Blog entry

Bosnia and Herzegovina: Who gains from extending the FBiH renewables support scheme?

Like the rest of its Western Balkan peers, in 2012 under the Energy Community Treaty, Bosnia and Herzegovina (BiH) committed to reach a certain percentage of renewable energy – not just electricity – by 2020.

In the case of BiH, its target was 40 per cent, based on the fact that its share in 2009 was already 34 per cent due to its existing hydropower plants and the widespread use of wood for heating.

Bias towards hydropower generated resistance

Bosnia and Herzegovina’s respective entities drew up action plans for reaching the target. In the electricity sector, these mainly consisted of building new hydropower plants. Various authorities across BiH had been handing out concessions for small hydropower plants since 2006, so this was the perfect opportunity to set up an incentives scheme to support them.

Like many EU countries, BiH’s entities set up renewables support schemes based on feed-in tariffs. Their action plans defined how much of each technology would be supported by buying off all their electricity at a higher-than-market price.

But unlike most EU countries, which had earlier used feed-in tariffs to stimulate new technologies and massively bring down the cost of solar and wind, the Western Balkan governments, including in BiH, stuck to what they knew – small hydropower – with hugely damaging consequences for rivers, streams and nearby communities across the region.

Nor did this help much with reaching the renewable energy targets. By 2018, Bosnia and Herzegovina had reached just 35.97 per cent of overall renewable energy in their energy mix – and it is not clear how much progress has been made since then. In the same year, small hydropower contributed just 2.6 per cent of total electricity.

An end to small hydropower subsidies…

In late 2020, public opposition to small hydropower had reached a peak and the Federation authorities pledged not to grant new incentives to such projects after the end of the year.

In fact, to achieve this, all they had to do was nothing. The whole incentive scheme was based on a 2020 target, so it automatically expired. Either the target had been reached or not; either companies had entered the support scheme or not.

The Federation had in any case prepared – but not yet adopted – a draft new Law on Renewable Energy and needed to set renewable energy, climate and energy efficiency targets for 2030. It also needed to bring any new incentive system into line with newer EU rules stipulating that any support schemes need to be based on competitive bidding and premiums rather than feed-in tariffs.

Or not?

Yet instead of just adopting the new law it has already prepared, the Federation government has now proposed a single-item addition to the existing law on renewables, due to be discussed in the House of Representatives on Tuesday 30 March.

Purporting to fill a legal vacuum by extending the existing action plan’s 2020 target until new strategic documents are ready, it fails to mention that this would also automatically extend the current feed-in tariff scheme, which is based on the action plan.

In failing to mention this, the government is clearly trying to pull the wool over the House of Representatives’ eyes, especially as the changes have been proposed via an ‘urgent procedure’ process, giving little time to debate their real implications.

Who gains?

There is no reason to extend the 2020 target. The only reason for this move could be to enable some renewable energy plants that did not manage to enter the feed-in tariff scheme by the end of 2020 to do so.

We cannot say for certain which producers will gain from this decision, if adopted, but one thing is for certain: the public will lose. Once again, it will be bill-payers who will continue to support a select group of businesses via this outdated support scheme.

The House of Representatives must recognise this proposal for what it is and refuse to approve it.

This publication was produced in collaboration with EuroNatur in the frame of the joint research and advocacy work on hydropower finance and subsidies.

Indorama Agro workers are fighting to register the first independent trade union in Uzbekistan

On March 19, over 200 employees of Indorama Agro in the Syrdarya region of Uzbekistan held a meeting to establish an independent trade union, “Xalq Birligi” (People’s Unity), the first of its kind in the country.

In a joint statement Bankwatch along with 11 other international CSOs, is calling on the government of Uzbekistan and international development banks to ensure registration and support to the trade union established by Indorama Agro employees in the Syrdarya region.

Previously, Indorama employees in the Syrdarya region raised their concerns multiple times about the massive job cuts, poor working conditions, unfair payment, gender discrimination, and retaliation against complainants. However, the company was reluctant to address them in any significant way. People had to call on the local authorities, international CSOs and international development banks active in the region, and ask them for protection of human rights.

