Blog entry

A forward looking energy strategy at the Asian Infrastructure Investment Bank

The AIIB’s Energy Sector Strategy is far from being green. In the past the bank has approved several projects that have caused serious impacts on communities and caused concern for allied civil society groups. Currently the bank is considering financinf for the Nenskra Hydropower Project in Georgia, the Tamakoshi V Hydroelectric Project in Nepal and the Southern Chattogram and Kaliakoir Transmission Infrastructure Development Project in Bangladesh. All these projects can cause serious social, environmental, climate and human rights risks.

For these reasons, a number of civil society groups have urged the AIIB to stop these investments, together with those in fossil fuels by aligning its portfolio with the Paris Agreement. The groups also argue for support to ‘scientifically-sound’ renewable energy. Across its portfolio, the bank should uphold its commitment to transparency and ensure the sustainability of its energy investments for nature, people and climate.

Read the full letter here.

Towards a people-powered, green transformation in Almaty

With its polluted air, chaotic construction and lack of green spaces, Almaty is very much like many cities in Central Asia: it needs to improve the living conditions for its residents. To achieve this, the city is greatly in need of sustainable investments.

The investments are coming, as the ‘green economy’ was named as a priority for EBRD funding in Kazakhstan, with the bank announcing that already 40 per cent of its portfolio in Kazakhstan in 2021 was for green projects. At the same time, the protests in the country at the start of the year demonstrated the frustration of Kazakhstan’s people with the lack of democratic reforms and decision-making that does not incorporate the needs and concerns of the public.

No green urban development without public participation

In 2019 Almaty joined the EBRD Green Cities initiative. The program will help the city develop a Green City Action Plan (GCAP) in order to deal with its major environmental challenges and define the focus for green investments. In 2019, the city presented the GCAP inception report to the public and held a number of public consultations. According to information from the EBRD, the next round of public consultations will take place in mid-March this year.

To help city residents better understand the GCAP process and inspire their participation in shaping their city’s greener future, Bankwatch developed a citizen’s guide on participation in the Green Cities programme.

One of Almaty’s Green Cities central projects is the Almaty Electric Public Transport. A EUR 58.9 million investment should be provided by the EBRD to Almatyelectrotrans (AET), the municipal company, to modernise the trolleybus fleet in Almaty with 190 electric, energy-efficient trolleybuses. The project aims to support both green and inclusive objectives of the EBRD, which the bank says will lead to the reduction of greenhouse gas emissions as well as will “support the Inclusive objective through (i) policy dialogue to seek a limited exemption from licensing laws for trolleybus drivers, which especially affect women’s access to jobs, (ii) inclusive HR practices to increase female participation in the workforce for trolleybus drivers and the executives level, and (iii) development and delivery of internally accredited trolleybus driving training programme for new employees out of which at least 35 per cent will be women.”

A question of governance

But residents of the Kairat district in Almaty keep asking a question about Almatyelectrotrans (AET), the EBRD’s client in this project. Kairat residents claim that Almatyelectrotrans violates the national law and their right to a clean and healthy environment by organising a bus depot. The depot was set up near residential houses without a proper sanitary zone, which produce noise and exhaust all day long.

Unable to resolve this issue with Almatyelectrotrans, local residents supported by local NGO Green Salvation decided to address their grievances to the EBRD.

The EBRD responded to residents’ concerns that the project’s scope is not related to the bus depot. It is not clear why the bank is hiding behind the issue of the project “scope”, when according to the Banks’ Environmental and Social Policy it has committed to appraising the client’s “business activities”, to ensure that clients respect human rights and address adverse human rights risks linked to their operations.

The EBRD, however, also added that it looked into the matter and agreed with AET to include an action point in the project’s Environmental and Social Action Plan for the company to relocate the bus depot from Kairat by the end of 2022.

