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Latvia supports climate neutrality by 2050 as long as EU budget follows suit

On 2 September, Latvia’s European Affairs Committee adopted a position in support of theEuropean Climate Law, anchoring its climate politics among those member states united in recognition of the need for more ambitious decarbonisation policies. This was the final decision before the European Parliament reviews a legislative proposal to set EU-wide targets leading to climate neutrality in 2050, as per the  European Commission’s proposal of March 2020.

Juris Pūce, Minister of Environmental Protection and Regional Development

While there is broad political support for an EU-wide target, there is much less agreement on obligations of different sectors towards net-zero emissions, and how individual contributions will reach beyond local climate change mitigation measures to address the global CO2 budget where Latvia has a tiny, nevertheless a crucial, share.

Later this autumn, the Commission will publish a proposal on increased GHG reduction targets for 2030. A core demand of Latvia’s decision makers is a cross-sectoral economic impact assessment. Their foremost concern is how the EU budget and the allocation of additional funding of other non-climate priorities fits in the picture. Second, the shift towards a low-carbon economy will be tolerated in as far it promises economic growth and business opportunities. Third, flexibility and compensation measures will further increase pressure on land management to secure carbon sinks in natural ecosystems.

Latvia’s National Long-Term Strategy and National Energy and Climate Plan were adopted in January 2020. While the plans for the next decade are detailed, the longer timeframe of 30 years remains abstract and lacks a strategic approach. Since August, the draft Operational Programme for the EU Funds 2021-2027 is open for public consultation. The plans for Recovery & Resilience facility and Just Transition are still in the making. 

The next decade is crucial to invest in climate action and start decarbonising every European Member State, and these funds account for most of the EU financial support to Latvia in the upcoming seven years. If planned and implemented correctly, they have the potential to support and materialise Latvia’s shift to an ambitious decarbonisation pathway leading to carbon neutrality by 2050.

No proper benchmark for checking European Export Credit Agencies’ compliance with EU objectives

Every year ECAs channel around USD 200 billion in public money to projects.  Some of these projects, are in stark contrast with the global effort to tackle the climate crisis, such as a coal power plant in Bangladesh, oil power plants in Cuba or an LNG project in Mozambique. Other projects contribute to human rights violations. For example, the investor behind the Olkaria I and IV geothermal power plant in Kenya supported by French and German ECAs and other multilateral financiers, ignored the Indigenous People status of impacted Masaai communities. In other cases, ECAs back projects in Indonesia’s coal sector, where companies have allegedly been moving millions of dollars offshore. As part of Bankwatch’s effort to enhance the reporting requirements of European ECAs under EU law, we have been in dialogue with the European Commission about making these public institutions as accountable as they should be. But the EU’s executive body appears to be satisfied with the status quo. “Member States should comply with the Union’s general provisions on external action, such as consolidating democracy, respect for human rights and policy coherence for development, and the fight against climate change, when establishing, developing and implementing their national export credit systems and when carrying out their supervision of officially supported export credit activities,” says an EU regulation, in force since 2011. To put this into practice, the European Commission produces an annual evaluation of the compliance of EU ECAs with the Union’s objectives and obligations. Specifically, the Commission’s monitoring is intended to check whether projects supported by ECAs are consistent with the “external action” objectives set out in Articles 3 and 21 of the Treaty of the European Union. These objectives promote, inter alia, the consolidation of democracy, respect for human rights, policy coherence for development and action against climate change. To check that, the European Commission has been accepting the Common Approaches as a benchmark for years. What’s even more striking, the checklist filled in by EU Member States is an outdated box-ticking exercise. For example, it doesn’t contain any questions related to climate action or the implementation of the Paris Agreement. ECAs, as public finance institutions, should be aligned with their governments’ climate change mitigation commitments, including the Paris Agreement. Meanwhile, European ECAs differ significantly when it comes to climate action commitments. The unique example of any action undertaken is the Swedish export credit agency EKN, which starting 2021 will no longer issue new guarantees for the financing of exports to coal mining. Dutch Atradius, in its 2017 Annual Report, stated its general intention to mobilize capital and finance for climate projects, thereby contributing to the Netherlands’ efforts to combat climate change under the Paris Agreement. But there are also many other export credit agencies, which don’t exclude projects related to the extraction and combustion of gas, crude oil, hard coal or lignite. Thus, a clear benchmark showing this and other EU objectives to be shaped by the European Commission is even more needed. In 2018, the European Ombudsman had called for improving the methodology and procedures used by the Commission to evaluate the annual reports it receives from Member States. In response, the Commission has started a revision of the checklist template used by Member States for their annual reports, which is ongoing. The problem is, this revision exercise is not even informed by any gap analysis of the Common Approaches vis-a-vis the European Aquis. The Commission should provide such gap analysis and employ EU standards as the benchmark for evaluating the compliance of member state ECAs with the EU’s external action obligations. Not to do so would, in our view, constitute maladministration.

