Blog entry

The EBRD must finally leave fossil fuels behind

In recent weeks, dozens of environmental groups in Romania, Estonia, Poland, Czechia, Georgia, Slovakia, Hungary and Latvia have sent letters to the European Bank for Reconstruction and Development (EBRD) representatives in their countries. In these letters, the NGOs demand the Bank stops direct finance to oil and gas and indirect support for coal, oil and gas and instead shifts its investments to help step up energy efficiency and expand sustainable renewable energy.

The groups underlined that such investments are needed for the reduction of these countries’ dependence on fossil fuels and that they would increase energy security and reduce CO2 emissions as well.

The EBRD is currently drafting its next Energy Sector Strategy that will determine which energy projects could be eligible for the Bank’s support.

The letters make clear that, rather than continuing to entrench dependence on volatile, polluting fossil fuels, the EBRD could play an important role in catalysing the energy transition in its 38 countries of operation.

In Romania, there is an urgent need to modernize and shift district heating systems from fossil fuels to renewables, and investments in industrial-scale heat pumps and the utilization of waste heat from cooling and industrial processes could really move the needle.

EBRD money could also support the development of solar capacities in Estonia, chiefly in communities that can use municipal buildings and facilities or former industrial sites.

There is also a great potential for investments in energy efficiency measures in Latvia in multi-apartment buildings, municipality-owned buildings, single family houses, small businesses and industry.

SlovSEFF, Slovakia’s sustainable energy financing facility developed by the EBRD itself could use an upgrade to bring it into the 21st century, by excluding support for both fossil fuels and false solutions such as biomass or waste-to-energy projects.

In Georgia, the EBRD’s long-standing, generous support for controversial hydropower projects needs to be replaced with promoting decentralised renewable systems that tap the country’s vast wind and solar potential while ensuring the protection of biodiversity.

And in Poland, EBRD financing could help step up the development of energy communities and the realisation of the geothermal potential in the country.

‘The recent energy crisis has shown us that we cannot base our energy systems on fossil fuels that increase the cost of living and lead to climate degradation,’ wrote a group of Romanian organisations.

EBRD support to fossil fuels continued to rise 2014-2020

The EBRD has long been boasting about its green credentials, all while channelling millions to the fossil fuels industry. Our analysis has shown that between 2006 and 2020 the EBRD forked out over EUR 9 billion in public money to the fossil energy industry. Worse still, of the four leading multilateral development banks, the EBRD was the only one that kept increasing its investments in fossil fuels during the warmest decade on record.

In 2021 Bankwatch analysed the EBRD’s energy-related operations for 2014-2020 and found that overall, the Bank had invested more in fossil fuels than in renewables. Of the EUR 11.8 billion lent by the EBRD for energy projects during this period, fossil fuel operations made up 43 per cent, followed by renewables (excluding large hydropower plants), which made up 26 per cent. Although the EBRD’s lending in the power sector has made strong progress towards decarbonisation in the recent years, this has been undermined by its continued support for fossil fuels and for fossil-fuel dependent utilities, both in the power sector and natural resources sector.

But there is a growing recognition that business as usual is no longer an option. In May 2021, the executive director of the International Energy Agency Fatih Birol told The Guardian that ‘if governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now – from this year.’

What happened to the EBRD’s Paris alignment pledge?

Two months later, the EBRD announced that all its operations would be in line with the Paris Agreement by end of 2022, then repeated this rhetoric ahead of this year’s UN climate summit.

And yet, even though the impacts of a rapidly warming planet are already taking a deadly toll on communities around the globe, the EBRD is apparently getting cold feet. In a recent briefing, the Bank’s managing director Harry Boyd-Carpenter, reportedly told journalists the public financier will not divest from existing oil and gas exploration and production projects and that, because of the ongoing energy crisis, the board might not support ending financing for fossil fuels just yet.

Except the EBRD is already lagging behind. The European Investment Bank (EIB), the world’s largest multilateral lender, was the first to cease all investments in fossil energy starting at the beginning of this year. And in a September interview the EIB’s President rightly rejected the suggestion that, due to the energy crisis, the Bank might reconsider this decision.

