Blog entry

EIB Global: new branding, old problems

EIB Global is supposed to play a pivotal role in the EU’s investments around the world, particularly through the new European Fund for Sustainable Development+. However, the EIB is not a development bank: its policies and standards are not strong enough to ensure international development is done in a responsible way. Instead, the changes promised around the creation of EIB Global seem technical and cosmetic. This lost cause may not have any impact on the bankers doing business as usual, but it will definitely be a missed opportunity for the people impacted by the EIB’s weak policies and due diligence.

Lack of transparency, insufficient human rights standards and a flawed complaints mechanism

Serious problems with the EIB-funded projects include their lack of development orientation and transparency; failures in due diligence; and major shortcomings in environmental, social and human rights standards. Bankwatch has been documenting such shortcomings for years.

Since 2015, the EIB has not required any promoter to carry out standalone human rights impact assessments.

Meanwhile, the EIB keeps providing support to projects associated with human rights violations, as proven by the more than 500 complaints submitted to the Bank regarding human rights abuses linked to a single project in Kenya.

Impacted communities from all around the world have lodged numerous cases at the EIB Complaints Mechanism, testifying on the serious impacts the Bank’s operations have had on their lives and livelihoods. In 2020 and 2021, the majority of contested cases came from complainants outside the EU.

Furthermore, the independence and legitimacy of the EIB Complaints Mechanism have been jeopardised – for instance, during the policy review process in 2018. The 2018 Complaints Mechanism Policy left room for the EIB staff and services — those whose decisions may well be the cause of adverse impacts — to interfere with the mechanism’s decisions. This further weakens the mechanism’s capacity to operate independently for those in urgent need of redress. The harmful impacts of projects from Nepal to Kenya and Georgia to Bosnia and Herzegovina were reported in global media, but nothing so far has made the Bank change its approach.

On numerous occasions, Bankwatch offered detailed recommendations for fundamental reforms at the EIB so that the Bank could better support partner countries’ development priorities, for instance on the protection and promotion of human rights. The significant gap between the EIB’s standards and their implementation on the ground has been analysed in the report Can the EIB become the EU development bank?. These calls echoed demands from the European Council, Commission and Parliament to strengthen the development orientation and effectiveness of the EIB.

The EIB has been refusing to commit to its Environmental and Social Policy and establish human rights due diligence during the 2020 and 2021 review of its Environmental and Social Sustainability Framework (ESSF). It has also been ignoring civil society’s requests to hold a constructive dialogue on the Bank’s methodologies and procedures aimed at assessing human rights violations risks and impacts. This stubbornness has become the shameful hallmark of the EU house bank.

Rebranding, a good way to distract the EU institutions and civil society

The idea of creating EIB Global addressed the EU Council’s attempts to develop an optimal scheme for the European Financial Architecture for Development. Back in 2019, the Council established a Wise Persons Group to analyse the situation and propose suitable options. This group’s report underlined the need to establish a singular institution that could become the natural centre for EU development finance. The report presented three options for this centre: the EIB, the European Bank for Reconstruction and Development, or a newly born EU bank. The European Council chose a fourth option, the ‘Status Quo Plus’, which was an enhancement of the current institutional setup.

This discussion was a push for the EIB to fill the gap in the EU financial architecture for development and resulted in the establishment of EIB Global. On the occasion of its launch, the EIB underlined that: ‘EIB Global is not just a new management structure. It represents a new direction to increase the impact of limited development finance.’ Yet surprisingly,

when trying to build its image as a financial institution well-equipped to support the EU’s development policies, the Bank almost totally ignored the need to secure proper safeguards and due diligence.

The EIB had regional offices outside the EU before creating EIB Global. Since its launch, the Bank has added regional hubs, starting with one in Kenya. On closer look though, the East Africa Hub or Nairobi Hub, as the EIB called it in the press materials promoting its opening, seems to be just another EIB regional office in Kenya, similar to the Nairobi-based EIB East Africa regional headquarters opened in 2019.

