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Second edition of Lung Run promotes climate action and clean air at COP26

As we enter the final decade to transform our world in such a way that prevents a climate catastrophe, everyone must be on board and support this move in any way possible. This year, our second edition of the Lung Run focused on climate action as a way to also improve air quality in the Balkans and fight the same enemy, the fossil fuels industry.

Since 2016, we have been collecting data to prove that coal-related air pollution impacts people’s health. From 2018 the Western Balkans coal power plants have caused 19 000 deaths, 12 000 of which were due to the breaches in the legal air pollution limits. Unlimited amounts of pollution spread uncontrollably through the continent, crossing borders and harming people.

We have all the data we need and we know who’s to blame. Coal is the main source of emissions of pollutants into the air right now and also the main source of greenhouse gasses that are damaging our climate. In order to keep climate change within acceptable limits, we have to phase-out coal before the year 2030. The science is clear on this, it is possible and it is achievable.

The Lung Run provides a perfect platform for people from different backgrounds to amplify this imperative to phase out coal use by 2030 to avert climate emergency and to ensure breathable air for future generations, while urging decision makers at the 2021 UN Climate Conference in Glasgow (COP 26) to take action aimed at saving lives and the environment.

More than 40 people joined our call to run or walk this symbolic distance of 20.30 kilometres at this year’s virtual edition of the Lung Run and shared photos and messages supporting our cause. People from all over Europe took part – from Glasgow, in the midst of the conference, to the coal regions in the choking Balkans and Ukraine. The total distance covered by participants was enough to get from Glasgow to Brussels and deliver one clear and simple message to the EU – there cannot be a pollution-free Europe without a coal-free Europe.

We are running out of time, and we need action now.

Bulgarian recovery plan improves after six-month impasse

More funds for biodiversity 

The new plan includes an increased budget for biodiversity-related measures, from EUR 16 million to almost EUR 46 million. Although it is a step in the right direction, this still leaves biodiversity measures with less than 1 per cent of the total budget.  

The biodiversity measure (Project NH5) added in the process of consultations focuses on forest and freshwater ecosystems, improving connectivity within and between Natura 2000 sites, and habitat restoration in line with the EU’s Biodiversity Strategy 2030 objectives.  

Activities will include mapping of non-state old-growth forests, a transformation of pine plantations to deciduous forests, wetland restoration and other projects. Given Bulgaria’s rich biodiversity, about one-third of the country is included in the Natura 2000 network. Yet the oversight of Natura 2000 sites is far behind other countries, and a lot must be done to implement the EU’s nature conservation directives.  

Improvements in the plan 

The rehabilitation of the old, state-owned irrigation systems project, which lacked Natura 2000 impact assessments, was dropped from the last version of the plan. Instead, as part of a larger agricultural fund, the plan includes funding opportunities for wastewater treatment facilities, including treatment and recycling systems; automation of separate stages of production processes (including irrigation); and measuring devices for hydro melioration facilities. 

In addition, the Minister of Environment and Waters rejected his predecessor’s decision not to subject the plan to a Strategic Environmental Assessment. The assessment is currently ongoing and can hopefully improve the quality of implemented projects. 

The next challenge facing biodiversity is to guarantee that climate-related measures are indeed biodiversity-proof. For example, the renewable energy measures included in the plan must avoid bird migratory routes or valuable grasslands to really ‘do no significant harm’. 

Improvements also can be found in the energy sector proposals. After several meetings with civil society representatives, the government adopted one of their most important proposals: the establishment of a commission tasked to come up with a plan for phasing out coal. This should allow to plan a clear energy transition.    

Problematic measures 

However, these successes should not hide the problematic measures that remain in the plan and hamper the necessary transformation towards a carbon free energy system. Indeed, the recovery plan has no general, unifying idea of moving to a low-carbon economy, but rather looks like a selection of individual projects with no connection between them. 

Some elements of the plan do not meet the philosophy of energy transition and just transition. This is visible in the proposal to replace one gigawatt of coal with gas, an expensive and temporary measure that will not have a sustainable effect. 

Furthermore, the Bulgarian authorities are planning to fund the costly construction of hydrogen transmission infrastructure and a pilot project for green hydrogen production, benefiting the two largest Bulgarian energy companies. Even though hydrogen has a future, there are more urgent needs that the recovery plan should address, for the benefit of citizens. The plan lacks projects that would decentralise energy generation, while at the same time supporting individual households to produce electricity from renewable sources.   