As tensions reach a tipping point at Amulsar gold mine, what next for the EBRD?

The heavy-handed eviction during the night of 4 August of a caravan posted at the entrance to the mine was the culmination of developments following mine operator Lydian’s decision to change security firms at the beginning of July. Police later removed the security presence, confirming that the protesters’ caravan was not illegally encroaching on Lydian’s territory.

But the first signs of trouble appeared on 1 July, when Special Security Forces employees moved on protestors, in spite of promises made the day before to not carry weapons, remain explicitly at the project site alone and employ only the number of guards required for one shift. 

Significant numbers of police officers were on hand to prevent physical confrontations between protesters and the security personnel, while activists from Yerevan and around Armenia rushed to Jermuk in support of the demonstrations.

Photo: Sona Margaryan

Where is the EBRD?

Against this backdrop, the accountability mechanism at the European Bank for Reconstruction and Development, which provided Lydian with EUR 11 million in 2017 and 2009, conducted an assessment into a complaint submitted by 23 locals to the bank. On 7 August the Independent Project Accountability Mechanism (IPAM) published a report that acknowledged that complaint had merit and warranted further investigation into whether the bank violated its policies on environment, social and human rights protections in funding Amulsar.

While IPAM deeming the complaint eligible was no surprise, given Lydian’s less-than-stellar track record, it was a surprise to find buried in the report a mention that the bank’s investment will be ‘terminated’ as part of Lydian’s corporate restructuring process. (Lydian filed earlier this year for bankruptcy protection in a Canadian court after being delisted from the Toronto stock exchange.)

Media then reported the company’s response to the public announcement of the EBRD exit, “Lydian will also continue to discuss the scope of further cooperation with the EBRD on the Amulsar project”. This reflects information received by Bankwatch from an EBRD representative in March this year that the project will need another financial injection, if the blockade will be lifted and the project restarts.

However any further cooperation between Lydian and the EBRD would require new assessments of the financial, reputational and compliance risks of such a new investment in the Amulsar project. As such, the IPAM review of the project’s compliance with the EBRD’s environmental and social standards could not have come at a better moment. EBRD decision-makers need to hear an independent view on what went right and what went wrong with the Amulsar project, so that the bank would be wiser the next time it approaches such a risky investment with a contested licence to operate.

EIB keeps denying Southern Gas Corridor climate impact

In November 2019, the EIB made important progress by deciding to phase out lending to fossil fuels projects and it is currently developing a roadmap to align its financial flows with the Paris Agreement.

However, despite this progress, the bank keeps on denying that its two massive loans, totalling EUR 2.4 billion, for the controversial Southern Gas Corridor, will only worsen the climate crisis. This therefore calls into question the bank’s ability to objectively assess the climate impacts of its future investments that will have to be Paris-aligned.

The two loans were extended for the construction of the Trans Adriatic Pipeline (TAP) and the Trans Anatolian Gas Pipeline (TANAP), which together with the extended South Caucasus Pipeline are intended to  bring Azerbaijani gas all the way to Italy.

Civil society groups have repeatedly warned the world cannot afford more public money sunk into massive fossil fuel projects such as the Southern Gas Corridor, and in February 2019,  Bankwatch, Counter Balance, Friends of the Earth Europe and Re:Common filed a complaint with the EIB’s Complaints Mechanism.

The complaint argued that the EIB substantially underestimated the greenhouse gas emissions associated with the project.