There’s a lot of promotion around EIB Global, but in practice the changes within the structure of the Bank are cosmetic. An Advisory Board or Group has been established, but it is hard to obtain information about its structure, remit, performance or even its official designation.

It seems that technically, EIB Global is simply another directorate with an additional advisory body, the composition of which the Bank has decided to keep secret.

Civil society demands key reforms of the EIB

In response to the launch of EIB Global, 23 civil society organisations from all around the world formulated key demands to guide the Bank’s future operations. Here are the most important ones:

EIB Global should demonstrate clear development additionality. Focusing on a pro-poor sustainable development agenda should be a priority rather than acting as a tool of economic competitiveness and diplomacy supporting geopolitical interests of the EU. EIB Global should modify its policies and governance structure to strengthen participation and ensure affected communities in recipient countries establish their own development strategies and priorities.

EIB Global must ensure inclusive and meaningful consultation and engagement with communities impacted by its projects prior to their approval and throughout project implementation.

EIB Global, especially when operating in fragile contexts, must ensure that local communities have knowledge about and access to effective, independent and safe complaints mechanisms (an independent project-level grievance mechanism, a reinforced EIB Complaints Mechanism and access to the European Ombudsman), including the right to effective redress. The EIB Complaints Mechanism should be reformed and its effectiveness and safe access should be reinforced so that it becomes a more meaningful and less risky avenue for impacted rights-holders.

Increased transparency is needed at the new EIB Global branch, especially for the people affected by EIB-financed projects, as well as for societies globally who should be given the information to understand the costs and benefits of EIB operations that are relevant to them. In addition to transparency at the project level, EIB Global’s decision-making structure – including its Advisory Board – should operate in full transparency via disclosing its composition, agendas and minutes.

Following the adoption of the new Environmental and Social Sustainability Framework, the EIB’s environmental and social due diligence practices should be reviewed and strengthened. Currently the quality of the Bank’s due diligence and monitoring remains insufficient. The EIB should not support any project which does not fully comply with all relevant environmental and social standards.

The EIB does not have a dedicated system of human rights due diligence. The existing social safeguards neither sufficiently prevent intimidation, threats and forced evictions, nor protect the existence and wellbeing of the most vulnerable project stakeholders. For this reason, the EIB must develop a Human Rights Strategy and adequate, publicly accessible procedures for human rights risks and impact assessments at project level.

Kosovo’s new law on pollution control risks muddying the waters

It was only a year ago, in July 2021, that Kosovo finally adopted an Administrative Instruction that brought its laws into line with pollution control legislation under the Energy Community Treaty. But the country now aims to move ahead and go beyond the legal minimum required by the Treaty, bringing its legislation into line with newer EU standards.

So far, so good. Even if Kosovo has not yet brought its existing coal plants into line with the Energy Community rules, it is vitally important to make sure that this happens as soon as possible and that any new industrial facilities are built in line with the latest EU standards.

The new rules are set by a draft Law on Integrated Pollution Prevention and Control, which is currently under scrutiny by the Parliament.

However, a new analysis shows that serious changes are needed if the new legislation is to avoid causing confusion and opening loopholes.

Three different air pollution standards – which is which?

The first problem is that the draft Law, if adopted as it is now, will result in massive uncertainty as to which pollution standards power plants and other industrial facilities have to comply with.

The Administrative Instruction, which is a piece of implementing legislation for the 2010 Law on Air Protection from Pollution, already regulates emission limit values, deadlines for compliance with these values, the process and deadlines for updating permits, and definitions of ‘existing plant’ and ‘new plant’. Now the draft law on integrated prevention pollution and control would regulate them again, but in a different way. In fact, the 2010 law is also in the process of being updated, but its implementing legislation would remain in force until replaced.

But the new draft Law on Integrated Pollution Prevention and Control is written as if this Administrative Instruction does not exist, so there are no provisions for a transition from one to the other.

