards energy democracy: launch of new financing tracker for energy communities in the EU

A study by CE Delft has shown that half of the EU’s population has the potential to produce its own electricity by 2050 and, as a result, significantly contribute to the EU’s overall demand. But this can only be achieved if citizens are empowered to lead the transition and have access to predictable and adequate financing instruments.

Governments across the EU must take proactive steps to support energy communities, in particular by providing them with access to finance and ensuring that energy policies are designed with citizen participation in mind. The EU’s Recovery and Resilience Facility, cohesion policy funds and Modernisation Fund offer Member States a unique opportunity to do just that. These funds can be used to support citizen-led renewable energy projects, promote energy democracy and strengthen the resilience of local communities in the face of climate change.

To ensure that these public funds are used effectively, it is important to monitor their use and impact. To that end, CEE Bankwatch Network, in partnership with REScoop.eu and Climate Action Network (CAN) Europe, have launched a new Public Financing Tracker, which shows how these funds are being used to support energy communities in 19 EU Member States. Updated on an ongoing basis, the tracker is a valuable tool for citizens and civil society organisations seeking to track progress and hold governments accountable.

CEE Bankwatch Network assessed eight central and eastern European countries – Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Poland, Romania and Slovakia – to determine the level of support among these countries for using EU public funds to develop the community energy movement. It found that the level of ambition varies widely across the region, with some countries prioritising support more than others. While some countries, such as the Czech Republic and Poland, have made tangible progress in this area throughout the programming phase, others, such as Bulgaria, Estonia and Romania, are still lagging behind with no specific measures for energy communities in place. Therefore, these Member States need to increase their efforts to support the community energy movement.

Understanding and using the Public Financing Tracker

The Public Financing Tracker is similar in structure and logic to the REScoop.eu Transposition Tracker, which assesses the progress of Member States in transposing energy community definitions contained in the EU’s Clean Energy Package directives into national legislation. Featuring an interactive interface, the Public Financing Tracker assesses the progress of Member States in supporting energy communities through the EU’s Recovery and Resilience Facility, Cohesion and Modernisation Funds. The tracker is visualised as three colour-coded maps representing different types of funds. Each Member State is assigned a colour on the map based on an assessment of whether and how it is supporting energy communities through a particular fund. This assessment is determined based on the mentions of ‘energy communities’ within the funds and a further 12 criteria covering programme design, transparency and alignment with implementation.

The tracker, which is regularly updated as new data and analysis become available, can be used by national campaigners as an advocacy tool and by policy-makers as a clear communication roadmap. The development of the tracker involved extensive background research carried out by a network of national campaigners. Additionally, data collection was carried out by REScoop.eu, CEE Bankwatch Network and CAN Europe. To ensure accuracy and relevance, interviews and bilateral feedback sessions were conducted with relevant stakeholders throughout the process.

For more information, please visit the Public Financing Tracker on the webpage of REScoop.eu.

The tracker also provides an overview of the revised national recovery and resilience plans of 23 Member States. In particular, it analyses whether and to what extent the measures foreseen facilitate a greater involvement of citizens in the energy transition. The analysis focuses on three criteria: 1) transparency and inclusiveness during the drafting process, 2) potential support for fossil fuels, and 3) favourable reforms and investments towards (collective) self-consumption and energy communities. The tracker is also presented as a separate tab on the REPowerEU chapter for each national recovery and resilience plan.

For more information, please visit the Public Financing Tracker on the webpage of REScoop.eu.

Trends and policy proposals

Our accompanying policy brief provides recommendations for designing public support programmes tailored to the needs of energy communities. EU legislation on Renewable Energy Communities (RECs) requires Member States to put in place a supportive framework to encourage and facilitate the development of RECs, including mechanisms to improve access to finance.

However, countries such as Bulgaria and Romania have not yet created specific legislation or enabling frameworks for energy communities, nor are they using EU funds to support them. In other countries, such as Germany, Ireland and the Netherlands, EU funds are not being used to support energy communities because robust national financing mechanisms already exist for this purpose.

We believe that EU Member States should allocate specific EU public funds to support energy communities with clear quantitative and time-bound targets for their growth. It is also essential that public funding programmes are co-designed in collaboration with community energy stakeholders and civil society, and that they prioritise support for energy communities that meet certain social and environmental criteria, such as the inclusion of energy-poor households, the reinvestment of revenues in the local community and the promotion of gender equality.