Against this backdrop, Bankwatch and over 90 civil society groups are now urging the EBRD to recognize the climate emergency the world is in and divest from fossil fuels once and for all.

In a letter sent on Monday (5 December) to the EBRD’s President and board directors, the NGOs are demanding that the Bank lives up to its climate pledges and works to exclude all fossil fuels – upstream, midstream and downstream – from its investment portfolio to facilitate the energy transition.

According to the letter, ‘The EBRD needs to signal to its countries of operation that the clean energy transition represents the best way out of current crises: climate, energy, and cost of living,’ the letter reads. ‘Structural changes in the EBRD’s countries of operation must be accelerated. With the limited resources that the Bank has at its disposal, this cannot be achieved if it is trying to balance between scaling up the energy transition and financing dirty technologies.’

As a development bank owned by governments, the EBRD’s financial capacity needs to facilitate, not hamper, the international community’s effort to address the biggest crisis humanity has ever faced. The urgency to break free from fossil fuels could not be clearer. The Bank’s new Energy Sector Strategy must not perpetuate countries’ dependence on coal, oil, and fossil gas but rather help them speed up the deployment of sustainable renewables and energy savings.

REPowerEU is a chance to prioritise renovating buildings in Latvia

For Latvia, the renovation of multi-apartment buildings is a huge challenge. More than 23,000 multi-apartment buildings need to be renovated, but only 1,600 buildings have been insulated since 2009, a renovation rate of 0.5 per cent per year. Energy consumed in the residential sector accounts for up to 30 per cent of the country’s entire energy usage, which means that this sector has great potential for reducing greenhouse gas emissions and air pollution.

The national energy and climate plan for Latvia (NECP) from 2019 aims to increase energy efficiency in at least 2,000 multi-apartment buildings by 2030 by installing non-emitting renewable energy technologies or by connecting them to district heating. The NECP will soon be revised to renew the targets, and it is clear that the target for renovated apartment buildings will be raised. The funding allocation in the Recovery and Resilience Facility (RRF) and the cohesion policy alone will not achieve this goal. Thus, the renewed targets will reinforce the fact that changes are needed in the current approach to the renovation of multi-apartment buildings.

When the existing version of the NECP was prepared, this need was already recognised; the current NECP aims to develop and start to implement a comprehensive long-term solution for increasing the energy efficiency of the housing stock by 2030, which hasn’t yet been realised. There have been improvements made in recent renovation programmes and regulations – for example, now, it is sufficient to have a majority (51 per cent) of a building’s residents vote in favour in order to start renovations, and the costs of preparing technical documentation for renovation (up to EUR 10,000) will be eligible for funding from the state. Yet this is not enough, especially given the current energy and climate crises.

On a positive note, The Riga Energy Agency is working on the creation of its own fund, which would combine financing from various investment funds at national and international levels to ensure that the residents of Riga have continuous access to financing for insulating their buildings. This could have a potentially significant role on the performance of the whole country, since almost 30 per cent of all multi-apartment buildings in Latvia are in Riga. However, Riga won’t be able to decarbonise its building stock without state support.

Low-income households excluded

To reduce the most emissions per euro invested, it makes sense to provide a minimum support intensity (grant or financial instrument) relying largely on households’ capacity to fund projects using bank loans. If the grant is kept to a minimum, provided that there are households still able to fund renovations with that level of state support, then more houses can be renovated with the same amount of money. Relying on middle-class households to participate in these schemes is also much less risky from a financial standpoint than getting involved with low-income households, which might not have secure income and might struggle to pay their energy bills on time. However, in the long term, largely excluding vulnerable households only aggravates social inequality.

If we want to be serious about social cohesion and reducing energy poverty, programmes funded by the EU must be designed to overcome social inequality. So far, EU funds for building renovation are used quite inefficiently given that 65 per cent of the funding across the EU is absorbed by high-income households that would have renovated their buildings regardless of the existing grants. (See Quentin Jossen’s 2022 report Pre-financing mechanisms for climate renovations accessible to all Flemish homeowners for CLIMACT (not available online)).