Instead, it introduces two additional new sets of emissions limit values. One set relates to those defined in the reference document on Best Available Techniques (BAT), and one relates to minimum emission limit values that are to be adhered to in cases where it is established that applying the BAT would be prohibitively costly.

Are the new standards really stricter? Nobody knows.

Another problem is that so far the new emission limit values have not been published, so it is unclear whether they are stricter than the existing ones or not.

The emission limit values which ensure that under normal operating conditions, emissions do not exceed the levels related to BAT are to be defined by the ministry responsible for the environment. This means that the emission limits related to BAT may end up being different and less stringent than those in the EU.

And the limit values for cases when BAT is deemed prohibitively costly are supposed to be defined in an annex to the draft law. However, they have not been published, so they may be even less strict than the current standards in the Administrative Instruction.

By analogy with the corresponding EU legislation, they should actually be the same as the ones in the Administrative Instruction as they should correspond with emissions limit values from Annex V parts 1 and 2 of the Industrial Emissions Directive, so it is not clear what the difference will be.

EU Best Available Techniques should be used

As well as the risk of Kosovo’s BAT-associated emission limit values being more lax than those of the EU, it is also not clear why the ministry needs to be burdened with the extremely time-consuming exercise of defining them when the EU ones are available.

Experience from Western Balkan countries which have stipulated that a ministry would define the BAT-associated emission limit values shows that the process is always heavily delayed, if it is done at all. Unless the country stipulates that it will use EU BAT reference documents in the meantime, such delays mean that permitting processes rely on older and less strict standards.

No access to justice

There are other issues with the draft law as well. For example, its definition of ‘new’ and ‘existing’ plant is different from that in the Administrative Instruction, and it is not spelt out how this relates to permitting of the plants. This will render it unclear which emission limit values apply for plants of different ages and especially those which are included in the National Emission Reduction Plan (NERP) as they are anyway subject to derogations from the usual emission limits.

But one of the most serious is the failure to include access to justice provisions from the Industrial Emissions Directive. This means that if the ministry makes an error in permitting, it will be difficult or perhaps impossible for the public to challenge it, thus severely undermining the integrity of the law.

How to move forward

The issues above require more than amendments to the draft law as it needs to be comprehensively revised in order to ensure a smooth transition from the Administrative Instruction and coherence with the draft law on air protection from pollution – or alternatively these two laws may be merged. Among other things, the changes need to include:

Clarifying the relationship between the two laws and the Administrative Act, as well as any necessary transition periods
Clarifying how permit revision and setting emission limit values will work for existing plants and new plants
Publishing the annex with the emission limit values for cases where BAT is deemed prohibitively expensive
Stipulating that the EU’s BAT reference documents are the ones to be used in permitting
Including the access to justice provisions from the Industrial Emissions Directive.

This publication was produced with the financial support of the European Union. Its contents are the sole responsibility of CEE Bankwatch and do not necessarily reflect the views of the European Union.

The real cost of hydropower plants in Central Asia and the Caucasus

A new report by the Business and Human Rights Resource Centre once again confirms the concerns of civil society organisations and local communities from Central Asia and the Caucasus about the destructive environmental and social impacts and severe human rights violations caused by unsustainable hydropower development.

The research

studied 32 hydropower plants linked with 265 alleged human rights issues in Armenia, Georgia, Kyrgyzstan and Tajikistan.

Seventeen projects – more than half of the studied plants – have been funded by international financial institutions. Hydropower has received support from these institutions in the past decade because it has been promoted as an alternative to fossil fuels. Yet this support has been in the absence of human rights standards and environmental safeguards. The report demonstrates that the international financial institutions have disregarded the UN Special Rapporteurs’ recommendations and the instruments underlined in the United Nations’ Guiding Principles on Business and Human Rights.

The report draws attention to the negative effects hydropower projects have had on communities, including land and water grabbing, declining water quality and quantity in rivers, disruptions to ecosystems, biodiversity loss and deforestation. All of this leads to socio-economic harm for communities and creates food security concerns, as communities lose access to land, and face difficulties accessing water.