To avoid corporate capture and to ensure the process is rigorous and trustworthy, we recommend that the European Commission develop a best practice guide for developing clear criteria. Satisfactory calls for applications, including appropriate selection criteria, are essential to maximise the social and environmental impact of energy communities and to realise their full potential. We call on managing authorities to develop appropriate selection criteria together with stakeholders. This will help to expand the community energy movement and unlock its many benefits, including its potential to create jobs, ensure energy security and reduce greenhouse gas emissions.

Latvia’s REPowerEU chapters – progress made and necessary investments

Latvia will receive a significant boost of EUR 123.9 million as a grant under the REPowerEU chapter of its recovery plan. In addition, Latvia will have access to up to EUR 2 billion in loans for energy investments.

The Ministry of Climate and Energy, Ministry of Economics, and Ministry of Finance are currently finalising the proposed investments and coordinating the preparation of the REPowerEU chapter, which is being carried out alongside suggested amendments to the approved recovery plan. The previous timeline indicated that the consultation with the European Commissionwill commence by the end of April via the electronic portal of legislative acts; however, this has not yet begun.

Latvia does intend to informally share the draft proposal with the European Commission, and informal communication with them has already begun. However, the overall timeframe for the process remains uncertain, posing a challenge for the meaningful involvement of civil society organisations.

What are the planned investments in Latvia’s REPowerEU chapter?

Thus far, informal information has been made available about one investment area that will be proposed under the REPowerEU chapter. The minister for climate and energy has mentioned the addition of funds to an existing measure in the recovery plan (measure 1.2.1.5.i.) with the aim of modernising the electricity grid in urban areas to promote electrification and increase the capacity of transmission lines.

Although further details are not yet available, these investments are significant for Latvia’s decarbonisation efforts and can be seen as a positive step forward. However, the status of loans available under REPowerEU remains unclear, as political consensus has not yet been reached.

Investments that would make the best use of REPowerEU funds

Investments that could maximise the use of REPowerEU funds in Latvia include those targeting residential building renovation, spatial planning for sustainable wind energy, and energy community projects such as smart local energy systems and green industrial parks.

Residential building renovation

Latvia is experiencing the pressing challenge of energy inefficiency in its residential building stocks, which cannot be adequately addressed through existing strategies alone. To accelerate renovation projects and achieve meaningful results, additional measures need to be introduced under REPowerEU, with the allocation of funds focusing on reforms. These measures include:

A standardised approach to improving energy efficiency. Latvia should aim to develop a standardised approach for improving the energy efficiency of Soviet-built multi-apartment buildings of the same type. This approach, similar to what is being implemented in Estonia, would streamline the renovation process for most buildings of the same type by organising joint procurements and producing standard panels industrially.

Municipal capacity-building programmes. Latvia should propose a programme where municipalities can apply for support to increase their administrative capacity. This would include training and hiring project managers to encourage and support residents throughout the application and renovation process. Additional support could be provided to the capital, Riga, to implement a district-based approach with a dedicated team.

Administrative changes for renovation incentives. Latvia should propose to introduce administrative changes in line with the recent amendments to the Energy Efficiency Directive. This includes the introduction of a fee for owners of certain types/ages of houses who do not start renovations within a certain period. Latvia should also consider reducing the value-added tax rate for measures that improve energy efficiency.

Spatial planning for sustainable wind energy

Latvia needs detailed geographical ‘mapping’ for strategic wind energy development. This would allow a concentrated use of knowledge and institutional resources to reduce the risks of biodiversity damage, reduce economic conflicts between land users, increase public acceptance and establish sustainable energy supply systems as soon as possible.

However, the Law on the Necessary Relieved Construction Procedures of Energy Supply Facilities for the Promotion of Energy Security and Independence, passed in September last year, has been criticised by industry representatives for failing to address the real bottlenecks in the deployment of wind power. It should be recognised that a suitable solution has not yet been found and that the act may only be suitable for part of the project plans.

Amendments to the recovery plan should therefore prioritise the task of spatial planning for wind energy.

Energy community projects – smart local energy systems and green industrial parks

Interest in the creation of energy communities is not limited to civil society representatives, but also extends to economic actors and local authorities, including the Association of Latvian Municipalities. Energy communities are emerging as new market players whose level of integration into energy supply systems may vary. It is important to note that energy communities are not primarily focused on financial profit but are value-driven and involve significant investments that can stimulate economic cooperation between various stakeholders, including small and medium-sized enterprises.