With its assessment underway, the Commission should reject the measures and reforms which oppose the pathway to a climate-friendly future. The recovery money should be used for measures focused on the future, not business-as-usual and unsustainable projects. Still, the Bulgarian recovery plan shows that by opening the process to public consultations, harmful measures can be removed and new ones supporting nature can be included.  

Radio silence on gas allegations: European Commission breaks another deadline to respond to Bankwatch’s complaint

The EU Ombudsman’s office is currently looking into a complaint by Bankwatch against the Commission’s omissions concerning the climate assessment of 12 gas pipeline projects in the Western Balkan and Caucasus countries. The Ombudsman’s findings, if delivered on time, could have significant implications for the way such projects are selected.

But the Commission hasn’t delivered its response yet to the Ombudsman’s inquiry. Neither has the Commission provided any explanation for delays on its end despite the Ombudsman already having granted three extensions to the Commission for its response. Normally it should take less than 3 months for an EU institution to provide a response according to the Ombudsman’s rules that govern the inquiry process. Already in this process, it has taken twice as long. 

These gas pipelines, so-called Projects of Energy Community Interest (PECI) and Projects of Mutual Interest (PMI), have been selected by the Energy Community Ministerial Council as the key energy projects in the region under the Energy Community Treaty. Project proponents can profit from EU financial support and fast permitting procedures. 

The key problem with the project assessment was that it assumed all gas projects would reduce CO2 emissions and not increase them. The idea was that gas would replace coal and that demand would not increase, so it would not cause additional emissions compared to today. These assessments overlooked the very likely scenario where gas would actually end up displacing other energy sources like renewable electricity or wood in some regions.

Gas is a fossil fuel that needs to be stopped burning if we are to stay below 1.5 degrees climate change. Last week, the International Energy Agency (IEA) reported that we need to stop building fossil gas infastructure globally if we are to stay on course for a 1.5 pathway. This is the second report from the IEA in less than 6 months that underlines the same pathway for fossil gas. The Intergovernmental Panel on Climate Change (IPCC), the UN body that should inform decision-makers, in its AR6 report, published before the summer, states that the climate change is widespread, rapid, and intensifying. Their findings show that unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach.

Therefore it doesn’t make sense to invest in the build-up of gas infrastructure in the Western Balkans now, especially as some of the countries are not even connected to international gas corridors. 

According to Bankwatch estimates, these projects would jointly cost more than 2 billion euros. The costs of their construction and operation would fall on taxpayers through subsidies and consumers through their energy bills.   

Furthermore, financing invested into fossil gas projects is money that is crowding out renewables financing.

Europe is at a crucial moment in discussions about new gas pipelines and liquefied gas terminals in Europe. As well as the energy price crisis, there are two ongoing processes right now: revision of the TEN-E regulation that entered the trialogues phase and is expected to be finished by the beginning of next year and the adoption of the new Projects of Common Interest (PCI) list for energy infrastructure that is expected to arrive in late November. 

If this inquiry continues at a similar tempo we can expect the Ombudsman decision at the earliest next year – too late to influence these processes. 

However, there is also some good news from the Energy Community. Following on our complaint, the Energy Community Secretariat proposed to the Commission to postpone the new PECI and PMI gas list until the revised TEN-E is adopted in the Energy Community. This corresponds with one of the requests from our complaint. This proposal is on the agenda for the next Energy Community Ministerial Council, to be held on 25 November.

IEA call to public finance institutions: End of finance for new fossil fuel projects & massive scale-up of clean energy spending needed

According to the IEA, the global energy sector has to be at the heart of action to tackle climate change, as it is responsible for almost three-quarters of greenhouse gas emissions that have already pushed global average temperatures 1.1 °C higher since the pre-industrial age, with visible impacts on weather and climate extremes. 

Why is this report important?  

The IEA was established in mid-1970s to secure OECD member states’ access to oil, a background which makes today’s report particularly significant.  Its previous scenarios, with a prominent role for fossil gas, were used by oil and gas companies to prolong our dependence on fossil fuels. This report, however, despite still containing some risky modelling choices on technologies such as carbon capture, storage and utilisation technologies and biofuels in order to reach net zero by 2050, confirms that new public finance for fossil fuel projects needs to end now.  

And how is the world faring right now according to the IEA?  