Due diligence as a ‘check box’ exercise

Most of the international financial institutions mentioned in the report (the Asian Development Bank, European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), Germany’s KfW and others) lack solid environmental safeguards and effective human rights and environmental due diligence for every project. As a result, projects fail to protect human rights and the environment, as well as to provide adequate remedy.

In the case of the Nenskra hydropower plant, the UN Working Group on Business and Human Rights raised concerns in April 2019 that ‘despite the additional measures taken to comply with the standards of international financial institutions… there was a perception that consultations with communities were conducted as a check box exercise’. These concerns were later confirmed.

After two years of investigation, both the EIB’s and EBRD’s independent recourse mechanisms confirmed that the Nenskra dam in Georgia, worth EUR 1 billion, was non-compliant with banks’ requirements in the following areas of human rights and environmental protection:

indigenous people’s rights,
the protection of cultural heritage,
gender issues,
assessment and management of environmental and social impacts,
information disclosure, and
engagement of local communities and other stakeholders.

The lack of stakeholder engagement, including with scientists and affected communities, often leads to defamation campaigns against human rights and environmental defenders and professionals, who provide their opinions about the risks of projects.

Some governments (Tajikistan, Georgia) even use reprisals, including police forces, against the affected communities and activists.

Environmental damage and human rights violations: not enough to discourage investments in harmful hydropower?

In light of this, the news that the European Commission has asked the EIB to become ‘the largest investor’ in the Rogun hydropower project in Tajikistan raises numerous concerns.

Construction of the USD 8 billion Rogun hydropower plant started in 2016. The project has been largely funded by Tajik government bonds and private loans coming from ‘a campaign of forced share-buying [in the Rogun project] among citizens in 2009-2010′. According to a study on the Rogun dam, ‘the majority of state employees, i.e. teachers, nurses, but also students were pressured to buy significant shares, sometimes to a value greater than an annual salary… The scheme caused such widespread debt among the population, that the World Bank warned it was significantly damaging the economy.’

The Rogun construction involved an involuntary resettlement of 42,000 people.

For many resettled families, the standard of living deteriorated as a result of land loss, lack of employment and poor access to essential services in new settlements. Local experts are also concerned about the ‘illegal trafficking’ of materials intended for the project and the alleged misappropriation of funds. According to the report by Business and Human Rights Centre, a crack in the dam was reported in 2019, which local experts attributed to the use of low-quality cement, steel and other building materials.

For these reasons, it is surprising to learn that an unnamed EU official “said a key reason for the EU to become a top investor in the hydropower dam was to make Tajikistan and its neighbours independent from Russian energy.’

The EU has vast tools and funds to support sustainable renewables investments in Tajikistan and all over Central Asia, rather than rush its investments into an environmentally unsustainable project that exacerbates human rights violations. Will the argument of gaining independence from Russian energy now excuse human rights violations and damage to the environment?

Narrow road ahead: the energy crisis in Kosovo in the context of Russia’s invasion of Ukraine

An overview of Kosovo’s energy sector

As Kosovo has entered its seventh month since the start of the energy crisis, there has been a lot of debate about what future pathways the young economy should follow. The country, home to 1.8 million people, is at a crossroads between a modernised and diverse energy sector and a highly centralised one. As the government drafts its energy strategy for the next decade, Kosovo is left with few possibilities in large part because of the effects of the energy crisis on its economy.

The energy sector of the Republic of Kosovo is composed of electricity generation, electricity transmission, electricity distribution and a few district heating plants) (ERO, 2021). Generation is mainly based on lignite power plants (Kosova A and Kosova B) and, to a lesser extent, the Ujmani hydropower plant, all of which are owned by the government of the Republic of Kosovo. In contrast, other hydropower plants and other renewables are privately owned (Ministry of Economy, 2017).