Cohesion funds will facilitate electricity sharing in apartment buildings, which will be provided through funding for building renovations. The recovery plan should also support the development of other types of energy communities, such as those in urban neighbourhoods, rural villages in cooperation with local authorities, farms (not only those for biomethane production), and production and service buildings. This holistic approach can promote diverse and inclusive energy communities and contribute to the transition to a more sustainable and decentralised energy system in Latvia.

Public involvement in the preparation of the REPowerEU chapter

To date, no public consultations or discussions have taken place, with government officials citing time constraints as the reason.

Green Liberty has proactively sent letters with recommendations for investments/measures to be included and met with representatives from the Ministry of Economics in July and August last year. This was followed by a second letter requesting a consultation and reminding the ministry of the recommendation process in February. It is not known at this stage whether or to what extent these recommendations have been considered.

The social partners – including the Latvian Association of Municipalities, the Chamber of Trade and Commerce and the Confederation of Latvian Employers – have submitted their recommendations to the ministries. However, these were not considered due to REPowerEU’s limited financial resources.

An opportunity to submit comments on the proposed investments was planned to be made available at the end of April during the reconciliation/consultation procedure within the electronic portal for legislative acts; however, at the time of publication of this post, this procedure has not been initiated yet. Also, only legal entities will be able to submit their opinions, whereas individuals most likely won’t have the chance to comment on certain procedures. It is probable that, apart from sending recommendations, this will be the only opportunity for public participation. However, there is a strong possibility that this process will be rushed and formal to avoid delays in the adoption process.

Although it is understandable that the REPowerEU process is time-constrained and that funds need to be spent as quickly as possible, its design should not be at the expense of public participation. While it is vital that funds are made available quickly to support energy independence, it is even more important that these public funds are truly used for the benefit of the public and in the most strategic and thoughtful way possible.

‘EU climate bank’ keeps back door open for fossil fuel giants

The EIB’s move to adopt the framework followed criticism that it had failed to take concrete measures to restrict its financing of high-carbon companies. Research that we conducted in 2018 showed that despite eliminating direct financing for coal projects (both in the mining sector and in energy production), the EIB was still indirectly financing the coal sector. Between 2013 and 2017, the EIB provided EUR 3.9 billion to several companies that either had a high share of coal in their power and heat generation portfolios or planned to develop new coal power capacity.

The PATH Framework was supposed to revolutionise the EIB’s approach to financing corporations whose climate impacts go beyond EIB-financed projects due to their operations in high-emission sectors, such as oil and gas extraction or steel and fertiliser production. It acknowledged its support of companies that continue to engage in activities at odds with the long-term goals of the Paris Agreement, and that the Bank must therefore ‘address legitimate concerns from stakeholders around the risk of “greenwashing”’.

But the Framework had yet to be even fully implemented when the EIB suddenly announced it would relax the rules for companies involved in the most polluting activities incompatible with the Paris Agreement, such as fresh investments in new high-carbon oil production techniques, thermal coal mines or coal-fired power plants. Originally, these companies were restricted by the Framework and could only, in exceptional cases, access financing for innovative low-carbon projects involving carbon capture, utilisation and storage, renewable hydrogen, advanced biofuels, deep geothermal energy or floating offshore wind. Now they are off the hook, free to access financing for all renewable energy projects as well as electric vehicle charging stations.

The EIB’s recent loans to energy companies Polska Grupa Energetyczna (PGE, Poland) and Repsol (Spain) show that the sieve-like PATH Framework has done nothing to stop major oil, coal and gas corporates from continuing their dirty business of polluting the planet. Effectively given carte blanche, they are now able to run their environmentally- and climate-damaging operations while simultaneously accessing attractive public loans.

The case of PGE

The EIB is a long-term financier of Poland’s state-owned utility PGE. In 2022, PGE received EUR 725 million from the Bank to modernise its electricity distribution infrastructure, supplementing the three other existing EIB loans on its balance sheet.