These EBRD efforts to resolve the grievances of Kairat residents are appreciated. Green Salvation on behalf of local people have asked the bank for a meeting to receive more information with regards to the milestones in the bus depot’s relocation and for transparency and public engagement in the implementation of the measure. Residents need more information about the next steps with the process and guarantees that the EBRD will monitor closely if AET will keep its promises and will relocate the bus depot in a timely and participatory way.

Bus depot near residential buildings in Kairat microdistrict

Trust in local authorities

AET, as a municipal company, did not disclose information about the bus depot upon residents’ requests. Previously residents received promises for the relocation of the bus fleet by the end of 2021. Now the promise is for the end of 2022, but they have not received any documents or opportunities for dialogue with authorities or the company.

Therefore, the EBRD should require its client AET to disclose the detailed plan of the bus depot relocation with clear and concrete milestones and to initiate a dialogue with residents affected by its operations. This will contribute to building the client’s capacity with regards to transparency and dialogue with city residents.

Green transformation with and for people

Developing sustainable solutions is possible only when it is done in an inclusive way. From the EBRD’s description of inclusiveness, it appears this is limited to the workforce of the company but excludes public transport service users and residents affected by the company’s operations, like those living in Kairat. EBRD funding to promote green initiatives in Kazakhstan and elsewhere should be grounded in practices of inclusive participation and effective disclosure. The EBRD should also ensure its clients’ capacity to respect human rights and the rule of law in accordance with the bank’s policies. Otherwise, the projects that have a green tag will do so in name only.

Reaching net-zero emissions in cities cannot be achieved without just and democratic reforms that earn the support of the public and affected people. It’s time for the bank and other financiers to see the broader picture of poverty and inequality, affordability of goods and services and overconsumption. These are just a few issues affecting climate investments that need decisive action.

Believing in climate action as a joint cause, Bankwatch together with its partners developed an easy step-by-step guide about citizen participation in green investments of the EBRD. We believe that genuinely green projects are developed together with state authorities and residents, and those will have a lasting and sustainable effect.

Republika Srpska moves ahead of its neighbours in virtually halting hydropower subsidies for new plants

In September 2019, we published our report Who Pays, Who Profits? which revealed that between 2009 and the end of 2018, at least 380 small hydropower plants (below 10 MW) were built in the Western Balkans, bringing the total number of installations to at least 488. This boom was fuelled by feed-in tariffs, which had been disproportionately directed towards hydropower.

In fact, in 2018, small hydropower received around 70 per cent of renewables incentives but generated only 3.6 per cent of overall electricity.

Feed-in tariffs have been widely used across Europe to stimulate the growth of renewable energy, as they guarantee the purchase of electricity from a certain number of electricity producers at a fixed price, set high enough to offer an investment incentive.

But instead of using them to attract investments in new technologies and bring down their costs, Balkan governments stuck to what they knew and what well-connected construction companies knew how to build, and largely subsidised hydropower. Some wind power, and in Serbia also biogas was supported, but solar power hardly at all, and as a result, solar capacity in the region is still negligible.

By the end of 2020, no fewer than 598 hydropower plants of less than 10 MW (15 MW in Albania) were online compared to 108 in 2009 – in other words, 490 new plants had been built.

532 of the plants were part of incentives schemes. This includes some older ones which had been rehabilitated, which is why the figure is larger than the number of plants built.

Figure 1 - Number of hydropower plants <10 MW per country (<15 MW in Albania) 2009 and 2020 — Figure 1 – Number of hydropower plants <10 MW per country (<15 MW in Albania) 2009 and 2020

Feed-in tariffs must be phased out for all but the smallest plants

Under the Energy Community Treaty, the Western Balkan countries have to apply EU state aid rules. In 2015 the Treaty Secretariat issued policy guidelines underlining the need to apply the Commission’s 2014-2020 energy and environment rules, which would include stopping new feed-in tariffs for all but the smallest plants – below 500 kW for hydropower – and introducing a system of auctions and premiums.

Renewable electricity would be sold on the market and producers who win in auctions would be able to receive a premium in case the market price was lower than the price they had pledged in the auction. This system is meant to continue to support renewables development while limiting the cost to consumers.