Short-sighted administrative cuts cause problems

Technical assistance from state and local governments would increase the capacity of apartment building owners and managers to properly renovate their buildings. This is supported by the Ministry of Economic’s ex-ante evaluation of the availability of finance for increasing the energy efficiency of multi-apartment buildings, which came to conclusion that the state and local governments must provide technical assistance to increase the capacity of apartment building owners and building managers. A lack of resources for Altum Financial Development Institution, the administrative body managing this money, is also causing problems. The current political paradigm is to cut administrative costs as much as possible without truly considering the long-term consequences of such a policy. High-level ministry officials have informally said that the number of staff could be approximately only 10 per cent of that of similar agencies in other Member States with a comparable population size.

This lack of capacity means that work is either not being done or is being done too slowly on measures that would speed up and make the building renovation more efficient. Latvia must include a long-term strategy and financial mechanisms that combine different sources of funding; offer long-term structure and stability for construction and material supply chain companies; and provide financial support continuously, regardless of EU planning periods and the availability of EU funds. The European Commission has also repeatedly indicated that Latvia must strengthen the capacity of this agency.

The energy crisis has put an immense strain on our economies, so it is understandable that state authorities wish to save money on administrative capacities and design uniform support programmes for various cases. But at least in terms of building renovation, the approach should be different. It should offer various financial support schemes and conditions (intensity of non-refundable financial support, pre-financing availability, length of repayment period) for different households, depending on their income level and building type. These proposed measures are supported by studies (see Jossen) differentiating social groups by their ability or inability to fund renovation projects and apply for different loan schemes, as well as their corresponding need for support from state programmes. Furthermore, the acceleration of investments in energy efficiency is one of the most concrete and immediate measures that will help citizens address energy prices.

A chance to prioritise and invest smartly

The REPowerEU plan and the option for Member States to request additional funds that will add to existing recovery and resilience plans are a chance to address some of these needs. Apart from the aforementioned challenges and the simple need for a greater amount of funding, the following measures or programs could provide the necessary boost for housing renovation in Latvia:

A programme for local governments to receive support for increasing their capacities. This could include measures such as educating and employing project and energy managers who would help communities or residents to successfully apply for funding and implement the renovation.
A programme for cities to support the district renovation approach. The precondition of this program could be that local governments must speed up the approval process within building administrations and prioritise projects that increase energy efficiency.
Introducing a ‘stick’ element by establishing penalty fees similar to a CO2 tax. This could be a long-term penalty for those who have a house of a certain type/age/technical condition and who do not decide to start renovation within a reasonable period or do not achieve specific energy efficiency results by implementing individual measures. At the same time, a specific financial support mechanism for vulnerable households needs to be in place.
Implementing a standardised approach. The state should organise tenders for the insulation of multiple apartment buildings of the same type as part of one procurement, including the mass production of insulation elements, like what is being implemented in Estonia. Latvia could also develop pilot financial mechanisms for energy efficiency measures targeting energy-poor communities following the example of the Lithuanian government.

Instead of investing in large-scale fossil gas projects in the name of energy security, the Latvian government should use REPowerEU funds to reduce energy demand and turn the EU renovation dream into a reality. This includes expanding special programmes for vulnerable households, designing programmes to help municipalities hire and train residential building project managers, implementing a standardised approach where possible and ensuring continuous funding.

Paved with good intentions: text of EU emergency regulation on renewables permitting agreed

The EU Council yesterday agreed on the text of an emergency regulation aimed at speeding up renewables deployment during the next 18 months while updates to the Renewable Energy Directive take effect. Formal approval is expected on 13 December at the next Energy Council.

Action to speed up small-scale solar and heat pumps is more than needed. But the regulation is a prime example of the phrase ‘the road to hell is paved with good intentions’.