PGE is Poland’s biggest coal-heavy energy utility, responsible for approximately 40 per cent of the country’s electricity generation. It produces energy on a vast scale. Based on 2021 figures, 89 per cent is produced from burning hard coal and brown coal (lignite) and 6 per cent from gas, but a measly 4.4 per cent of the company’s energy production comes from renewable energy sources. In 2021, PGE’s production of electricity from lignite increased by 25 per cent in comparison to 2020, while its production of electricity from hard coal also increased by 20 per cent. Over the same period, renewable electricity production remained at the same minimal level. PGE operates two open-pit mines (Bełchatów and Turów), which delivered almost 47.2 million tonnes of lignite in 2021, increasing extraction by 18 per cent in comparison to 2020. The company is also a shareholder in hard coal mining group Polska Grupa Górnicza (PGG).

PGE, which owns and operates the notorious 5.3 GW brown coal-fuelled power plant in Bełchatów (the largest in Europe), remains one of the biggest carbon dioxide emitters in Europe. In 2022, PGE started selling coal and lignite for heating purposes to external institutions and individual consumers. The use of lignite for home heating had been illegal before the latest legislative changes to address coal shortages were introduced in 2022. Despite knowing that combustion of lignite is extremely toxic, especially when used by individuals to heat their homes, PGE continues to sell it to consumers regardless.

PGE’s greenwashing strategy of reaching climate neutrality by 2050 and its anti-EU public campaign

In 2020, PGE announced a new strategy aimed at achieving climate neutrality by 2050. However, the EIB failed to ensure that the company submit its strategy under the PATH Framework criteria. Instead, it granted the company a one-year period to update its strategy. In 2020, Greenpeace filed a lawsuit against PGE – the largest ever filed in Poland – demanding it halt all fossil fuel investments. During the court proceedings, PGE refused to deliver a decarbonisation plan for its part in producing electricity from coal. Serious doubts remain as to whether the company ever plans to deliver a sound decarbonisation strategy in line with the PATH Framework, which requires the strategy to address all activities, including lignite mining and fossil fuel-based electricity production. For now, PGE’s current preference is to rely on the indulgence of its lender.

Shortly after announcing its climate neutrality strategy, the company added 2.3 gigawatts (GW) in brand new coal capacity to be used for at least the next 30 to 40 years: 900 megawatts (MW) each for two new hard-coal-fired units in Opole; and approximately 500 MW for a new lignite-powered unit in Turów. And if the pattern of the company’s capital expenditure is anything to go by, PGE is only going to follow one path – in the last six years, the PGE group has spent a meagre 3.5 per cent of its investments on renewable energy sources (4 per cent in 2021).

In early 2022, PGE along with other Polish energy utilities launched a controversial anti-EU ‘light bulb campaign’. Huge billboards displayed across the country pushed the misleading narrative that EU climate policies equate to expensive energy costs and high prices. The campaign cost PLN 12 million. The Polish Advertising Council stated that the campaign breached standards of reliable advertising by falsely claiming 60 per cent of energy production costs were directly caused by the EU’s climate policy. The Council concluded that the campaign’s real aim was to reduce the responsibility of the energy companies for the increase in energy prices.

In its response to the campaign, the European Commission rejected the idea that EU climate policy is responsible for 60 per cent of consumer electricity bills, claiming it to be inaccurate.

The case of Repsol

Repsol, a fossil energy multinational and Spain’s top greenhouse gas emitter, is also benefiting from EIB financial support. In December 2022, the Bank signed a EUR 120 million loan for Repsol’s first biofuels plant, enabled by a newly introduced ‘exception’ under the PATH Framework.

Located in Cartagena, Spain, the plant is intended to produce fuels for transport ‘from different types of waste primarily from the agri-food industry, such as used cooking oils’, according to the EIB. But these so-called innovative fuels are also deeply problematic. One of the plant’s products, hydrotreated vegetable oil (HVO), is often synthesised from palm oil, the exploitation of which has led to extensive deforestation and human rights violations. In 2016, the European Commission designated palm-oil-based biofuels as a high-risk indirect land use change (ILUC) biofuel and, in 2019, decided to initiate a complete phase-out given its catastrophic environmental and social implications. Producing HVO from palm oil can hardly be considered sustainable by any yardstick, let alone a legitimate use of EU public money.

In justifying its loan for the project, the EIB claims it is ‘supporting Repsol’s decarbonisation strategy’. But even if this project were ever to be deemed environmentally sound, it’s only a drop in the dirty bucket that is Repsol’s fossil fuel business. Even the EIB has acknowledged that Repsol, which is also engaged in shale and oil production, pursues ‘activities that are considered incompatible with the Paris Agreement in the PATH framework’. Yet the Bank has sought to legitimise its support for Repsol by focusing on the ‘innovative nature’ of the project while ignoring the multinational’s core business.