Global emissions by scenario, 2000-2050. Source: World Energy Outlook 2021 Report by IEA, available here: https://www.iea.org/reports/world-energy-outlook-2021

The world is on the track for a catastrophic 2.6°C of warming by 2100 with the measures that have actually been put in place, even taking into account policy initiatives that are currently under development, according to the IEA. Even if we add the newly announced climate pledges in the run-up to November’s COP26 climate summit, we are still going overboard, with a temperature rise of 2.1 °C above preindustrial levels in 2100. 

Is there a solution?  

IEA projections show that we need a radical transformation of our energy systems to stay on a course below 1.5°C, clean energy spending must triple to curb climate change – and that of course means ending public finance for new fossil fuel projects.  

Natural gas demand according to the Net zero scenario, 2010-2030. Source: World Energy Outlook 2021 Report by IEA, available here: https://www.iea.org/reports/world-energy-outlook-2021

In the net-zero compatible scenario, demand for fossil gas needs to drop sharply from 2025 onwards and reach not more than 1,750 billion cubic metres in 2050. The IEA has reiterated the conclusions from its landmark Net Zero by 2050 report that the necessary rapid drop in oil and natural gas demand means that no fossil fuel exploration is required and no new oil and natural gas fields are required beyond those that have already been approved for development. 

Solar PV and wind generation by scenario, 2010-2030. Source: World Energy Outlook 2021 Report by IEA, available here: https://www.iea.org/reports/world-energy-outlook-2021

The IEA’s recipe to prevent the worst consequences of climate change is to accelerate the decarbonisation of the electricity mix, focus on energy efficiency, and cut methane emissions from fossil fuels.  

According to the report we need to triple global clean energy investment by 2030. Furthermore, investing heavily in energy efficiency means that the energy intensity of the global economy needs to fall by 4 per cent annually this decade. 

The role of public international finance 

According to the IEA, a key role in accelerating the energy transformation is reserved for public financial institutions.  

Getting the world on track for 1.5 °C requires a surge in annual investment in clean energy projects and infrastructure to nearly USD 4 trillion by 2030. Some 70 per cent of the additional spending is needed in emerging market and developing economies. 

Clean energy and infrastructure investment, 2018-2030. Source: World Energy Outlook 2021 Report by IEA, available here: https://www.iea.org/reports/world-energy-outlook-2021

Alongside the necessary policy and regulatory reforms, public financial institutions – led by international development banks and larger climate finance commitments from advanced economies – need to play crucial roles to bring forward investment in areas where private financing is missing.   

IEA analysis has repeatedly highlighted that a surge in spending to boost deployment of clean energy technologies and infrastructure needs to happen quickly.  

However, more investments in renewables alone cannot lead to decarbonisation: public finance institutions also need to send a strong signal to the markets, by stopping all support for fossil fuels, including fossil gas. This is crucial if international development banks want to make a meaningful contribution to climate change mitigation and adaptation and to long-lasting economic transition in its countries of operation. 

Kenya energy project exposes the dark side of EU development funds

For several years, Bankwatch and other civil society groups have been raising the alarm about the risk of grave human rights violations around the Akiira geothermal energy project in Kenya. In June 2019 we warned that the local community is facing an imminent forced eviction to make room for the energy project. At the time, the European Investment Bank (EIB) was considering a EUR 155 million loan to the controversial project. Four months later, the Bank informed us it had decided to pull out.

This should have been a sigh of relief. Instead, a few weeks later the village – home to 47 families living in abject conditions – was burned down in its entirety, and the local residents were chased away by the police. The humanitarian crisis that ensued necessitated a Red Cross intervention to aid the inhabitants, especially children, who had been left without food or shelter. 

Even more astonishing, our investigation revealed that while the EIB has stopped considering a loan to the Akiira project, it has in fact already been financing it through a different channel.

It turned out the 70MW geothermal energy project has been a beneficiary of European public money through the Global Energy Efficiency and Renewable Energy Fund of Funds (GEEREF), a joint initiative of the EIB and the European Commission in which the Bank plays both an advisory and investor roles[1].

In GEEREF’s Impact Report for 2015, Akiira is mentioned as an example of good stakeholder engagement. Yet, in August 2021, the EIB’s Complain Mechanism confirmed that the violent eviction of the villagers constitutes a breach of the Bank’s standards. In its response to members of the impacted community, the Mechanism also admitted that the EIB’s monitoring of the GEEREF’s social performance was insufficient.