In its good intention to speed up renewable energy deployment, the European Commission, which published the proposal two weeks ago, has proven to be easy prey for industry lobbyists trying to dismantle EU environmental legislation by the back door.

Of overriding public interest – or just riding roughshod over EU environmental law?

The most controversial part of the regulation is Article 2, which would see all renewable energy projects presumed to be of ‘overriding public interest and serving public health and safety’. For example, if it is deemed that there are no suitable alternative solutions, a hydropower project could be built, no matter how much it damages Natura 2000 sites or degrades river water quality.

This undermines existing EU environmental legislation which allows such harmful developments only after assessing projects on a case-by-case basis.

It is also likely to increase public opposition to the most controversial renewables projects with impacts on protected areas or pristine rivers, because it will increase the impression that the projects are being pushed through irrespective of local opinion.

But the most painful part is that it’s unlikely to make a major difference to the EU’s overall renewable energy capacity. Existing EU law is already flexible on this issue and allows many projects to be built despite having significant impacts, so just a few most damaging projects will benefit from this change.

Abuse of emergency powers

The emergency regulation has been adopted under Article 122 of the EU Treaty, which allows the EU to take emergency action, particularly to overcome energy supply difficulties. But the text goes far beyond economic measures with severe and disproportionate effects on key environmental laws.

And some of the measures – particularly on overriding public interest – are not only of marginal importance for the overall energy supply, but they will anyway not have an impact on time to tackle the current energy crisis.

Even if a damaging renewable project – say a hydropower plant or a wind farm in an area important for birds – is declared to be of overriding public interest now, the chances of it being built in the next year or so are almost zero.

Sidelining the European Parliament

Major changes to EU environmental law should not be carried out via emergency regulations. Existing legislation should be reviewed for its effectiveness – the so-called fitness check, and any adjustments should be proposed by the Commission, accompanied by an impact assessment, and agreed on by the European Parliament and the Council.

In fact, the last fitness check on the Habitats Directive found that it was fit for purpose, and the same goes for the Water Framework Directive. So any changes would have to be particularly well-justified. This was not the case here – as this is an emergency regulation, no impact assessment had to be carried out, and the Parliament did not have to be consulted.

To make matters more complicated, the emergency regulation includes some of the same measures currently being discussed by the European Parliament as amendments to the Renewable Energy Directive, but with different wording. Even if the Parliament later votes against such measures or votes to change them, they will anyway be in place for the next 18 months, rather undermining the Parliament’s decision-making role.

Welcome to legal chaos

The existing EU environmental laws and national laws are still in place, so the new regulation has created a parallel system for renewables that creates clashes and contradictions. This is likely to lead to more lengthy court battles, not fewer.

Among the most absurd provisions is that the new regulation allows Member States to change the permitting rules half way through for projects already undergoing permitting: ‘Member States may also apply this Regulation to ongoing permit granting processes which have not resulted in a final decision before [starting date of application of this Regulation], provided that this shortens the permit granting process and that pre-existing third party legal rights are preserved.’

In theory, this makes it more likely that the regulation would have a quicker impact, targeting projects which are already undergoing permitting rather than those which have not started yet. But in practice, it’s hard to imagine this leading to anything other than legal chaos.

Remember, when it comes to overriding public interest, we are talking about only the most controversial projects which wouldn’t be able to be built without these new changes. So on one hand, project promoters will be pushing to have their projects assessed under the new rules, no matter where in the process they are. And opponents of the projects will push to ensure their rights to consultation and to legally challenge permitting decisions are preserved. It’s not hard to see who will win in this case, but this will just unleash a new round of legal challenges.

What next?

Given that the Commission and Council have likely overstretched the definition of emergency measures in this case, it remains to be seen whether the regulation will be subject to legal challenges,

But in any case, Member States have considerable flexibility in applying these new provisions, so it will be partly up to them to minimise the amount of chaos and dissatisfaction stemming from the new rules.