Countries are free to choose what type of renewables they most need to support, as long as they don’t unfairly discriminate between technologies. Given the favouritism towards hydropower so far in the region, the widespread damage it has caused, and the fact that it is a mature technology whose costs are not falling, governments should stop incentivising it.

Mixed progress on removing hydropower support

As the countries had geared up their renewables legislation and incentives systems towards meeting their 2020 renewables targets, it made sense to have this new system in place by 2020, yet in reality none of the countries did so fully. Even those which changed their rules, like North Macedonia and Albania, left non-compliant feed-in tariffs in place for new small hydropower.

What now for the Western Balkans’ renewables incentives schemes?

At the end of 2020 both Kosovo and the Federation of Bosnia and Herzegovina (FBIH) appeared to have stopped awarding new feed-in tariffs, but progress since then towards more efficient and environmentally acceptable renewable energy policies in the region has been mixed.

After long delays, Republika Srpska has now seized the chance to introduce a more efficient incentives system via its law on renewable energy that was adopted last week. After blatantly favouring hydropower in its previous incentives scheme, it has finally limited them, so that only new plants below 150 kW will be able to receive feed-in tariffs, and larger hydropower plants will not be eligible to participate in auctions. The next step will be to ensure prompt implementation of the law and avoid hidden subsidies via eg. loan guarantees for larger plants such as Dabar and Buk Bijela.

Serbia, after years of inaction, moved forward the most, by adopting a new renewables law that moves to an auctions and premiums-based scheme for all but the smallest plants. However there has recently been political pressure against the energy minister, so it is unclear whether this will continue. It is particularly crucial to make progress on encouraging prosumers and on launching solar auctions.

Montenegro has finally taken decisive action to stop awarding feed-in tariffs, cancelled several small hydropower concessions, and started to encourage household solar, but urgently needs to progress with larger wind and solar projects which are sorely needed to replace the Pljevlja coal plant. It needs to avoid getting distracted by the Komarnica large hydropower plant and ideas about gas plants, which would cause a new fossil fuel lock-in.

Kosovo, too, has made the first step by halting the feed-in tariff scheme for new plants. It is also doing better than others in the region with regard to connecting prosumers. It now needs to move forward with new renewables legislation to set a predictable incentives framework for the period until 2030 as well as making sure that planned solar and wind projects move forward.

North Macedonia, declaratively a frontrunner in sustainable energy, seems to have stalled in the last year and urgently needs to finally stop awarding new feed-in tariffs for small hydropower.

Albania’s solar and wind auctions need to start showing on-the-ground results, and the country must stop offering incentives for hydropower, particularly feed-in tariffs for plants under 2 MW.

The FBIH incentives system has to be completely overhauled, starting by cancelling the two decisions made in 2021 to extend the 2020 feed-in tariff quotas. The draft law on renewable energy must be publicly consulted as soon as possible, and adopted. But in parallel, stronger action needs to be taken regarding the conduct of the Operator for renewable energy, as the new Director is failing to increase its transparency, and public trust can hardly be restored by the timid corrective measures from the audit report mentioned above.

Overall, progress is being made towards cutting hydropower subsidies, but far too slowly in some of the countries. In fact, while North Macedonia, Albania and the Federation of Bosnia and Herzegovina continue to allow hydropower incentives that are not in line with the European Commission’s 2014-2020 Guidelines, new Guidelines entered force in January which lower the threshold for feed-in tariffs even further – to 400 kW until 2026 and 200 kW after that. These Guidelines have also now been endorsed by the Energy Community.

With increasing damage from hydropower and public resistance, as well as increasing evidence of its climate vulnerability, it’s high time to work more on saving energy and increasing the share of appropriately-sited solar and wind.

This publication was produced in collaboration with EuroNatur and RiverWatch in the frame of the Save the Blue Heart of Europe campaign, with financial support from MAVA Foundation.