One of the wealthiest countries in the world in terms of lignite reserves, Kosovo’s power system is mainly designed to produce basic electricity based on lignite as a raw material (Ministry of Economy, 2017). Hence, due to the inflexibility of its power generation, Kosovo cannot achieve maximum load coverage, which usually reaches its peak during the winter months, and does not have balancing capacities (battery or pumped hydropower storage capacities) (Energy Regulatory Office, 2020).

Kosovo has installed generation capacities of 1,431 megawatts (MW), including renewable generation capacities. However, the operational capacity is considered to be 1,099 MW, of which lignite thermal power plants account for about 87.36 per cent, and the rest consists of the Ujmani hydropower plant with 2.91 per cent, the Kitka wind power plant with 2.95 per cent and other renewables (hydropower plants, solar panels and wind power plants) with 6.78 per cent (ERO, 2021).

Most of the time, these capacities would be sufficient to cover demand and export. Still, due to power plant ageing and insufficient flexibility, imports and exports are required to balance the system (ERO, 2021). Lignite also remains an environmental issue due to greenhouse gas emissions and other pollutants.

Energy crisis in Kosovo

In October 2021, the increase in the price of gas from Russia affected the energy prices in the European market. Due to the lack of new capacities being developed within the country, Kosovo’s consumption patterns, and the collapse of internal generating capacities, Kosovo faced an energy shortage as never before. During December, both power plants, Kosovo A and B, malfunctioned and were offline for some time: Kosovo Electricity Corporation returned Kosovo A and a unit of Kosovo B into operation within a day; however, Kosovo B2 was back in operation only on 23 January 2022 (Bota Sot, 2022). Due to the lack of internal capacities and the astronomical prices in the European energy market, Kosovo had to review its electricity prices.

In January 2022, Kosovo’s Energy Regulatory Office was forced to increase the price for households and businesses. The prices of the end consumption almost doubled from 6.5 cents per kilowatt hour (kWh) to 12.5 cents/kWh after subsidies for consumers who spent more than 800 kilowatts (kW). The government decided to subsidise the energy sector with a total of EUR 120 million to cover a portion of the price increase. The subsidies were given directly to the consumers through a deduction on their final electricity bill, making the increase unnoticeable for businesses and households who spent less than 800 kW per month (Energy Regulatory Office, 2022).

A timeline of the Kosovo energy crisis

7 July 2021: the Energy Efficiency Agency called for energy efficiency measures to soften the possible
upcoming energy crisis.
2 November 2021: the Ministry of Economy created a task force to analyse the possible scenarios
13-16 December 2021: the three remaining units of Kosovo A malfunctioned and were fixed within a day
15 December 2021: the two blocks of Kosovo B malfunctioned and went offline, causing Prishtina’s district heating, Termokos, to be out of operation
16 December 2021: Kosovo B1 restarted operations
24 December 2021: the government of Kosovo approved emergency measures for the energy supply
18 January 2022: the Energy Regulatory Office approves emergency tariffs for electricity, and the
government of Kosovo commits to cover a portion of the tariffs through subsidies
23 January 2022: Kosovo B2 returns to operation
9 April 2022: the Basic Court of Prishtina suspends the new tariffs
18 May 2022: the Court of Appeals verifies the decision of the Basic Court
7 June 2022: the Draft Energy Strategy 2022-2031 addressing security of supply is published for public
consultation

How will the Ukraine crisis affect the energy market in Kosovo?

Russia’s invasion of Ukraine has caused upheaval in the energy market and geopolitics of energy, driving oil and gas prices to their highest levels in nearly a decade and forcing many countries to reconsider their energy supply. According to the International Energy Agency, Russia is the world’s largest oil exporter to global markets. Its gas is one of the most significant resources used in the European economy. While Kosovo is not directly connected with the Russian or Ukrainian energy markets because it does not have gas infrastructure, the lack of reliable internal capacity has enabled the shock to also affect the young economy.

Due to the energy shortage, Kosovo bought electricity from the Hungarian Power Exchange (HupX) market, which was strongly affected by the energy crisis and Russia’s invasion of Ukraine.

