Blog entry

Fossil gas investments undermine green recovery in Romania

As the European Commission currently reviewing the Romanian Recovery and Resilience Plan there is a risk billions of euros in public money could end up pampering the fossil fuels industry. Once approved, EUR 29.2 billion will be available to fund Romania’s post-pandemic economic recovery, as well as the green and digital transitions – core processes of the EU’s Recovery and Resilience Mechanism. A recent analysis of the RRP’s energy component shows that despite an impressive 40.8 per cent share of expenses related to the green transition, a large part of the plan’s investment proposals is based on fossil gas. The energy sector has been allocated approx. EUR 1.6 billion divided into six investments and six reforms. The most substantial investments are in fossil gas, both on the production side, as well as transport and distribution, with the hydrogen component attached only to meet the European environment requirements.

A gas fuelled recovery

In the region of Oltenia, connection to the fossil gas distribution is patchy, but the potential of renewable energy is considerable. And yet, Romania’s RRP foresees EUR 400 million allocated to the expansion the fossil gas network. It consists of approximately 4000 km of pipelines capable to transport also hydrogen and other low-carbon gases in a proportion of up to 10% of the capacity. Regardless of the need to reduce the greenhouse gas emissions in a coal-dependent region, this proposal from the recovery plan actually commits to increase the emissions through the use of fossil gas. Besides fossil fuel and hydrogen distribution networks, the plan includes additional investments in two new 159 MW gas-fired power-plants. These plants are intended as part of two facilities aimed at proving the technical and economic benefits of producing hydrogen mixed with gas and renewable energy sources. These projects are expected to receive EUR 585 million, representing nearly 40 per cent of the total financial allocation for the RRP’s energy component. The plan does not specify what type of hydrogen will be produced, so the carbon footprint of the proposed projects is difficult to assess. In turn, these investments risk end up delaying the much-needed energy transition. Adding the hydrogen component to the fossil gas projects is effectively greenwashing. It is the fossil fuel industry’s attempt to remain relevant throughout the decarbonisation process.

Potential for renewables remains untapped

Apart from expanding fossil gas, Romania also plans to reform its renewable energy sector. The main initiatives aim at revising the existing legislative framework and introducing support instruments, such as Power Purchase Agreements and Contracts for Difference, to accelerate the development of the sector. Despite Romania’s considerable potential for offshore wind energy, the plan fails to prioritize this sector. and investments in storage capacities are minimal. Only EUR 32.5 million will be allocated to a storage project with an installed capacity of 50 MW, and a EUR 167 million state-aid scheme will support research and development in this sector, to bring extra 100MW installed capacity by the end of 2025. Overall, the renewable sector will receive around 25 per cent of the total allocations under the energy component, insufficient for achieving Romania’s 2030 renewable energy target.

Romania’s recovery and resilience plan:

Investments and reforms conflicting with the decarbonisation process of the energy sector

Coal phase-out spoiled by gas

The Romanian recovery plan also puts forward a coal phase-out date to 2032. The necessary legislative framework for this transition will be developed to include a concrete timeline for coal replacement, mine closure and conservation measures, as well as re-skilling and professional training or socio-economic measures for the affected communities. Unfortunately, this coal phase-out process largely implies switching many of the coal units to fossil gas-based ones, preventing Romania form achieving its climate goals. Leaders need to be decidedly more ambitious with this transition, and take into account the technological developments in the renewable energy field. A final approval of the Plan is expected in September as the revision process is still ongoing. According to recent reports,the European Commission criticized the investments in fossil gas and hydrogen, but the national authorities are keen on proving their viability. Hopefully, the approved version of the Recovery Plan will exclude these harmful measures that go against Romania’s energy and climate commitments.