Apart from being a repeat climate offender, Repsol also has a dismal human rights and environmental track record. In January 2022, a Repsol-owned refinery was behind a major oil spill on the coast of Peru. Nearly 12,000 barrels of oil contaminated the ocean and coasts, dealing a devastating blow to approximately 3,000 families, many of whom depend on fishing and tourism for their livelihoods. In their report on the spill, UN agencies UNEP and OCHA state: ‘Vulnerable communities who rely on the sea are facing uncertain futures amid beach closure, safety concerns and limited options.’

In late February, activists from the environmental group Ecologistas en Acción staged a protest in Madrid in solidarity with the Peruvian fisherfolk affected, demanding Repsol be held accountable for the vast damage wrought by the spill.

As a result of its role in the environmental catastrophe, Repsol has thus far been issued with over EUR 16 million in fines by the Peruvian authorities. With local ecosystems not expected to recover for many years, farmers who depend on them for their livelihoods are now demanding just reparation.

Quite apart from the environmental and humanitarian consequences of Repsol’s actions, it is morally unacceptable that EU public funds should be used to support a major, discredited energy multinational that raked in a net income of EUR 3.2 billion within the first nine months of 2022 alone.

It is ludicrous for the self-styled ‘EU climate bank’ to be channelling public money into fossil fuel companies such as PGE and Repsol. By financing their so-called ‘sustainable energy projects’, the EIB has not only turned a blind eye to the core business of companies that have made fortunes on the back of a historic energy crisis, but has also made itself complicit in their brazen attempts at greenwashing.

Transalpine oil pipeline expansion: REPowerEU funds must not swell the coffers of energy crisis profiteers

Scope of TAL+ project remains unclear

Established in 1967, the TAL Group, which operates the existing pipeline, is made up of three oil companies: Austria’s Transalpine Ölleitung in Österreich GesmbH, Germany’s Deutsche Transalpine Ölleitung GmbH and Italy’s Società Italiana per l’Oleodotto Transalpino SpA (SIOT).

The TAL pipeline serves 100 per cent of Bavaria’s needs, 90 per cent of Austria’s and 50 per cent of the Czech Republic’s. In the Czech Republic, the pipeline is connected to refineries in Kralupy and Litvínov through the Ingolstadt–Kralupy–Litvínov (IKL) oil pipeline.

Since the beginning of Russia’s full-scale war in Ukraine, there have been discussions about increasing TAL’s supply to help the Czech Republic and other countries diversify from dependence on Russian oil. The Czech government plans to use a REPowerEU loan to finance the expansion of the pipeline through the TAL+ project, which aims to:

increase TAL capacity by an additional 4 million tonnes of oil per year to replace Russian oil supplying the Czech market (in 2021, the Czech Republic imported about 6.8 million tonnes in total, about half via this route);
increase the oil storage capacity of tank farms along the IKL pipeline, which connects TAL with the refineries in Kralupy and Litvinov; and
modify the Druzhba pipeline to replace Russian oil with supplies from other sources and to eventually transport fossil gas or non-fossil fuels (despite the fact that the technical and economic feasibility of this plan remains unproven).

The Italian government is also looking to develop its fossil energy generation capacity as part of the TAL+ project, possibly also courtesy of REPowerEU funds. However, due to an overall lack of transparency, it is unclear whether the Italian arm of the project will receive any form of public subsidy.

Plans for the Italian section of the pipeline, which flows through the Friuli Venezia Giulia region, involve the construction of four fossil gas combined heat and power (CHP) plants at pipeline pumping stations – each expected to produce 7.7 megawatts (MW) of electricity and 7.2 MW of heat – along with investments in Trieste’s port and storage facilities.

While the generated electricity will be used for the pumping stations along the pipeline, the generated heat is planned to raise the temperature of crude oil by 1 °C to increase flow speed, delivering supposed energy savings and environmental benefits. The investment is reported to cost EUR 58 million.

Feeding the fat cats

By including this project in the REPowerEU chapter of its recovery plan, the Czech government will be using EU money to subsidise even further the already highly profitable oil industry. In particular, this will benefit the TAL Group, whose shareholders include some of the largest oil companies in the world, such as OMV, Shell, Rosneft, ENI, C-BLUE BV (Gunvor), ExxonMobil, Mero, Phillips 66/Jet Tankstellen and Total.