These conclusions are shocking, showing that despite the EIB’s promises to make every effort to ensure that the EIB’s Environmental and Social Standards are respected throughout all of its projects it ignored the raised problem and did nothing to inform and advise GEEREF how to prevent eviction and address project’s non-compliance. 

One third of the EIB portfolio unknown to the public

Nevertheless, the Akiira geothermal energy project is emblematic of a systemic issue with financing by the world’s largest multilateral lender. A third of the EIB’s 2020 investments – a total of EUR 22.6 billion – were made through financial intermediaries. These are typically commercial banks, national promotional banks and public financial mechanisms such as GEEREF.

Projects enabled through these intermediaries usually escape public scrutiny, and it is extremely difficult to trace the EIB’s involvement. These project also lack proper environmental and social due diligence as it is entirely delegated to the financial intermediaries, including for high risk projects.

In the case of Akiira, the EIB’s Complaint Mechanism stated the Bank was supposed to “allocate sufficient resources to perform the same standard of due dilligence as it usually applies to its own operations.”

Such due diligence would have spotted the risk of human rights abuse this project entailed for the local community. Yet, the absence of screening for potential environmental and social ramifications of projects enabled through financial intermediaries has been evident in a number of cases Bankwatch has been monitoring.

In Croatia, the construction of the Ilovac hydropower plant in a protected Natura 2000 area has led to the loss of aquatic species in the Kupa river. Only after it was built, thanks to civil society groups fighting to expose the project’s financiers, did the EIB’s contribution via the Croatian Bank for Reconstruction and Development (HBOR) come to light.

The Blagoevgradska Bistrica hydropower cascade in Bulgaria, which was constructed without an environmental impact assessment inside multiple protected areas, has dramatically altered the river’s hydrology. Nevertheless, as civil society later managed to reveal, the project promoter received EIB money through a loan to the commercial bank Allianz Bank Bulgaria PLC after the hydropower project was already built.

In October 2019, at the same time the EIB confirmed it is ditching the Akiira geothermal energy project in Kenya, the Bank also informed it is withdrawing from the Vinca waste incinerator project in Serbia. And just like in Kenya, right after activists who had been campaigning against the controversial Belgrade project welcomed the EIB’s decision it turned out that the EIB-financed Marguerite II Fund remained a shareholder in the company contracted to build the waste incinerator. 

Later the Bank also acknowledged that “the Marguerite II Fund is required to ensure that investments comply with the EIB  requirements, including on environmental and social matters,  through the legal documentation, which i.a. includes the obligation to  comply with national laws and with EU legislation, as applicable.”

High time for EIB to open up about intermediate lending

The EIB’s board of directors is set to adopt a new version of the Bank’s environmental and social standards within weeks. Yet, the draft policy offers little to ensure EIB investments do not harm the environment or local communities.

This document does introduce a new, dedicated standard for intermediated finance supposedly intended to help improve the evaluation of the social and environmental implications as well as the development impact of such investments. But, alarmingly, the text makes little to no attempt to address the fundamental concerns raised in cases like the Akiira project.

In comments on this new standard jointly submitted by Bankwatch and 15 other NGOs in August 2021, we called on the EIB to disclose the relevant details of higher risk projects supported through financial intermediaries, improve the appraisal and monitoring of high risk clients and projects, and ensure that communities affected by such projects have access to remedy.

Revising the EIB’s environmental and social standards is an opportunity for the Bank to learn from the experience of the Akiira geothermal energy project and other reckless projects. Enough damage has already been done by projects realised through financial intermediaries with no transparency or due diligence. The EU’s house bank has the responsibility to ensure that European public money, whether invested directly or indirectly, does not end up wrecking the natural world and enabling human rights violations.