More stakeholder participation needed in preparation of new cohesion programmes

A new phase of regional policy has just started in the EU. At the beginning of the summer, the new cohesion policy legislative package came into force, paving the way for the programming of EUR 373 billion in European Structural and Investment Funds between 2021 and 2027. The next step is the submission of Partnership Agreements and operational programmes by Member States, followed by their approval by the European Commission, before project promoters can ask for funding.

Some new rules have been introduced to steer the policy, including new provisions on climate protection: the ‘do no significant harm’ principle (already in the Recovery and Resilience Facility) has been made part of the Regulation and new targets for spending on climate have been established – 30 per cent of the European Regional Development Fund (ERDF) and 37 per cent of the Cohesion Fund (CF).

One aspect that has not changed since the previous package is the pivotal role of stakeholders in shaping cohesion policy, defined by the partnership principle. Partnership has always been a cornerstone of the EU’s regional policy, allowing representatives of local authorities, socioeconomic actors and civil society to have a say in the way this policy is implemented. In 2014, the partnership principle was significantly strengthened with the introduction of the European Code of Conduct on Partnership as a legal act attached to the Common Provision Regulation; since then, Member States have had clear guidance on how to involve partners throughout the whole programming cycle, from the planning of investments to the implementation monitoring to evaluation.

In particular, the Code of Conduct sets obligations for Member States to consult relevant partners in a timely, meaningful and transparent manner. Concretely, this means that:

Relevant partners are identified early;
Partners are involved early enough in the programming;
Partners are able to join the process early with information in time to be able to give input;
Partners may be offered reimbursement, capacity building opportunities and technical assistance; and
Inputs are adequately considered and contributors are given guidance and feedback.

The introduction of the Code of Conduct has been instrumental in guaranteeing the engagement of stakeholders in the budgeting process, and its reaffirmation for the 2021-2027 period represents an important sign from the Union on the role of civil society.

Recently, Bankwatch and Climate Action Network (CAN) Europe analysed the stage of the advancement of Partnership Agreements and operational programmes in 11 European countries: Bulgaria, Croatia, the Czech Republic, Estonia, Germany, Hungary, Latvia, Poland, Romania, Slovakia and Slovenia. The main purpose of this study was to investigate whether the provisions imposed by the Code of Conduct have been satisfied in most countries. Special attention was given to the involvement of environmental CSOs in the process and to environmental decision-making: cohesion policy falls under the scope of the Strategic Environmental Assessment directive (Directive 2001/42/EC), and consequently Member States are required to carry out a screening procedure to determine whether plans will affect the environment.

The partnership principle is also fundamental to reaching the ambitious climate and environmental targets set by the European Green Deal:

in order to achieve a green transition that leaves no one behind, all actors at all level need to be heard and included in the process.

Unfortunately, our findings are not very promising.

Countries are at very different stages of the preparation process: some are at a significantly more advanced level of preparation of the documents, like the Czech Republic and Hungary. Yet some conclusions can be drawn even from such a preliminary analysis. For example, drafts are not always publicly available, and it seems that several Member States are reluctant to open consultations to environmental CSOs. The latter represents a clear breach of Article 4 and 5 of the Code for Partnership Agreements and operational programmes on the identification of relevant partners to consult. Mandatory strategic environmental assessments have not been conducted yet in most states, and in the most extreme cases civil society has no information at all (Germany and Slovenia). Altogether, these findings are alarming signs that the partnership principle risks not being thoroughly enforced by the time the draft national programmes are submitted for the Commission’s approval.

This approach would not only breach the principles laid down in the Code of Conduct, but it would also be inconsistent with the importance given to the role of the European citizens under the current Commission. Since the beginning of her mandate, President Von der Leyen has emphasised the need for citizens to play a leading and active role in building the future of the EU. At the event ‘Engaging Citizens for Good Governance in Cohesion Policy’, organised in February 2020 right before the beginning of the lockdowns in Europe, von der Leyen restated her commitment to engage citizens and civil society more. On the same occasion, the Commissioner for Cohesion and Reform, Elisa Ferreira, addressed the role of citizens in cohesion policy: there is large consensus that engaging with citizens is part of good public governance practice.