And most importantly, similar provisions are currently being discussed for the longer term as amendments to the Renewable Energy Directive. So it’s crucial for the Parliament, Council and Commission to take a long, hard look at whether trashing EU environmental legislation is going to make a serious contribution to upping the EU’s renewable energy share. We can’t solve the climate crisis by destroying nature, after all.

Is Estonia doing enough to reach 100 per cent renewable electricity, and can it do even more with the help of REPowerEU?

Investments in renewable electricity production and storage

The energy and climate-related investments and reforms in Estonia’s operational programme and recovery plan include a wide range of interventions. Altogether, they make up a coherent policy mix that supports the move towards 100 per cent renewable electricity and include:

Incentivising renewable electricity production in industrial areas.
Strengthening the electricity grid to allow for the integration of new generation capacities.
Piloting renewable electricity and heat storage to balance production and consumption when the amount generated fluctuates based on the weather.
The deep renovation of buildings in regions outside the larger cities.

As the Estonian government prepares to add a new chapter to its recovery plan under REPowerEU, we in the Estonian Green Movement would like to emphasise which investments and reforms should be introduced, improved and prevented.

Biogas can offer an alternative to fossil gas

Fossil fuel phase-out will be necessary not only in the electricity sector, but also in the whole energy system, including in heating and transport. In light of the current gas crisis, it is especially important that Estonia uses EU funds to scale up the production of alternative gases such as biogas and renewables-based hydrogen.In order to assure sustainability, we propose the call for proposals contain criteria that would allow for biogas production only from residue and waste, not energy crops.

Estonia’s operational programme incentivises biogas production with demand-side investments. A EUR 12 million investment is planned for procuring biomethane buses for public transport in larger cities and building biogas fueling stations. The buses will consume around 55 gigawatt hours per year of biomethane, and it is expected that the increase in demand will spark a corresponding rise in domestic biogas production. In the future, biogas from these production facilities can also be used for electricity and heat production in hours of peak demand instead of fossil gas.

Hydrogen use has to be carefully prioritised

Estonia’s recovery plan will support the uptake of renewables-based hydrogen technologies, making EUR 50 million available for pilot projects that aim to build up whole value chains. Projects must require that hydrogen be produced from electrolysis with the use of renewable electricity, financing for transmission and storage infrastructure, and specific technologies for hydrogen consumption. Although green hydrogen is not a bad solution in principle, it should be used only in sectors where reducing emissions by other means is very difficult, such as the steel and chemicals industries, aviation, long distance shipping and heavy duty road transport. We propose the call for proposals includes criteria that prioritise the production and consumption of hydrogen only in the aforementioned sectors where better alternatives for decarbonisation, such as electrification, alternative fuels, a modal shift, do not exist or are not competitive.

If the sectors that can apply for EU funding to develop hydrogen capabilities are not limited, financial support may be used to build up hydrogen value chains in sectors that are not economically viable or environmentally optimal. An example of such a project has already emerged in Tallinn, where hydrogen will be produced from wood biomass and used as fuel for city taxis. These options are not reasonable: first, electrolysis requires a very large amount of electricity and wood biomass is a very limited resource; second, in the case of passenger cars (including taxis), direct electrification (electric vehicles) is a significantly more efficient and environmentally friendly solution than hydrogen fuel cell vehicles.

Gas demand must be reduced

Estonia must also avoid using EU funds to build additional permanent fossil gas infrastructure such as LNG terminals. Instead, Estonia should seek to reduce gas demand as much as possible and to invest in biogas and hydrogen production where the highest environmental standards for its use can be met (as indicated in the previous sections).

At the moment, gas is primarily used for heating: approximately 45,000 households in Estonia are heated with gas boilers. To reduce the dependence on imported fossil gas, buildings with gas boilers should be connected to a district heating network or their boilers replaced with heat pumps as soon as possible. The Estonian Heat Pump Association has estimated that around half of these households would need financial support to purchase a heat pump. We propose to allocate additional funds for replacing gas boilers with heat pumps or district heating.