NGO recommendations from a joint paper sent to the EIB:

  • Improving appraisal and monitoring of high-risk clients and sub-projects – Specifically, the EIB should define higher risk sub-projects which should be given higher attention, including by EIB staff. This should include sub-projects which may have human rights implications, affect indigenous or vulnerable communities, involve displacement of affected communities, support fossil fuels, or those which impact protected areas and areas of high biodiversity value.
  • Improving development outcomes, including climate action and human rights protection – the EIB should measure and disclose its climate commitments in financial intermediaries (FI) lending. It should invest only in FI clients who commit to develop a portfolio decarbonisation plan to achieve emissions reductions in line with the Paris Climate Agreement. 
  • Transparency – EIB and financial intermediary should disclose the name, sector, beneficiary, location and planned approval/signing date of higher risk sub-projects financed via FIs on EIB’s website and on the FI client’s website; FI should be obliged to provide the EIB with environmental and social documents and to inform about the  EIB’s involvement in sub-projects at the project sites for high risk projects, ensuring that it is clearly visible and understandable to affected communities.
  • Access to remedy – without transparency about sub projects, the EIB is effectively denying complainants their right to be heard and to access redress. The EIB should require its FI clients to disclose the EIB’s involvement in sub-projects and about the Complaint Mechanism at the project sites, ensuring that it is clearly visible and understandable to affected communities.

Notes:

[1] The financing structure of this deal is rather intricate: GEEREF invested in a fund (DI Frontier Market Energy and Carbon Fund) that partly finances the project. GEEREF is advised by both branches of the EIB Group: the European Investment Fund (EIF, the private sector branch of the EIB Group) and the EIB itself. Furthermore, the EIB is an investor in GEEREF and the EIF represents the European Union’s shareholding in GEEREF as Trustee on behalf of the European Commission.

EIB misinterprets EU’s development finance needs

In fact, the EIB is currently rewriting its environmental and social safeguards, but the draft policy remains a far cry, not only from the standard one might expect from the world’s largest international lender, but also from the equivalent policies in other development banks.

And even before this process is completed, the EIB announced last month a so-called new development branch.

The EIB’s lackluster attempts to act as a development bank have been evident since the first evaluation of its external operations in 2010. And yet, there has been no decisive institutional follow-up on the recommendations from that evaluation. In fact, even the  High-Level Group of Wise Persons concluded recently that the Bank has failed to improve the impact of its financial support to development projects.  

Only scarce information about the new ‘development hub’ was presented to the public. The EIB’s press release had nothing about new, dedicated strategies for improved development impact or how the Bank plans to  increase cooperation with other European financial institutions. In reality, the EIB’s superficial announcements are nothing more than internal reshuffling and rebranding, which are to ensconce it in its current investment business model.  

Hard-pressed, an EIB official explained to Devex that having more staff will be one of the crucial elements in the changed business model. It is part of the Bank’s intention to advance complicated projects faster, disbursing loans faster and getting interest payments faster which, in turn, should increase the Bank’s revenues to cover the increased cost of staff. Magic. 

Civil society organisations have long been urging the EIB to ensure it has the staff necessary to deliver on its development promises. However, we have also pointed to the wrong internal incentives pushing the Bank’s staff to throw out big loans for big projects whose development impact was questionable. Impact financing is not about speed. It’s also not about how much money you manage to invest in developing countries. Impact financing is about enabling projects that are in the interest of the greater society, knowing who benefits and how, improving standards in and beyond the project and contributing to wider, systemic improvements. Obviously, the EIB is fully aware that such projects would require time to prepare even if more staff is involved, forging partnerships in project implementation, longer maturity and bigger financial risk (e.g due to local currency exposure). The EIB has had enough time to prepare a meaningful proposal and it should have openned it for public discussion.

It is also worrying to learn that the Bank is claiming it still hasn’t distinguished its EU operations from its non-EU ones and that a new branch will finally enable dedicated financials, objectives and key performance indicators for measuring results.

Well, that is not how the EIB has been portraying its outside EU operations so far. They have always been separated in its operational plan, separately budgeted and reported. Most of these operations are covered by various EU mandates setting specific objectives and providing additional guarantees against risks and losses. It is incredible that the EIB, after decades of external lending, has finally found it has it all upside down and needs to create an internal branch to put things straight. Even more magic.    

In reality, much more fundamental reforms are needed if the EIB is to fulfil its development mandate. It’s just not enough to create an internal branch, accelerate spendings and rebrand existing local offices as “hubs”.

A rigorous project selection, based on policy objectives, must be followed by prudent environmental, social and human rights due diligence and accompanied with the highest level of transparency. It is outrageous that the EU’s house bank has been involved in projects devastating biodiversity, violating human rights and enabling corrupted elites.

The EIB needs to carefully monitor its operations and work in partnership with promoters and other local stakeholders. Finally, it needs to report, not only on the length of train tracks it had supported, but also on how it actually contributed to the strategic objectives of the EU’s external action such supporting democracy, the rule of law, human rights and fundamental freedoms.