In 2020-2021, the European Bank for Reconstruction and Development (EBRD), and the International Finance Corporation (IFC) approved $130 million loans in total to Indorama Agro to enhance economic inclusion, especially for young people and women in rural areas. Both banks recognise the right of workers to elect their representatives, form or join workers’ organisations of their choosing and engage in collective bargaining.

Moreover, according to the EBRD Environmental and Social Policy, the client – in this case Indorama Agro – shall not discriminate or retaliate against workers who act as representatives, participate, or seek to participate in such organisations or in collective bargaining, and cannot engage in employment discrimination on the basis of affiliation to a union. According to the IFC Performance Standard on labor and working conditions, the client must engage with workers’ representatives and workers’ organisations and provide them with information needed for meaningful negotiation in a timely manner.

Apart from it, the ILO Convention 87 on Freedom of Association and Protection of the Right to Organize, ratified by Uzbekistan in 2016, clearly states that “public authorities shall refrain from any interference which would restrict this right or impede the lawful exercise thereof.” In March 2020, Uzbekistan revised “Law on Trade Unions,” exactly to ensure compliance with its international obligations to protect the rights to free association and collective bargaining.

However, the very next day after the establishment of the trade union in Syrdarya region, some members of a newly formed worker organisation reported receiving calls from local authorities and police warning them to stop this initiative. Any actions taken by the Uzbek government or Indorama Agro to restrict the workers’ rights might be perceived as violations of the country’s obligations under the international law and investment agreements respectively.

The group of international CSOs call on the Government of Uzbekistan to ensure the timely registration of the independent trade union “Xalq Birligi” and on the EBRD and IFC to ensure that Indorama Agro respects the rights of its workers to form an independent union by remaining neutral in union registration and organization. Indorama Agro should enter into good faith negotiations with the organization’s democratically elected leadership to resolve worker concerns. All the parties must take immediate and decisive measures to prevent retaliations against union members and organisers.

Demonstrators demand cleaner skies as Bulgaria presses on with incinerator

The latest action was a visible reminder to the city of the problems plaguing the beleaguered project chosen by the municipality for EU funding.

In an open letter sent to the Ministers of Environment and Waters and the Minister of Health, the organisers demanded a complete revision to the waste and air quality management plans, including a total ban on incineration, strict control over polluting facilities and a ban on waste imports for incineration.

In March 2020 the European Commission approved the EUR 77 million project, arguing that it would support “the construction and operation of a high-efficient cogeneration plant to produce heat and electricity using fuel derived from unrecyclable municipal waste to be in line with EU State aid rules”.

The project is slated to receive a whopping 30 per cent of all the funding available to Bulgaria under its environmental programme in the current EU budget.

Other public financiers also lie in wait. The European Investment Bank (EIB) also signed a EUR 67 million loan for 2018 and is considering an additional loan to co-finance the project. This in spite of the fact that the EIB does not classify waste to energy projects as ‘circular economy’.

Does not add up and crowds out funding for EU targets

If built, the project will prevent Bulgaria from reaching the Commission’s waste management targets for 2030, which sets a 65 per cent recycling rate. The project’s planned incineration capacity of 180 000 tonnes of refuse derived fuel annually is three times the amount currently produced in Sofia. This means that if there is not enough waste being produced, waste could be imported from other towns or from abroad, and sludge from the water treatment facility could also be burned, as is proposed in the project’s environmental impact assessment

Bulgaria desperately needs investments in integrated systems for separate collection, recycling and composting installations, as well as information campaigns to explain why these issues are important.

[This blog post was originally published on the 22nd of March and republish after corrections].

Latest unambitious domino falls as Poland publishes plan for EU recovery fund

With public hearings on the plan kicking off this week, it is crucial for the Polish government to heed the proposals of civil society groups for more ambitious projects and to avoid potentially harmful investments.