CSOs are a potential bridge to involving citizens in EU policies: this is why the partnership principle is at the heart of cohesion policy and the green recovery. A proper application of the Code of Conduct is the first step towards the achievement of all these objectives. On top of this, participation is now even more important for creating the acceptance and ownership that are necessary to reach the ambitious targets under the Green Deal framework.

Judging from the findings of our study, more effort should be made to ensure the role of CSOs in the process. If this does not happen, the lack of citizen involvement may compromise the content of Partnership Agreement and operational programmes and undermine a fair green transition.

No renovation wave in sight across EU recovery plans in central and eastern Europe

The text was originally published at www.energypost.eu.

One of the most crucial sectors to address in order to achieve climate targets through EU recovery spending is buildings. Buildings account for 40 per cent of the energy consumed and are responsible for 26 per cent of the greenhouse gases emitted in Europe. Renovating the building stock can also lead to job creation and tackle other social challenges like air quality and energy poverty.

The recent Renovation Wave strategy suggests doubling the renovation rate and improving the quality of renovation. This should be done through the application of the ‘energy efficiency first’ principle, accelerating the integration of renewables in buildings and decarbonising heating systems. Many actions are planned at the EU level, some of which are included in the recently released Fit for 55 package.

The potential of the Recovery and Resilience Facility to speed up renovations is vast. It is no wonder the Commission has strongly encouraged Member States to include dedicated investments for buildings in their plans, identifying this sector as one of the six flagship initiatives in the EUR 672.5 billion recovery fund. The Commission went as far as proposing concrete measures to the governments, such as dedicated home renovation support schemes and on-stop-shops facilitating energy renovation projects.

In the end investments in building sector are present in almost all national recovery plans. The Commission estimates that between EUR 50 and 55 billion are planned for building renovation throughout Europe, following only behind clean transport.

The need for a renovation wave is particularly evident in central and eastern Europe (CEE) due to its less efficient building stock and higher rates of energy poverty, particularly in Bulgaria, Slovakia and Hungary. Since the region is more dependent on EU funds than other parts of Europe, the recovery plans present a key opportunity to invest in long lasting building renovation measures that contribute to climate action.

CEE Bankwatch Network assessed the planned measures in eight countries – Bulgaria, Czechia, Estonia, Hungary, Latvia, Poland, Romania and Slovakia – and finds that all are planning funds for building. Estonia is preparing to renovate 100 000 individual homes and 14 000 apartment buildings. Romania will establish a dedicated renovation wave fund, and Bulgaria will for the first time tackle energy poverty for a number of households throughout the country.

But given the enormous funding needs, more allocations for the building sector are needed. For instance, in Czechia, the recovery plan is supposed to largely contribute to the national renovation programme, but it will support only 35 000 medium and complex-deep renovations, when the national strategy in the sector estimates twice as many renovations. In Bulgaria, an interesting measure to support renewable energies in residential buildings not connected to district heating and gas networks is only available to too few participating households. A five to tenfold increase would actually be needed to tackle the energy poverty needs.

Energy efficiency and renewables in buildings in national recovery and resilience plans

A lack of funds is not the only reflection of the low ambition of governments to really tackle this issue. National plans are supposed to include reforms as well, and a proper legislative framework is needed to remove barriers and put in place incentives when it comes to improving energy efficiency. Yet in many countries some loopholes will make it harder to facilitate renovations.

For instance, in Latvia, there are no plans to introduce much-needed individual heat meters in multi-apartment buildings. In Hungary, the recovery plan should be the occasion to introduce a comprehensive energy housing scheme that includes non-refundable element, given the marginal availability of grants in the national energy efficiency programme. Also, in Romania the EUR 2.2 billion Renovation Wave Fund might not be enough without training the workforce to adapt to the stricter renovation standards.