Energy poverty has to be addressed

It is welcome that the Estonian recovery plan intends to implement differentiated financial support for renovation, with higher support rates in rural areas where property values and the residents’ capacity to invest are low. However, the inability to renovate may be correlated more with household income rather than the area of residence. At the same time, in the current energy crisis, low-income households who are unable to renovate are the ones who need renovation the most to lower their energy bills. We propose that Estonia differentiate reconstruction subsidies based on household income (or, in the case of apartment buildings, the average household income), whereby low-income households would receive higher subsidy rates.

Energy communities need a nudge

Although the EU’s new solar energy strategy foresees the creation of at least one citizen energy community in every city that has at least 10,000 inhabitants by 2025, so far the electricity production in Estonia has been heavily centralised in the hands of a few oil shale companies. No support is currently foreseen for establishing energy communities in the Estonian operational programme or recovery plan, making cooperative electricity production an untapped opportunity that could help to increase local communities’ support for renewables and improve their energy security.

However, local communities may not have enough funds to initiate the planning of large-scale solar and especially wind farms. We believe Estonia should follow the lead of other European countries that support energy cooperatives through direct grants in the early stages. The grants could be used for conducting preliminary studies, establishing the feasibility of the projects and attracting investors from the community.

Wind farms do not belong in forested areas

To increase the uptake of renewables in the energy mix, the REPowerEU plan proposes to accelerate the permitting process for wind and solar farms by largely abolishing the requirement to conduct an environmental impact assessment. This would, for instance, make it easier to clearcut forests to make way for wind and solar farms.

Although it is necessary to shorten some parts of the permitting process, it should not be done by abolishing environmental legislation and excluding the voices of affected stakeholders. Estonia should not finance the building of wind and solar farms in forested areas under REPowerEU, as the necessary clearing of forested land creates new carbon emissions, reduces carbon sequestration and damages biodiversity. Following Estonia’s Land Use, Land Use Change and Forestry (LULUCF) sector sequestration target for 2030, preference should be given to sites other than forested areas when planning wind parks. Replacement afforestation cannot outweigh decades of carbon sequestration deficit and biodiversity loss related to massively increased clearcutting.

Suggestions for Estonia’s REPowerEU chapter

Estonia is taking steps in the right direction, but there are still some measures that could and should be improved in Estonia’s recovery plan. REPowerEU offers an opportunity to do so, but there are loopholes that should be avoided. We suggest the Estonian government:

increase support for replacing gas boilers with heat pumps or district heating,
carefully prioritise support for green hydrogen production and consumption in sectors where better alternatives don’t exist,
differentiate renovation support based on household income,
introduce a subsidy for emerging energy cooperatives to conduct preliminary studies, and
avoid financing wind and solar farms in forested areas.

Sustainable district heating gives hope to the Romanian city of Motru, in a coal mining region

It’s not often that a town in a coal dependent region leaps to a fully renewable district heating system. Sometimes it is not even technically possible; other times, decision makers are just too rooted in ‘how we’ve always done things around here’ and keep old polluting heating systems on life-support because it’s the easier political decision. But the city of Motru in Romania benefits both from political will and from diverse sources of sustainable energy and can be a leading example for other municipalities in the country in their efforts to decarbonise the heating sector.

On 17 November, the study Heating from renewable and alternative energy sources for the city of Motru. Solutions and recommendations was launched in Motru, Gorj County, with the support of the mayor and representatives of the local council. The study, which presents five alternative scenarios to the current coal-based district heating system, was carried out by the Institute for Studies and Power Engineering (ISPE) at the request of Bankwatch Romania. Its goal is to assess whether the need for heating and hot water of the 5,000 homes connected to the system can be met in a sustainable way, using renewable energy sources, with minimal negative impact for residents’ health and the environment.

The coal-based district heating plant is managed by the local council and has been providing hot water and heating to Motru’s residents since 1970. Currently, it supplies 86 per cent of Motru’s population, 8 per cent of the public institutions and only 6 per cent of the private ones.

The end of an era?