Figure 1- HupX prices for April 2022

In April 2021, the average price per megawatt hour (MWh) on the HupX exceeded EUR 200 (figure 1), compared to EUR 55 from the same week last year (figure 2).

Figure 2- HupX prices for April 2021

With these higher prices on the European market, the young economy of Kosovo is left with few possibilities. The two existing power plants are currently in operation; however, there is no guarantee that the malfunctions will not be repeated during the winter of 2022. Furthermore, preplanned investments at the plants will leave Kosovo without a significant proportion of its internal generating capacities for a period of six months in 2023.

Kosovo is currently developing its energy strategy for 2022 to 2031. There are a few possible scenarios that the government of Kosovo can select, and none of them are ‘no-regret’ scenarios apart from investments in energy efficiency. During winter 2021-2022, a significant proportion of families switched from coal and wood heating sources to electric ones; this resulted in a considerable increase in energy demand, reaching an all-time high of 1,400 MW (Energy Regulatory Office, 2022).

Therefore, increasing energy efficiency and promoting near-zero energy buildings would help decrease energy demand during the winter peak and dependence on external power. To accomplish that, primary and secondary legislation, as well as establishing a Strategy for Energy Performance in Buildings and related plans, are required. Furthermore, in Kosovo, a system to assist the training and certification of Energy Performance Certifiers must be authorised as a first step toward near-zero energy buildings.

Moreover, the Energy Efficiency Fund should increase its capacity to expand its work to support households adopting such measures. Lastly, the newly amended legislation needs to address energy-poor households and support them throughout the transition, especially in implementing energy efficiency measures. Currently, the national legislation does not define ‘energy poor’ households, making it impossible to develop policies targeting them.

Furthermore, the rise of energy security as a priority due to the Ukraine crisis has underlined the need to invest in new generating capacities. The existing coal-powered power plants are unreliable; building a new one is not affordable, as the Kosova e Re saga showed, and with the likelihood that Kosovo will have to introduce a carbon tax or emissions trading scheme, the price per MWh would be unreasonable.

Therefore, in the face of such circumstances, Kosovo can use this opportunity to pave a greener and brighter future. By drafting policies that encourage renewable energy investments and launching renewable energy auctions to attract additional local and foreign investors, Kosovo can reduce its carbon emissions, create new jobs and support a green and sustainable recovery after the COVID-19 pandemic and Ukrainian war crises.

Studies from the World Bank have shown that Kosovo has enough technical capacity to transition towards renewable sources by utilising solar and wind technologies (World Bank, 2018). Furthermore, investing in new interconnection lines, integrating its market regionally and investing in secondary and tertiary reserves will allow for higher security. The draft Energy Strategy 2022-2031 shows that apart from auctions, some of the initiatives of the government include a EUR 227.3 million financing agreement with Millennium Challenge Corporation on battery storage and a EUR 64 million agreement with Germany’s KfW on solar heating and electricity generation, which aim to help the country move towards the energy transition (Ministry of Economy, 2022). Lastly, the strategy aims to reach 35 per cent of electricity generation from renewable energy sources.

When talking about renewable self-consumption, it’s vital to remember that this section isn’t recognised or valued as a significant renewable energy industry. The existing policy framework does not emphasise or even mention renewable self-consumption objectives. As a result, Kosovo should either pass a Renewable Energy Law or change its Energy Law to incorporate renewable energy self-consumption. Kosovo’s energy sector has no technical or technological limits when it comes to the installation of all forms of renewable technology by self-consumers who are linked to the grid via net metering. The only limitations stand in financing and bureaucratic procedures for gaining the necessary permits. The draft Energy Strategy 2022-2031 is the only strategic document that addresses prosumers as an essential target group and aims to further support their deployment. However, the strategy alone cannot support the deployment of prosumers; therefore, the government of Kosovo needs to take swift action in adopting the necessary legislation and developing support programmes to further enable a free and fair market, while promoting the renewable energy sector.