No resolution for Ukrainian villagers after three years of negotiations with agro-giant MHP

In June 2018, residents of the villages of Olyanytsya, Zaozerne, and Kleban submitted complaints to the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) on the environmental and social harm of MHP’s operations and requested dispute resolution for these problematic issues.

MHP’s subsidiary, ‘LLC Vinnytska Poultry farm’, has a huge poultry production complex in Vinnytska oblast. It produces around 200 million broiler chickens annually. The rapid increase in and resulting high concentration of industrial facilities in the area became one of the main reasons for the local residents’ complaints. They connected various problems with the expanding operations of MHP, such as a decrease in the water levels of local wells, deterioration in water quality, contamination of soil and air, and damage to infrastructure by the use of heavy vehicles on village roads.

Local residents were concerned about MHP’s attitude towards communities: the company didn’t organise meaningful community consultations before building new farms or expanding the enterprise. Local residents felt pressured during the meetings and did not have an opportunity to express their fears freely. Other concerns were about MHP employees’ safety at work and MHP’s impacts on local residents.

The issues were not only around protection of the environment. The company’s contractors drive their trucks on the village road, which is not designed for a large number of heavy vehicles. In addition to noise, residents experienced strong vibration and later began to observe the appearance of cracks on the walls of their houses. Even after the construction of the bypass road, which was supposed to divert traffic from the village of Olyanytsya, people continued to complain that vehicles serving MHP still traveled on the village road.

Locals hoped that the company, which promotes itself as one of Ukraine’s leaders in environmental protection, would have no problem resolving the issues raised in the complaint.

Concerns of the complaints

Studies show that high level of nitrates and other chemicals are common in places close to livestock farms. This affects the quality of the soil, causes the flowering of nearby water bodies, harms biodiversity, and makes groundwater unfit for consumption. Drinking water with high levels of nitrates increases the risk of health issues in the thyroid gland and circulatory system. Moreover, it increases the risk of cancer, and it also affects the physiological and mental development of children, especially infants.

Last summer, a team from the non-governmental organisation Ecoaction went on an expedition ‘In Search of Clean Water’ to check the quality of the water in the wells and reservoirs of 14 different communities in ten regions of Ukraine. The villages of Olyanytsia, Zaozerne and Kleban in the Vinnytsia region, whose representatives complained about the negative impacts of MHP’s operations, were also inspected and showed disappointing results.

Analyses revealed record rates of nitrate pollution in wells – the worst of all the studied sites in the country. At the maximum allowable level of nitrate contamination up to 50 milligrams per liter (mg/L), both rapid and laboratory tests showed excess nitrate levels in almost half of the 19 tested wells, often reaching 150 mg/L, three times more than the maximum allowable level.

Still, it is difficult to determine the source of pollution with this type of research. Results only show that there are problems with water quality in these villages, which could pose a danger to their inhabitants.

According to local residents, there are also problems with the availability of water due to high water consumption by MHP’s enterprises. After being used in poultry production, the water is treated at water treatment plants, but the villagers could get neither data on consumption, nor data on water treatment and quality from MHP during negotiations with the company. Meanwhile, forecasts show that due to climate change, water runoff in the Southern Bug basin, which includes rivers in the Vinnytsia region, will be reduced by a third, and in some months even up to 45 per cent.

How villagers tried to negotiate with MHP

MHP has received more than half a billion euros in loans from multilateral development banks for its projects. In particular, it received more than USD 300 million from the IFC, EUR 275 million from the EBRD and EUR 85 million from the EIB. In their policies, these banks set high environmental and social standards for the projects they finance, and promise that they will be implemented in a sustainable and just way. Communities impacted by such projects can address their grievances to the banks’ accountability mechanisms. Affected people can raise grievances about the projects’ non-compliance with environmental and social standards, as has been the case with MHP. The procedures of the accountability mechanisms provide two ways to resolve complaints:

problem solving (mediation) – the parties to the conflict can sit down at the negotiating table to find mutually acceptable solutions with the independent mechanisms of the banks serving as their facilitators, or
compliance review – experts from the mechanisms come directly to the impacted area, investigate the situation and determine whether the bank has adhered to its policies when assessing and monitoring the project.