In recent years, the increasing costs of CO2 allowances – up from EUR 7 per tonne of CO2 at the end of 2017 to over EUR 70 per tonne of CO2 now – and the health-damaging pollution caused by the aging power plant, have made it increasingly difficult to operate it. The wear and tear on both the thermal power plant and the hot water distribution system also results in a lot of lost heat: the system’s registered thermal energy losses in 2021 stood at an eye-watering 46.8 per cent.

At the end of 2021, the company running the plant just barely managed to get out of the insolvency process it had been mired in since 2016. To continue providing heating and hot water for the residents of Motru, the operator received at least EUR 6.5 million in financial aid from the local budget.

Because the financial problems were projected to deepen month after month, the mayor of Motru and Bankwatch Romania decided to look for sustainable, financially viable and non-polluting solutions.

A fully renewable energy scenario is possible, even in a coal dependent town

The study includes the analysis of five scenarios with different technologies for the production of thermal and/or electrical energy. These technologies range from conventional ones, which are expensive to operate and have considerable environmental impacts (such as fossil gas boilers, a municipal waste incinerator), to a biomass cogeneration plant, to photovoltaic (PV) panels on the ash deposit and heat pumps.

Out of all five scenarios, the 100 per cent renewable one stands out as the best choice for modernising the thermal power plant. It involves the use of heat pumps powered by solar PVs mounted on the heating substations and on the ash disposal sites. The electricity required to power the heat pumps when the solar PVs cannot provide it will be taken from the national grid. Along with a deep renovation of the apartment buildings stock, and the rehabilitation of the distribution system, the scenario is possible, viable from a technical-economic point of view and ‘easier to manage and safer from the point of view of continuity and safety of supply’, according to the authors of the study.

The income from the system’s operations fully covers the annual operating expenses. The EUR 23.5 million original investment is estimated to be recovered eight to nine years after the new heating system is put into operation. After the ninth year of operation, the new district heating system would begin making profits. An important part of the cost cuts is because the plant will no longer have to buy CO2 allowances. In 2022 alone, the plant operator had to buy over 45,000 CO2 allowances, with a cost burden of approximately EUR 2.5 million.

The 100 per cent renewables scenario will also significantly improve the local air quality, as current emissions from the district heating plant (sulphur dioxide, nitrous oxides and dust particles) would disappear altogether.

The fully renewable scenario ensures the district heating system will be independent from potentially unreliable, unavailable or expensive fuel sources such as gas, waste or biomass. The fully renewable solution eliminates the risk of having production outages and it gives more predictability to consumer prices.

Funds exist – Motru just has to go for them

The investment needed for a 100 per cent renewable district heating system in Motru is estimated at EUR 23.5 million, which the local administration must fundraise. Fortunately, the palette of available sources of funding is wide, and it ranges from grants to low-interest loans. The Modernisation Fund, the Just Transition Fund, Romania’s COVID-19 recovery plan, and its operational programmes all prioritise investments in renewables, especially in district heating. Motru is a just transition region and has a Territorial Just Transition Plan, so it ticks all the boxes to qualify for this funding. International financial institutions (such as the EBRD) would gladly lend to such projects as well, but when grants are available, they should be the municipality’s preferred option. We can only hope the local council sees all these benefits and opportunities and approves Motru’s way forward on its sustainable path.

The city of Motru is the first town in one of Romania’s coal regions to take such a step towards the use of renewable sources and thus towards decarbonising thermal energy production. The initiative is in line with EU policies and the commitment to increase renewable energy production and improve energy efficiency. Moreover, it will set an example for other towns in similar situations. The well-being of Motru’s citizens will depend on the modernisation of its heating sector.

Ukraine Reconstruction Platform: nothing to write home about

Since May 2022, when the European Council tasked the European Commission with designing the ‘Ukraine reconstruction platform’ to streamline international effort to rebuild Ukraine, no progress has been made. At the Ukraine Reconstruction Conference in Berlin in October 2022, Ursula von der Leyen, President of the European Commission, reiterated the same pledge without elaborating on the issues that have caused frustration among crucial shareholders in the process – civil society organisations in Ukraine and internationally.