References
Bota Sot. (2022, January). Drejtori i KEK-ut tregon se kur pritet të kthehet në funksion blloku B2 i “Kosova B”. Prishtine, Kosovo.
Energy Regulatory Office. (2020). Annual Report 2020. Prishtine: GoK.
Energy Regulatory Office. (2022). Consultation Report Review of the Tariff Structure for Regulated Household Customers supplied by USS. Prishtine: ERO.
Energy Regulatory Office. (2022, March). https://www.ero-ks.org/zrre/sq/konsumatoret-shtepiak/energjia-elektrike/tarifat-e-energjise-elektrike. Retrieved from https://www.ero-ks.org: https://www.ero-ks.org/
ERO. (2021). ERO Annual Report 2021. Prishtine: GoK.
Ministry of Economy. (2017). Energy Strategy 2017-2026. Prishtine: GoK.
Ministry of Economy. (2022). Draft National Energy Strategy 2022-2031. Prishtina: Government of Kosovo.
World Bank. (2018). Energy in Kosovo. Prishtine: World Bank.

Romania’s decision to phase out coal by 2030: how will it serve a just and green energy transition?

The decarbonisation law, which has been in public consultation for 10 days, proposes the permanent closure of coal power plants and mines in Romania by 2030. The graphs below show how this new law would speed up the closure of coal assets, compared to the rate at which a Bankwatch analysis published last year predicted they would close.

This is because the law schedules an accelerated closure of several coal production units and mines especially in 2026 when Black Sea gas is expected to enter the market.

However, the law does not reflect the fact that some power plants have already been closed or non-functional for several years. Contrary to the government’s claims that 4,900 MW needs to be closed, Romania currently has only 2,895 MW of coal capacity connected to the grid, according to the system operator.

Public participation, State aid and safety nets

The coal phase-out will be managed by a Coal Commission with assistance from an Advisory Committee, composed of diverse stakeholders including representatives from unions, market players, experts, academia and civil society.

The closure of capacities will be supported with State aid. Each coal-fired power plant and mine included in the plan will receive State aid, and the European Commission will be subsequently notified of this. If the Commission does not approve the aid, the producers will be obliged to close the capacities anyway, with support from other resources. So far, there is no estimate of the costs involved in closing these assets.

The law provides safety nets for workers affected by closures. Thus, they will have priority in enrolling in reskilling courses and in the installation of their own photovoltaic panels (3 to 5 kilowatts) from non-reimbursable funds.

Bankwatch recommends that the relatives, including the spouses of the miners, should be considered for skilling or reskilling courses, which would give them the potential to increase the family income. Furthermore, young people are also an important resource and should be trained in areas related to the energy transition. The idea behind this is to help solve some of the inequalities in coal mining regions and get the community involved in the re-development process.

Still, the law does not consider compensation for the long-term negative effects of coal mining, which has affected the health of hundreds of locals in the area of open pits.

To be in line with the principles of just transition, the aid should be extended to them for the provision of safe drinking water, as well as ensuring access to private property and agricultural land.

Checks and balances

Contravention and criminal fines are being put in place for producers who do not comply with this law. Thus, for the construction of new coal production capacities and for breaching the decisions on coal capacities and mines closures, producers will receive contravention fines.

At the same time, the opening of new mines or exploitations without agreement will be punished as a criminal offence. This is very important, because frequently the producers continued to expand their coal pits and operate their thermal power plants even after court decisions demand they suspend their activity.

Fossil gas won’t save the day

After closing the coal assets, the energy previously produced from coal must be replaced by other sources. Therefore, a successful transition also requires plans for the development of the energy system. The closure of thermal power plants must be balanced with the opening of new ones, preferably producing renewable energy.

To achieve this, the renewables industry needs to be stimulated and have a stable regulatory framework. However, Romanian authorities are running late in fully transposing the Renewable Energy Directive and the Energy Efficiency Directive, as well as in passing the Offshore Wind Law. There is also the need for a legal framework for the creation of energy communities – groups of people who produce their own energy and exchange it with each other or share it with a larger network.