Perpetuating fossil fuel lock-in

The increased capacity planned for the Czech Republic aims to replace the oil currently imported from Russia, which represents 50 per cent of the total oil supply. But simply changing one oil source for another will do nothing but prolong the ongoing climate crisis, which has already severely impacted the country’s environment, economy and society. This course is also incompatible with the EU’s goal of reducing greenhouse gas emissions and achieving climate neutrality by 2050.

The Czech Republic needs to substantially step up efforts to decrease oil demand, not to satisfy it. An analysis by Charles University in Prague, which, among other things, examined projected fuel consumption by the transport sector in the Czech Republic between 2015 and 2050, found that there is unlikely to be almost any decrease in the need for fossil fuels by 2025 and only a small decrease by 2030. Instead of supporting a project that effectively leads to carbon lock-in, the Czech Republic should use REPowerEU money to finance measures that decarbonise the transport sector.

Likewise, the Italian arm of the project substantially undermines Friuli Venezia Giulia’s regional decarbonisation strategy to 2045. In fact, the additional greenhouse gas emissions from the four new cogeneration plants would be equivalent to the emissions of about 40,000 households of four or more people per year.

Inadequate environmental assessment

On 22 September 2022, the environmental organisation Legambiente sent a letter to the former Italian Minister for Ecological Transition requesting the revocation of authorisations granted to three of four ‘high-efficiency cogeneration projects’ submitted by SIOT to the regional administration in Friuli Venezia Giulia.

The TAL+ project and connected investments have been split into individual units for the purpose of environmental assessment. However, this prevents a comprehensive evaluation of the project’s cumulative impacts on the environment, with no consideration given to costs, benefits or reasonable alternatives.

Lack of consultation results in public opposition

Local concerns over the expected environmental and climate impacts of the project and the absence of any public consultation with affected municipalities have led to protests and the submission of petitions to the regional administrative court in Friuli Venezia Giulia and to the Italian government. The court recently rejected an appeal filed by the municipality of Cavazzo Carnico requesting the annulment of the authorisation for the construction and operation of the cogeneration plants. Despite this, Legambiente, supported by local communities and activists, is set to file a new appeal on different grounds.

On 24 March 2023, the current Italian Minister for the Environment and Energy Security, Gilberto Pichetto Fratin, issued a statement, claiming SIOT’s plans are ‘consistent with energy-saving objectives and with no detrimental effects from an environmental point of view, being also necessary and strategic in view of the critical situation caused by the Russia–Ukraine conflict’.

Recovery funds must not be used to undermine climate action

Overall, there is a high risk that the project will undermine the climate commitments of both the Czech Republic and Italy. Using public money to back a private consortium made up of some of the biggest oil companies in Europe is not acceptable. Recovery and resilience funds must not be allocated for this project.

The Czech recovery plan lacks a concrete strategy for the decarbonisation of the transport sector. This project will not contribute to reducing oil consumption but do the opposite. EU money must not be spent on projects that go against Green Deal objectives.

The European Commission, which is responsible for assessing whether the initiatives proposed under the Czech and Italian recovery and resilience plans achieve the objectives of green transition, must not allow recovery funds to be used for these projects.

Nuclear ambitions risk hindering Estonia’s energy transition

Until now, nuclear energy has been a remote prospect for Estonian citizens. For over a century, the small Baltic country, with an average electricity demand of about 1,000 megawatts, has heavily relied on oil shale – a carbon-intensive fossil fuel – for its electricity production. Fortunately, more stringent environmental regulations and recent climate policies mean Estonia is now strictly obliged to phase out oil shale and execute a just transition for workers in mining regions.

However, the recent surge of panic over security of supply has opened the door to an increasingly blatant nuclear lobby, whose actions pay no heed to a recent analysis – conducted by the consultancy firm Trinomics in cooperation with the Tallinn branch of the Stockholm Environmental Institute (SEI) – which found that nuclear energy is the least favourable path Estonia could take towards climate neutrality.

More worryingly, Estonia’s Ministry of Economic Affairs and Communications, which commissioned the analysis, has turned a blind eye and seems determined to welcome nuclear investment that would nedlessly complicate its energy system. As a result, Estonia risks missing out on a golden opportunity to ensure a resilient, fully renewable and decentralised energy infrastructure.