Coordination platform: a lot of hot air

The objectives of the latest Berlin conference were formulated around how to involve different sectors and actors, how to map investment needs, how to coordinate action, and, of course, how to channel resources in a reliable and accountable way. Yet these objectives, set by one of the conference’s organisers, the European Commission, were not achieved. The discussions were primarily centred around ‘what?’, not ‘how?’, postponing answers for another occasion – maybe even until the next donor conference, which will take place in summer 2023.

On the other hand, Ukraine’s government should keep abreast of the decisions taken regarding the Reconstruction Fund as well. Ukraine’s prime minister proposed the concept of a ‘financial Ramstein’, which became a new buzzword following the meeting, as one way to do this. This proposal would most likely consist of regular decision-making meetings resembling those of the Ukraine Defense Contact Group (the ‘Ramstein’). Yet there is no clarity if Ukraine’s partners would support such a format.

Sleepwalking into ‘build back as it was before’

It is not just the process of preparing for Ukraine’s reconstruction that is worrisome, but also the fact that the European Commission and other international partners seem to be ignoring civil society’s requests for its implementation. Civil society organisations want to see green and sustainable principles at the core of the planning for Ukraine’s reconstruction. Sporadic, fast repairs and preparations for the winter are already happening as we speak. If there is no common understanding and overarching agreement that Ukraine’s post-war reconstruction must be green, we may find ourselves sleepwalking into a situation where Ukraine’s reconstruction is not in line with its Green Deal commitments.

This year, COP27 has already shown that the leadership of the developed world envisions Russia’s full-scale war on Ukraine as an impetus to accelerate decarbonisation, not an excuse to ease green transition. Ukrainian civil society organisations and their partners in other countries should have a seat at the negotiation table to prevent fossil fuels from being allowed under the RebuildUkraine reconstruction plan.

Delivering on the previous achievements

Since Ukraine has become an EU candidate country as of 23 June 2022, the country’s reconstruction will be closely linked to closing the sectoral chapters of the accession process. The European Commission’s civil servants have been working with the Ukrainian government since 2014 when the parties signed the Association Agreement: this means there is a certain institutional memory to build on in the reconstruction and accession processes.

The European Commission – more precisely, DG NEAR, a dedicated Support Group for Ukraine and the EU Representation in Ukraine – already constitutes the key coordination and institutional mechanism to monitor the EU-Ukraine Association Agreement. To avoid additional coordination burden and further slow-down of the procedures, the future Ukraine reconstruction fund secretariat should be integrated with the already established workstreams. On the Ukrainian side, aligning the reconstruction and EU candidacy workstreams will motivate Ukrainian civil servants and further the professionalisation of Ukraine’s institutions.

The question of who should lead in coordinating the donors has been discussed many times recently, and several parties would have a say in it. Still, the European Union constitutes the most stable counterpart when it comes to long-term commitment, which post-war reconstruction is. The US policy towards Ukraine may change depending on the country’s leadership, adding one more argument to keep the EU at the head of the reconstruction coordination platform.

At the implementation level, a bankable, EU-candidacy-aligned national reconstruction plan should receive the green light from the wider group of Ukrainian stakeholders and recognition from civil society. While Ukraine lays out its own plans, it is necessary to set up an inclusive overall planning process for those plans and aligning it with EU goals and priorities.

Ukrainian state bodies sometimes provide contradicting messaging, which is understandable due to the effort dedicated to defending the country against Russia’s military aggression. However, if we want to be ready to deliver changes swiftly upon Ukraine’s victory in this war, forward-looking thinking and partnership should be at the core. This is where the experience of EU agencies and civil society might be helpful, but civil society should have inclusive communication channels, equal opportunities, and a fast pace if it wants to influence decision-making. The European Code of Conduct on the Partnership Principle may provide insight into how to implement public involvement from all stakeholders’ perspectives. There is little point in waiting until next summer’s donor conference in the UK when we can have all hands on deck now, hammering out solutions that will serve Ukraine’s green, people-centred reconstruction.

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