Harmful projects for energy efficiency

The lack of vision is on display in the recovery plan when it comes to energy efficiency. Although this component is supposed to consume a significant part of the funds, the draft does not present reforms that would make an effective and sustainable reduction of greenhouse gas emissions in line with the EU’s Renovation Wave strategy objectives. Moreover, some of the planned spending will feed the Clean Air programme that financially supports the installation of new coal and pellet boilers. Since Poland has no formal pellet quality or sustainability standards, the pellets can be made from harmful materials, such as waste furniture boards. That kind of policy is clearly incompatible with the EU’s ‘do no significant harm’ (DNSH) rule because of the potential risk of rising CO2 emissions. The draft does not get any better in terms of renewable energy sources. Apart from the fact that the funds allocated for this purpose are relatively small, the draft plans list investments in municipal waste incineration, most of which are plastic.

This type of incineration will lead to CO2 emissions per unit of energy production comparable to coal-fired installations.

In this context, the draft’s focus on hydrogen is surprising. There are no credible prospects of Poland’s imminent achievement of surpluses of clean energy from renewables, which could be utilised to produce clean hydrogen. Investing money in research and development potential for pure hydrogen is desired as long as a solid renewable energy impulse would accompany it. On the other hand, investing in gas pipelines or ‘hydrogen’ storage facilities right now is only strengthening dependence on fossil gas. There are good reasons to believe that this pro-gas policy, conceived in the recovery plan, will lead to a powerful lock-in of natural gas to the electricity and heating grid. Poland plans to replace most of the coal that is removed from the energy mix with gas, producing 56 TWh of energy from gas in 2030, or approximately one third of all current production. The idea that gas is not a transition fuel but will stay with Poland to the end is not that far-fetched.

Biodiversity protection neglected in the plan

The Polish plan’s most bitter defeat so far is its virtually non-existent focus on biodiversity, similarly to other national plans. The lack of adherence to the DNSH principle is clearly visible. The Polish plan does not include improvements to the poor management of Natura 2000 sites. Although measures like establishing flower meadows and similar nature-based solutions for cities, these are pushed somewhere to the margin. The authors seem to ignore the main factors of the loss of biodiversity in Poland, the disappearance of habitats and ecological corridors and the overexploitation of natural resources.

Biodiversity and the DNSH principle are mentioned in the document as abstractions.

The plan assumes that all the reforms and investments contribute to protecting biodiversity and do not cause severe damage to nature. Such a lawmaking philosophy does not comply with the EU’s regulations on drawing up the recovery plans. A plan should explain how none of the proposed measures and investments seriously damage nature. The Polish plan does not include any activities aimed at protecting species, ecosystems, ecological corridors, or any ideas for strengthening the protection or enlargement of protected areas. On the contrary, some of the proposed solutions undermine environmental legislation. The program includes, for example, the adoption of a special law on anti-drought investments. It contains new regulations that threaten Poland’s biodiversity and water resources. This proposed act simplifies investment procedures for the building of concrete water facilities. Its core is to make it easier for Polish Waters (national regulator of water investments) to obtain permits for new dams and artificial reservoirs in Niepołomice on the Vistula, in Ścinawa and Lubiąż on the Oder and in Pisz on the Pisa. The draft assumes the priority of the special act’s provisions over nature protection bills. This makes it much easier to intervene in protected areas, for example by enabling water installations in nature reserves. The small hydropower plants encouraged by the project are mostly incompatible with the EU Water Framework Directive. They do immense harm to biodiversity by blocking wildlife corridors while making a disproportionately small contribution to renewable energy production. Moreover, the proposed anti-drought regulation deprives society of democratic and effective participation in investment consent proceedings. It severely interferes with the competences of local governments as well.

Possible improvements

The silver lining is that all of these misguided plans are possible to fix before it is too late. The plan should strengthen forests and river valleys by restoring them to their natural state. Such measures have been proposed by a group of civic organisations in a document with programmes and reform directions that can be easily incorporated into the recovery plan. This includes legislative changes to the bill on forests, water law, or the EU directive’s application on environmental impact assessment. Those proposals remove from Polish law non-compliance with the EU acquis and upgrade the environment and biodiversity protection. Civil society is also proposing to initiate a national river restoration programme and modify the draft programme to combat drought, shifting the focus from extending concrete hydropower infrastructure to nature-based solutions. In addition to tackling biodiversity loss in Poland, these two programs would help the country adapt to climate change by mitigating the effects of droughts and countering climate change by protecting and restoring natural carbon sinks such as forests and wetlands.