Communities in Vinnytska oblast chose the first option. In June 2018, they asked the banks’ independent accountability mechanisms to facilitate a dialogue on the issues they linked to MHP activities. They were advised by three non-governmental organisations: Ecoaction, CEE Bankwatch Network and Accountability Counsel. The mediation process lasted more than three years, during which the community and the company tried to find common ground, and the non-governmental organisations provided advice and support to the complainants. But the mediation produced no final agreement, because MHP decided to withdraw from the process. MHP’s withdrawal also halted a pilot study of the impact of its heavy vehicles on the destruction of buildings in Olyanytsya, which the parties had been preparing together within the mediation process.

Will the problems be resolved?

Before the mediation, all involved parties signed a memorandum outlining the rules of the process. Because locals felt constant pressure from the company, in part due to cases of retaliation, the parties also signed additional agreements to guarantee the confidentiality of the process and the identities of negotiators, as well as the prohibition of retaliation against each other. In addition, neither party had the right to disclose details about this process.

During these three years, MHP has been able to actively build its image as a ‘green’ company that cares about people. But advertising in the media, funding for charitable foundations, the organising of festivals, and even ‘environmental’ awards do not help the environment and the local communities in Vinnytska oblast. The communities continue to worry about the stench of chicken manure; the destruction of houses in Olyanitsa; and the health problems people have linked to air, water and soil pollution.

The independent accountability mechanism of the EBRD has already presented a problem solving report, and the IFC’s mechanism will do so soon.* Afterwards, the banks’ independent mechanisms should decide to close the complaint or proceed to plan B – compliance review. As part of the compliance review, the mechanisms will gather evidence and decide whether MHP projects have violated the banks’ environmental and social policies. If violations are proven, EBRD and IFC management will develop a plan to mitigate the damage, and the mechanisms will monitor its implementation.

However, only the company can decide whether or not to solve these problems, as the banks cannot impose any penalties or sanctions on the company at this time. The locals hope to finally achieve justice: that the impacts of MHP on the environment will be fully investigated and disclosed, and the company itself will improve its practices.

(*) Since this blog post was originally published in Ukrainian, the Office of the Compliance Advisor/Ombudsman (CAO), the IFC’s accountability mechanism, published its report (1 February 2022). It can be found here.

Original in Ukrainian: Вінниця проти Юрія Косюка – як вінничани борються за чисту воду та повітря – Новини України (zn.ua)

In Russian: Винница против Юрия Косюка – как винничане борются за чистую воду и воздух – новости Украины (zn.ua)

The EU carbon border adjustment mechanism: How to make it work for decarbonisation in the Western Balkans

Last year, the European Commission’s draft Proposal for a Regulation of the European Parliament and of the Council establishing a carbon border adjustment mechanism was published, and is now being considered by the European Parliament’s Environment Committee. On 2 February rapporteur Mohammed Chahim presented a draft Committee on the Environment, Public Health and Food Safety report to the Committee, which includes substantial proposals to make the CBAM more effective and help to more rapidly phase out free Emissions Trading Scheme (ETS) allowances.

While the emphasis on phasing out free ETS allowances is crucial, it shouldn’t detract from other aspects of the CBAM’s effectiveness, such as its impacts on the Western Balkans’ electricity sector.

Why CBAM is important for the Western Balkans power sector

Our latest Comply or Close report shows that between 2018 and 2020 the EU imported around eight per cent of the Western Balkans’ coal-based electricity.

This electricity is artificially cheap, because the countries do not apply carbon pricing – with the dubious exception of Montenegro – and their coal plants are exceeding legal limits for air pollution, thus breaching the Large Combustion Plants Directive (LCPD), which has been binding under the Energy Community Treaty since 1 January 2018.