In any case, Romania should avoid replacing one fossil fuel with another.

Most coal replacement plans are linked to new gas-fired power plants and are largely based on new exploitations from the Black Sea. Fossil gas produces fugitive methane emissions throughout its entire supply chain. Methane is a fossil fuel 86 times stronger than carbon dioxide in the first 20 years of its life, so it has a huge potential to warm the atmosphere in the short term. Some studies show that if methane leaks in the entire system are 3 per cent of the total amount circulating, then gas is as polluting as coal.

Watershed moment for EIB’s climate ambitions as EU rushes to quit Russian fossil fuels

Photo: Magnus Manske

More than ever before, the European Investment Bank (EIB) has to step up its climate finance game.

With European determination to phase out the import of Russian gas, oil and coal, the EU’s financial arm is expected to play an important role, particularly under the European Commission’s REPowerEU initiative.

Skyrocketing energy prices have already proven oil and fossil gas, especially when imported from authoritarian regimes, are no reliable energy sources. Crucially, volatile fossil energy prices disproportionately affect the poor.

In the face of both war and a worsening climate crisis, EU public finance needs to be fully mobilized to help expedite the decarbonisation process.

In November 2020, the EIB adopted the ‘EU climate bank’ moniker, pledging to align all its operations with the Paris climate agreement. Now, as the global energy map is being redrawn, the Bank needs to help accelerate Europe’s shift away from fossil fuels.

In fact, the Commission has already announced it intends to work with the EIB to step up support for energy efficiency, renewables and electricity networks via grants, loans, technical support and other instruments.

When EU finance ministers meet on Friday (17 June), in their capacity as governors of the EIB, they need to ensure that the Bank’s transformation into ‘the EU’s climate bank’ has no strings attached. No asterisks and no exemptions.

In the name of so-called diversification of energy sources, political pressure is mounting to expand the EU’s fossil gas import infrastructure. But if the EIB is to live up to its commitment to no longer finance fossil fuels – in force since the beginning of 2022 – it needs to resist any attempts to use EIB money to enable any oil, gas or coal projects. There must be no turning back to fossil fuels.

There is reason for serious concern. A new analysis by Counter Balance and CEE Bankwatch Network released today finds that during 2020-2021 the EIB handed out €7.4 billion to companies operating in the fossil fuels industry such as EDF Group, TotalEnergies, Eni and Orlen even if in most cases for development of renewable energy and electricity transmission and distribution. Out of this, €2 billion went to companies heavily dependent on coal for electricity or heating. Even though the EIB will ask such borrowers to present decarbonisation plans, in reality they will not have to commit to any specific short-term actions nor coal phase out deadlines.

In addition, 20 percent of the EIB’s transport portfolio during that same period – €4.36 billion – went to carbon intensive projects, including highways, small roads, airport infrastructure and seaport expansions.

These investments, in both the energy and transport sectors – if they do not end up as colossal stranded assets as the EU ratchets up its climate and energy targets – could bog down Europe’s effort to cut greenhouse emissions.

Not least, these EIB-backed projects have effectively helped entrench Europe’s dependence on fossil fuels, including Russian fossil fuels, thus becoming a security liability which further complicates the EU’s departure from gas, oil and coal.

The upcoming midterm review of the EIB’s energy policy has to close all remaining loopholes that could allow for EIB money to support fossil gas projects.

Instead, the EIB should use its financial clout to drive the implementation of energy efficiency programmes, the deployment of heat pumps and the rapid expansion of renewables – with a focus on community-led and small-scale projects – across Europe and beyond.

In January 2021, EIB President Werner Hoyer told reporters that ‘gas is over.’ This bold statement, coming from the head of the world’s largest international public lender, was symbolic for the fight against continued fossil fuel financing. It is essential that EU finance ministers, as governors of ‘the EU’s climate bank,’ restate this commitment and instruct the Bank to redouble its effort to put Europe on a new, sustainable energy path.

« Previous Page