Several member states, are also missing the opportunity to modernise heating systems, and some are planning support to fossil fuels based heating, sometimes at high levels. They pose a risk of using more fossil fuels at the time when the EU wishes to switch to more renewables. Slovakia proposes an allocation to support gas boilers installation for 40 000 households affected by energy poverty. While the intention is laudable, this is a short-term solution and the recovery plan would be better used to support renewables and energy efficiency. Poland as well included widespread support for gas heating systems.

These measures reflect a lack of vision to transform the building stock at a fast pace. In many recovery plans, CEE countries refer to outdated strategies to justify investments for building renovation. The mindset of countries is still focused on the former 2030 objectives and in some cases, even those objectives aren’t mentioned. This is likely to affect the quality of renovation and can lead Member States to limit their new measures to a mere improvement of existing solutions.

Slovakia plans weak renovations with the aim of complying with a national strategy relying on insufficient assumptions (such as a decrease of greenhouse gas of 25 per cent by 2050). Bulgaria as well shows limited ambitions as it is prioritising investments for Class C energy efficiency measures, thus hampering other households to achieve close to zero energy consumption.

The Recovery and Resilience Facility is an opportunity to massively improve energy efficiency and adapt the building stock to new standards. It is regrettable that some Member States are planning to comply with only the former 40 per cent greenhouse gas reduction target by 2030 just when the Commission proposes a legislative package to achieve a 55 per cent reduction.

These measures are likely to make only little energy savings compared to the tremendous figures set out in the Renovation Wave, and it severely hampers the implementation of this strategy. As it stands, the recovery plans will not contribute to the necessary transformation of the building stock in central and eastern Europe.

The heroic dust monitor

That the Western Balkans are plagued with toxic air is, unfortunately, common knowledge for anyone living in the region. But in the absence of publicly available air quality data, Bankwatch’s air quality monitor has been able to expose the connection between air pollution and coal throughout the region for the first time – a link that has proved vital in communities’ efforts to loosen the stranglehold of the dirtiest of fossil fuels.

In fact, every major achievement in Bankwatch’s air pollution work has been enabled by our dust monitor. For five years it has been working in the most polluted regions in the Balkans and central Europe, providing us and communities with a huge amount of invaluable data.

So far, the monitor has visited 16 locations, some of them twice. There, it is measuring dust pollution in the ambient air, specifically coarse particles (PM10) and fine particles (PM2.5). The indicative monitoring is done for a period of one month, which is enough to get some preliminary data on the ambient air quality at the location, and by using the meteorological station attached to the monitor, to also get some indication of possible sources.

In all locations, the culprit has been the same – coal. Outdated power plants, ash disposal sites and open-pit coal mines are major sources of air pollution in their regions. These facilities seriously impact the natural environment, quality of life and public health. Local residents see the pollution, smell the burning coal and feel the toll it is taking on their health, but there is not much they can do without data to support their claims.

Authorities provide only limited official air quality data, or none at all. Environmental groups have long been struggling to get more scientific evidence and more updated or real-time air quality data in order to prove the link between coal combustion for energy and air pollution so they can help those communities reduce their exposure.

This is the gap that the dust monitor managed to close in the places it visited. These people have every right to know the condition of the environment they are living in and the right to ask for air pollution to be within the legal and health protective parameters.

By providing just one month of data, the monitor was able to give some of the locals just the right amount of information for them to get some improvements. In Romania, the dust monitor has helped people get the resettlement they had sought for years, to get away from ever-expanding mines; in Hungary it helped bring about the closure of small local coal mines that were polluting remote mountainous villages; in Bosnia and Herzegovina the monitor helped get a better knowledge of the health toll by the old coal power plants. In other cases the monitor has given communities additional ammunition in their efforts to stem construction and expansion of new polluting facilities; and it has motivated IT professionals to start looking for cheaper, long-term ways to track air quality so that local residents can have data available at any time.