In fact, in 2020, the region’s 18 coal plants emitted two and half times as much sulphur dioxide as all 221 coal power stations in the EU combined.

The EU benefits from cheap electricity, but it pays a high price. Between 2018 and 2020 coal power plants in the Western Balkans caused an estimated 19,000 deaths, with almost 12,000 of these due to non-compliance with the LCPD. Over half of these modelled deaths took place in the EU.

As EU accession countries, the preferable option is for the Western Balkans to join the EU Emissions Trading Scheme. The Energy Community Secretariat is working hard to enforce industrial pollution legislation and introduce carbon pricing, but this will take time, and needs stronger support from the European Commission. Political will to introduce carbon pricing varies considerably among the Western Balkan governments and it cannot be taken for granted that it will happen soon.

How can the CBAM help?

The CBAM has the potential to take effect earlier than domestic carbon pricing in some of the Western Balkan countries. In addition, it can be decided on directly by the EU rather than waiting for Western Balkan governments to get on board. This is an opportunity not to be missed.

While the CBAM is only one part of the efforts needed to decarbonise the region’s power sector, it can still make an important contribution. Due to the fact that electricity prices, especially for households, are regulated at an artificially low level in the Western Balkans, export of electricity to EU countries brings higher revenues for electricity producers than selling to domestic customers.

Thus, if carbon-intensive exports are diminished, those coal plants which have been exporting until now are likely to have lower revenues.

Even if the CBAM leads to renewables-based electricity being exported instead of coal-based electricity, coal plants will be in a worse position than now by only being able to sell on the domestic market. However, the Commission’s proposal to allow the use of actual embedded emissions factors for the exporting power plants, instead of country- or regional-level default ones, would still reduce the CBAM’s effectiveness in pushing across-the-board decarbonisation in the countries. Thus this option, which is outlined in Annex III point 5 and referenced in other parts of the text, needs to be deleted.

Western Balkans power exemption until 2030?

The CBAM needs to be introduced as soon as possible if it is to be effective. This means that the provisions in Article 2.7 of the Commission’s proposal, which potentially exempt the Western Balkan countries from the CBAM for electricity until 2030, need to be more stringent. They currently allow the countries until 2030 to fully implement carbon pricing, which would be alright if partial carbon pricing was in place by 2025, but there is currently no requirement for this in the text. Thus there is a danger that in 2030 there will still be a lose-lose situation, with no carbon pricing in place and no CBAM applying.

To avoid this scenario, clear requirements need to be put in place for at least a certain level of carbon pricing to be introduced by 2025 if the countries are to be exempted from the CBAM. This timeline is in line with what can be achieved under the Energy Community’s Decarbonisation Roadmap as well, so it makes no sense to allow additional time.

Compliance with EU law is – rightly – also a condition for exemption from the CBAM until 2030 needs to be more regularly checked than is currently proposed. Instead of just in 2025 and 2029, it must also be done in 2027, otherwise any changes will be detected very late.

A further condition for exemption from the CBAM until 2030 proposed by the Commission is that no public support may be granted for new power plants with carbon dioxide emissions of more than 550 g CO2/kWh, which means no public support for coal. This may have been progressive a few years ago but is inadequate today in a situation where the IEA has underlined that no new fossil fuel infrastructure can be built and the power sector must be decarbonised by 2040 if we are to stay below 1.5 degrees.

The threshold therefore needs to be reduced to 250 g CO2/kWh instead of 550, in order to be aligned with the EU and Western Balkans’ commitment to carbon neutrality by 2050.

Will the CBAM have unwanted social impacts in the countries?

It will be difficult to assess the impacts of the CBAM separately from other ongoing power sector processes in the Western Balkans, but coal is clearly on its way out, and the impacts of this need to be mitigated. Most coal power plants need to be closed in the next decade or so due to legal breaches but also due to age, yet there is still serious over-employment in the sector. After three decades of under-investment, this winter has seen unplanned coal plant outages caused by coal supply and technical problems. The energy transition is coming faster than expected, and making it a just transition will be a major challenge.