Europe’s Green and Digital Decade could be a raw deal for people and the environment in Serbia

As Bankwatch’s recent Raw Deal report exposes, meeting industry and consumer demands cannot come at the expense of the people and nature at the other end of the supply chain, where the raw materials – indispensable for a green and digital Europe – are extracted.

A new case study on a planned lithium mine in Serbia offers an example of the possible hidden costs of Europe’s Green and Digital Decade. The mine, promoted by corporate giant Rio Tinto, is connected to illegal government support, lack of public participation and secrecy.

60 times more lithium needed by 2050

In its Foresight Study, the Commission estimates that for electric vehicle batteries and energy storage, Europe would need up to 18 times more lithium and five times more cobalt in 2030 and almost 60 times more lithium and 15 times more cobalt in 2050.

The sourcing and production of raw materials were included as a priority in the European Green Deal:

‘Access to resources is also a strategic security question for Europe’s ambition to deliver the Green Deal. Ensuring the supply of sustainable raw materials, in particular of critical raw materials necessary for clean technologies, digital, space and defence applications, by diversifying supply from both primary and secondary sources, is therefore one of the pre-requisites to make this transition happen.’

In the Raw Materials Initiative, the Commission has also proposed to ‘accelerate and facilitate procedures’ for the approval of mining projects in the EU and its neighbours, such as Norway, Ukraine and the Western Balkans, as well as in its partnerships with countries in Africa and Latin America. In November 2020, Commissioner Šefčovič mentioned that Serbia is a country with solid reserves of most critical raw materials, and a promising source for ensuring the EU’s ‘strategic autonomy’ for key raw materials. What did he have in mind?

Serbian jadarite compared to Superman’s kryptonite

The story goes back to 2007, when news broke about the discovery of a mineral called jadarite, whose composition is described as identical to the formula invented for the fictitious kryptonite from the film Superman Returns. The mineral is composed of lithium and boron. Exploratory works on the jadarite deposits, located in the Jadar River Valley in western Serbia, have been developed by the international mining corporation Rio Tinto.

If the estimates stating that there are approximately 200 million tons of lithium borate ore in the Jadar Valley are correct, Jadar’s future mines will be one of the world’s largest lithium deposits, supplying 10% of the world’s demand for lithium. Lithium is considered one of the key raw materials for the green and digital transition agenda of the EU.

The Serbian government promotes this investment as the ‘project of the century’, a ‘project that will put Serbia on the map of high technologies’, and one that should serve as a flagship success of both Rio Tinto and the Serbian government. However, there are numerous problems with the project. Rio Tinto has not disclosed crucial information about how lithium will be extracted and what the impacts will be on the population. The Serbian government has offered illegal support to facilitate the mining company’s initial work.

Most importantly, the project will drastically and irreparably alter the environment and way of life of the residents living there. Residents have not been captivated by the glamour of the mineral and the vision for the mine’s construction. They argue that, if developed and deployed, these facilities will threaten more than 15,000 agricultural households in the town of Loznica and the Krupanj municipality and the health and well-being of citizens of the communities of Loznica, Šabac and Valjevo.

Furthermore, the government of Serbia did not inform the governments of Bosnia and Herzegovina and Croatia through transboundary consultations about the planned project. This is particularly important due to the project’s expected pollution of the Drina River, which flows from Serbia into Bosnia and Herzegovina.

European Commission must take actions now

European Commission Vice-President Margrethe Vestager wrote in her latest opinion piece:

‘Now that digitalisation has become the driving force of the modern economy and even a critical factor in today’s geopolitics, there is an urgent need for more democratic governance over technology.’