This is just a small list of reasons why the dust monitor has become somewhat of a hero for the local communities plagued by coal pollution. Whenever it was direly needed, it was there, travelling thousands of kilometres to help those in need. We returned the favour by keeping it clean, regularly serviced and calibrated, making sure it can continue fighting the good fight.

Contact us!

Contact us if you are an activist, civil society organisation or local community representative from the Balkans interested in monitoring air pollution near you: pollution.monitor@bankwatch.org.

How to ensure public control over projects funded by development banks in non-democratic regimes

Video tutorial in Russian and Uzbek languages is available here.

Hundreds of projects in Uzbekistan have been funded by development banks, with billions of dollars invested in energy, water and sanitation, industry, the financial sector and reforms. Investments at such a scale require scrutiny and public control to ensure they work for the good of people and nature, especially in countries with non-democratic regimes.

CEE Bankwatch Network monitors public finance institutions in Central Asia, and in Uzbekistan in particular. Together with local communities and other NGOs, we expose violations of human rights and social and environmental standards and advocate for the improvement of public investment projects.

For this purpose, we developed a video-tutorial in Russian to inform civil society organisations (CSOs) and activists in Uzbekistan and Central Asia about how they can protect the environment and human rights in the region when they are threatened by development banks. With the support of Uzbek Forum for Human Rights, the video tutorial is also available in Uzbek.

The tutorial covers background information about the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB), including the banks’ accountability mechanisms and the social and environmental obligations they need to follow. It also includes information about Bankwatch’s experience with public monitoring of development banks.

The focus is on the mechanisms for the public to influence the decisions of the banks and their clients in terms of information disclosure, stakeholder engagement, environmental and social impact assessment and mitigation, retaliation prevention, compensation for land acquisition, effective remedy, etc.

We explain how public investments work and how the public needs to be involved in the decision-making process to ensure the compliance of the projects and the companies funded by the banks with environmental, social and human rights standards.

This tutorial serves representatives of civil society organisations, civic activists, individuals and communities who have been or may be affected by projects funded by international development banks, as well as journalists covering investment activities in the region.

Estonia barely scratches the surface on green recovery

Public participation in the planning was limited and lacked transparency, and the process suffered from long delays, as we flagged during the preparation of the plan. In addition, the long-awaited 429-page draft of the plan provides disappointingly vague details of the planned measures, leaving too much room for interpretation and thus for environmentally harmful investments. Although the recovery plan is based on the country’s long-term strategy Estonia 2035, the biodiversity sections of the strategy have not been included in the recovery plan. Environmental organisations highlighted this issue during the first round of consultations. Yet, the government chose to take no action, despite the uniquely large fund, the poor state of Estonian ecosystems, the EU’s biodiversity targets, the EU Green Deal and the Estonia 2035 strategy.

Green recovery excludes biodiversity

Estonia’s recovery plan has neglected nature as a part of the green transition. While the plan includes many opportunities to help various industries transition their operations to more environmentally-friendly systems, the very environment these industries have degraded in the past decades has been forgotten. Even though the funds may help reduce the environmental impact of industries in the future, a lot of the damage is already done and should be remedied. In addition to reparations, protecting nature and ecosystems should be at the centre of the green transition due to the sheer basic necessity of irreplaceable ecosystem services and nature’s potential to mitigate and assist in adapting to climate change. Valuing nature is essential for a successful green recovery. Some recovery plan measures which claim to contribute to climate action are potentially harmful to biodiversity – with a holistic view of green transition, this should be impossible. Climate action and biodiversity should not be competing for investments, as they are two sides of the same coin. The contradiction is partly an issue of oversimplification: in mainstream conversation, climate change is often reduced to the amount of CO2 emissions, which dismisses the complexity of the process. While CO2 emissions are indeed a key concern, narrow framing has allowed for the development of nature-harming ‘climate action’ projects, one of the most glaring examples of which is unsustainable forest biomass. This framing has allowed us to disconnect climate goals from biodiversity targets, which is detrimental for the green transition process in the long term.