Together with the Green Tank, we have therefore recently proposed the setting up of a dedicated Just Transition Fund for the Western Balkans and proposed allocation criteria that, unlike the EU Just Transition Fund, would reward climate ambition. Such a Fund could excellently complement the proposals in the draft Environment Committee report that propose to reinforce climate spending in the Union budget’s Instrument for Pre-Accession Assistance III. It could also have the advantage of clearer conditionality in order to ensure project quality.

An opportunity that must be seized

With the Western Balkans’ accession prospects atrophying and increasing political turmoil in the region, we cannot rely on even the previous levels of progress towards sustainable decarbonisation continuing without more of a push and resources from the EU.

Most of these efforts should take place via the Energy Community Treaty, which has for years been a driving force in the region, including on efforts to introduce carbon pricing. However, the Treaty has its limitations and needs strengthening to include penalties for non-compliance. This will take time, and the CBAM has the potential to help fill the gap. This opportunity must be seized.

In Czechia, dubious projects funded from covid support

Much has been written about the fact that the state aid from covid grants is excessive. However, information about the government’s support of large export companies is much less reported. This is no surprise, as the institutions that offer export support, such as the state-owned credit insurance company EGAP, are not transparent. Small Czech entrepreneurs can only dream about the conditions offered to large corporations.

The Czech state has provided a guarantee through EGAP for a CZK 2 billion loan to the company Liberty Ostrava, owned by Sanjeev Gupta and financed by Greensill Group. The dubious business practices of the Greensill group were well known long before EGAP approved the guarantee. At present, it is unclear what has happened with the 2 billion crowns in question.

This is not the only problematic project. Why, for instance, is EGAP supporting the air ticket seller Kiwi, which has not published any environmental impact analysis? Do we need to grant covid aid to an industry that is a major contributor to pollution?

EGAP specialises in the support of Czech exporters. But it is unclear whether individual clients really are Czech companies. For smaller contracts worth up to CZK 100 million, the share of Czech goods is not monitored at all and could possibly be even zero. For larger contracts, Czech goods have to represent at least 20 per cent.

While EGAP does publish some information about its activities, its recent magasine issue omitted both peculiar guarantees for Liberty Ostrava and Kiwi.

Whither the billions

The Czech foreign trade balance is negative. Export, which has represented 75 per cent of Czech GDP since 2011, is threatened mainly by the difficulties faced by the automobile industry. In this situation, it seems logical that the state wants to support Czech exporters. The question is if it does so efficiently or if it is throwing tax payers’ money down the drain.

EGAP administers the COVID Plus programme, which is directed at large export companies, in anopaque manner. The beneficiaries’ names are not public. Nobody knows if the money is invested in sustainable projects. The programme is neither regulated in any way nor supervised by the Czech National Bank or another supervisory authority.

Small entrepreneurs can only hope for such support without any major limitations. The guarantees for loans approved through the programme for the first six months of 2021 total more than CZK 22 billion. Besides COVID Plus, EGAP provided insurance to the export of Czech goods and services worth CZK 19 billion in the same period.

We have communicated with EGAP on a long-term basis to find out more about the Liberty case and as well Adularya, an unfinished project for a Turkish lignite power plant which has cost Czech tax payers almost CZK 12 billion. However, the communication has been unsuccessful, as we have not been able to obtain any meaningful answers.

Empty rhetoric

Despite guarantees of the Czech Act on Free Access to Information, we have not received sufficient answers to our questions from EGAP. As a result, we learned that EGAP knew neither if the 2 billion guarantee provided to Liberty Ostrava by Greensill Bank was valid, nor if it had examined the financing behind Liberty Ostrava when approving the guarentee. EGAP often refused to provide information, citing business confidentiality.

Now that a new Czech government is in place, we will see if state support to big corporations continues. We want the public to see how the government hands out billions without close scrutiny. How much more can prices rise if the Czech Republic continues to spend like this?

This article was originally posted on the www.lidovky.cz.

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