Indeed, for this EU agenda to be effective, it has to counterbalance the procurement of the raw materials indispensable for the green and digital revolution with safeguards for the people affected by raw materials mining and for the nature destroyed by the overwhelming pressure for cheap and fast exploitation. Therefore, the Commission must be even more ambitious and incorporate policies that ensure the use of less exploitative and toxic-safe technologies; the restoration of the old mining sites; strict environmental, social and human rights due diligence for mining projects; and finally, the right for the communities affected by the mines and surrounding facilities to have a say.

The EU cannot attempt to overcome the climate crisis at the expense of local communities, workers’ rights and biodiversity, especially in the face of the COVID-19-induced economic and social crisis. It would be a raw deal, one experienced too often in the past, which should finally be left far behind.

Step into the light: transparency review at EU bank can end culture of secrecy

Yet a draft of the revised policy that is now open for comments until mid-March does little to bind the bank to best practices for openness and correct its secretive model of finance. That is why dozens of organisations from various countries have called on the bank to step into the light and raise the bar on transparency at the development lenders.

When compared to other development finance institutions, the EIB’s transparency practices fall short of the pack. In the 2020 Aid Transparency Index, an annual measure of transparency for the world’s major development agencies, the EIB scored just 58 of 100 points and ranked 28 of 47 institutions.

Aid Transparency Index 2020

The core problem lies with the EU bank’s obsession on protecting its internal processes from ‘interference’. While other development banks, such as the European Bank for Reconstruction and Development and the World Bank, publish project documents, including their own appraisal documents, well in advance of approval decisions and often seeking public opinion on the proposed operations, the EIB operates in secrecy as much as possible to make decisions unhindered.

With this warped approach to the right to access information, the EIB undercuts its claims of supporting human rights. The timely disclosure of project information is instrumental in stamping out corruption, identifying potential social, environmental and economic risks and avoiding adverse impacts on people and sensitive ecosystems.

Yet in cases where a project may lead to these types of ills, those impacted have been deprived of timely access to information and the opportunity to engage with the EIB over their concerns. If the EIB had listened, it could have improved the project before making a loan and avoiding an expensive fix.

For example, in 2018 the Complaints Mechanism at the bank reviewed a complaint from Plataforma Ciutadana en Defensa de les Terres del Sènia about the Castor Underground Gas Storage project in Spain that alleged among others the way the public consultation was carried out.

It concluded that “during the first appraisal by the Bank, the Complainants already drew the Bank’s attention to a series of concerns that were confirmed over time: the court ruling confirmed the fragmentation of the project and, as a result, the limited appraisal of cultural impacts. The seismicity risks were also documented by the public consultation. However, the Bank did not enter into discussions on mitigation measures with the promoter regarding these issues”. This happened because it ignored the inputs of local stakeholders. Eventually the project turned to be dysfunctional and was cancelled.

EIB operations are particularly opaque when the bank lends to projects through an intermediary financial institution – a ‘middle man’ – which is especially problematic given that this lending makes up a lion’s share of the bank’s overall portfolio. In 2020 almost 40 per cent of all EIB loans were credit lines for financial intermediaries. The bank considers these as ‘low risk’ projects for which disclosure obligations are entirely delegated to those financial intermediaries.

In 2018 Bankwatch contacted 43 of the EIB’s financial intermediaries in the Western Balkans and asked whether they had published environmental information about the projects they financed on their websites. None of the financial intermediaries sent the links to sections of their websites where environmental information relating to the EIB credit lines is published. Indeed, several argued that they did not have any obligations to do so.

Where this research could identify specific loans made by intermediaries, it found that EIB provided over EUR 22 million for the construction of at least 19 hydropower plants, several of which are located in protected areas of high biodiversity value. The negative impacts of these projects could not have been detected and shared with the bank because such operations are not being publicly announced by the EIB.

The EIB should be ready not only to publish information or provide it on request but also to engage with and listen to those who might be impacted by projects the bank intends to finance. The review of the transparency policy is an opportunity to set the right principles and address these deficiencies.