‘Do no significant harm’ assessment misses out on harmful aspects

The ‘do no significant harm’ assessment that is included in the recovery plan ignores multiple potentially harmful consequences of certain measures. For instance, the assessment for the measure supporting companies’ digital transition identifies only the potential impact of digitalisation on climate goals, but completely ignores whether the measure can be used to promote the efficiency of fossil fuel-related or other environmentally harmful sectors. The measure aiming to support companies’ export competitiveness is a similar case. Its ‘do no significant harm’ assessment is based on an erroneous assumption that Estonia exports almost exclusively information technology (IT) solutions and thus the measure is intended mainly for IT companies. The assessment, however, ignores the fact that shale oil and woody biomass are also major export items in Estonia. [/vc_column_text]

As such, the measure could potentially be used to allow EU funds to boost the production, export and use of fossil fuels or spur further logging, loss of biodiversity and the declining carbon sink in Estonia.

Recovery plan measures could harm biodiversity

One measure which is potentially harmful to biodiversity is the valorisation of bioresources. The key issue is that the description of the measure does not indicate specifically what will be invested in, or flag projects which will not be supported. Although the plan states that the focus is on valorising waste and by-products, which do not increase pressure on ecosystems, valorisation of other types of biomass is not excluded. Thus, the measure in its current form does not prevent harmful investments. For instance, while energy production from biomass is not supported by this measure, energy production from waste or its by-products is supported. This raises many obvious concerns regarding how waste is defined – the forestry industry and environmental organisations have very differing understandings – and how the process is monitored to ensure that only waste is used. In addition, the measure claims to promote the sustainable use of bioresources while not explaining what is deemed sustainable. The description of the measure refers to no limits, maximum quantities or potential safeguards (barring references to EU directives) to actually deliver the ‘sustainable use’ promise. It is a common misconception that valorisation or other forms of efficiency improvement naturally reduce the use of the resource, when in fact growing demand may increase the overall quantities needed in order to make the most profit. In the context of continuously increasing pressure on bioresources, setting limits is crucial for preventing further ecosystem degradation. Another measure which indirectly threatens biodiversity is the Ülemiste multi-modal transport terminal. While promoting sustainable mobility via building a multi-modal terminal is positive from a climate perspective, the terminal is part of the Rail Baltic railway project. According to the current plans, however, building the new railway will likely negatively affect ecosystems in Natura 2000 areas due to the chosen railway route. In the ‘do no significant harm’ analysis, this connection was not taken into account.

European Commission flags unlawful logging in Natura 2000 areas

Early this June, the European Commission opened an infringement procedure concerning logging activities in Natura 2000 sites in Estonia. The procedure claims that Estonian national law is not aligned with the EU Habitats Directive and Strategic Environmental Assessment Directive, after the Commission identified 217 sets of site-specific protection rules which were adopted without the required environmental assessment. This infringement procedure validates many concerns voiced by Estonian environmental NGOs in previous years regarding loosened logging regulations, including in protected areas. The infringement procedure further emphasises that Estonian nature protection has serious systemic issues, which have affected even those areas that should be most protected. The recovery fund was an opportunity to remedy them.

Current battles over nature protection and the unwillingness to use the recovery fund to invest in biodiversity illustrate the state’s constant prioritisation of economic gain over functioning ecosystems.

Although Estonia’s recovery plan sets out multiple positive measures, it lacks a holistic vision of a green recovery, scratching the surface with a natureless green recovery, providing vague details of measures, and allowing funding for harmful measures. Good intentions do not automatically lead to good outcomes – while the recovery plan was not created with a malicious intent to fuel ecosystem-destroying industries, it also does not prevent the funds from being used for these purposes.

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