No justification for nuclear in the Estonian context

As debates around green transition accelerate, recent studies demonstrate that Estonia has great potential to ramp up the pace by unlocking its massively underutilised wind and solar potential.

And according to the Trinomics/SEI analysis, the use of as-yet-unproven small modular reactors (SMRs) in driving the transition to a climate-neutral electricity system in Estonia is the least recommended of eight different scenarios.

The analysis highlights multiple limitations and threats related to nuclear pathways, including regulation issues, technological delays and citizen opposition to nuclear development. The preliminary evidence warns of:

(1) overreliance on a technology that is still underdeveloped with no history of use in Estonia;

(2) cost overruns (nuclear energy is far more expensive than sustainable alternatives like wind and solar for which Estonia has huge untapped potential);

(3) hold-ups with the deployment of SMRs (climate neutrality could be achieved faster on its current trajectory);

(4) safety risks; and

(5) the unresolved issue of permanent waste disposal.

As a non-renewable source, nuclear power also relies on imports of uranium and other rare materials, often from non-democratic countries, thus supporting exploitation and exacerbating existing inequalities.

Based on the assessment of Trinomics/SEI, a nuclear pathway is ‘not recommended’ and considered the ‘riskiest scenario’. The most recommended scenario is a combination of renewable energy sources (RES) and storage, followed by scenarios involving ‘all technologies’ (excluding nuclear) and ‘renewable gas’. We should also recall that Estonia recently set an ambitious target to cover its annual electricity consumption with 100 per cent renewable electricity from 2030 onwards, and that several reforms are currently being designed to accelerate procedures that would facilitate renewable energy. In this context, a non-nuclear pathway can only be viewed as the most logical, efficient and cost-effective way forward.

But should Estonia proceed with a costly, time-consuming and politically vulnerable SMR project, the ambition of its energy transition planning is likely to be negatively impacted and, in the worst case, severely delayed.

Ministry ignores its own report

In 2024, Estonia’s parliament will decide on whether to pursue a nuclear pathway once the findings of a dedicated working group are assessed. However, the Ministry for Economic Affairs and Communications appears to be already designing its energy policy with a bias towards nuclear energy.

Bafflingly, the ‘consultant assessment’ in the Trinomics/SEI analysis is accompanied by an ‘alternative ranking criteria’ that rates nuclear as the most preferred pathway (pages 10 and 28). The need for this alternative ranking is briefly justified on the grounds that selection of the pathway is ultimately a ‘political’ choice (page 9). Of course, this completely contradicts the very concept of an independent assessment and fails to explain why these alternative criteria were included.

The current draft of the Estonian Energy Sector Development Plan until 2035, which has so far only been shared with internal working groups, states that if fossil fuels are to be completely phased out from the energy system, the only alternative for meeting baseload demand is a nuclear power plant – a false assumption that contradicts a host of scientific studies on the potential of renewable energy sources.

Even more concerningly, the draft of the plan already provides for the establishment of a nuclear energy regulatory body, another alarming example of how preparations are being rushed ahead of informed decisions. This could create a self-fulfilling prophecy: once the conditions are created for nuclear energy development, it has a higher chance of being backed by parliament.

Who wins in the nuclear rush?

The race to act before crucial decisions are made raises the question of who will benefit. The answer is clear – Fermi Energia, a controversial nuclear company established in 2019. Currently, Fermi Energia is raising international funds to experiment with novel SMR technologies in Estonia. The company claims that by 2031, its power plant will be fully operational, even though the most optimistic estimate from the government’s side is 2035.

The state recently granted Fermi Energia EUR 180 000 to conduct geological studies in a location of its choosing (Letipea) to investigate the feasibility of constructing a nuclear power station. Residents of Letipea have already collectively made it very clear that they do not want a nuclear power plant in or near their village. In assessing the suitability of the site, the company has completely avoided local consultation and shown no desire to publicly reveal the risks of such an investment. Instead of honestly discussing the social costs and risk scenarios with the local community, the company’s external communication has so far been limited to an evidence-free promise of unlimited cheap energy.

Counteraction must not be delayed

Environmental organisations want the state’s decision on the future of the energy system to be based on evidence, not on the SMR nuclear lobby’s unfounded claims. Instead of rashly signing up for nuclear dependence, Estonia must turn the tide. Until now, the country has taken remarkable steps to break away from fossil fuels and ensure its energy independence. The pursuit of nuclear power must not thwart the goal of an energy system that is fully renewable, resilient and sustainable.

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