It exposed the incomplete and incoherent nature of the bank’s assessment, including the use of outdated science and a failure to address significant greenhouse gas emissions. In particular, the EIB underestimated the global warming effect of methane, a greenhouse gas up to 86 times more powerful than carbon dioxide (CO2).

Environmental and social impact assessments (ESIA) for both pipeline projects also systematically underestimated inevitable releases of this extremely potent greenhouse gas and excluded key parts of the project, such as the gas extraction and the pipelines carrying it through Azerbaijan and Georgia.

In a report issued several days ago in response, the Complaints Mechanism simply dismissed these concerns, saying it did not find anything wrong in the EIB’s carbon footprint assessment. In fact, instead of addressing the arguments in the complaint, the report provided no additional justifications beyond what the EIB had contended earlier.

For one, the bank’s own carbon footprint assessment hadn’t considered the project over its full lifetime, but instead based its analysis only on the first stage of the project, in which it will transport 10 billion cubic meters of gas annually. However, it is clear that the pipelines are ready to transport at least twice as much gas, in line with the political objective stated by the EU for the Southern Gas Corridor to transport more and more gas from Azerbaijan and other countries in the Caspian region in the future. The EU list of projects of common interest (the so-called 1st PCI List) has also expressed clearly that 10 billion cubic meters annually is a minimum amount of gas that will be imported to the EU thanks to this project. Even the EIB itself doesn’t seem to have any doubts about the project’s capacity: “the infrastructure created could transport larger volumes of gas in the future – at a lower cost than during the initial phase – which would increase the economic benefits of the projects.”

Then, the EIB argued that the project will be entirely climate neutral by making the highly questionable assumption that all the imported gas will be used to replace more polluting sources of energy. In Turkey, gas from TANAP is expected to replace coal for power generation but no evidence was provided to substantiate this claim, such as coal-based power plants closure plans. In fact, this assumption has little to do with reality. The 2019 OECD report noted that Turkey’s stated objective was to reduce its reliance on energy imports by exploiting its domestic coal resources. According to this report, Turkey is the country with the largest coal power plant development programme in the OECD and new plants are being constructed in line with the national target to increase  electricity generation from domestic coal.

Similar ungrounded assumptions have been made for the gas to be imported to the EU. According to the EIB, it is supposed to replace Russian gas from the Nord Stream 2 (NS2) pipeline or from Ukraine. In reality, NS2 is well under construction and the Ukrainian gas system remains entirely dependent on Russian counterparts’ decisions whether to use it or not.

The EIB’s assumptions that the gas from the Southern Gas Corridor will entirely replace other sources of gas are highly hypothetical. In reality, this gas could also procrastinate energy efficiency measures or the expansion of renewable energy sources which will have to compete with this subsidised gas. In the end, the bank was unable to provide any indication which EU gas imports will be replaced by the Southern Gas Corridor.

Although the EIB internal standards require that all operations comply with the United Nations Framework Convention on Climate Change, in reality the bank did not conduct any due-diligence regarding the impact of this gas project on the obligations of transit countries under the Convention.

The majority of direct emissions taking place along the pipeline route will take place outside the EU, namely in Azerbaijan, Georgia, Turkey and Albania and will feature on the emissions balance sheet of these countries. Emissions from TAP and TANAP in Greece and Turkey, for example, will be reported in their National Inventory Submissions and will be subject to emission cuts as committed by those states. These countries will however not be able to claim that TAP or TANAP related emissions were compensated by emissions reductions taking place somewhere else, as the EIB had suggested, either in Ukraine or Russia.

In the case of Albania, the impacts of TAP will be particularly significant. When TAP will reach its designed capacity of 20 bcm in 2023, its emissions are expected to account for 7% of the annual total emissions of the country and will even double the emissions of the Albanian energy sector. Again, our concerns regarding the EIB’s dismissal of potential mitigation and compensation measures or offsets for Albania have effectively been brushed-off by the EIB-CM.

The Complaint Mechanism’s disappointing report suggests that the EIB has not learned from its mistakes. Despite the clearly harmful consequences of the Southern Gas Corridor, the EIB keeps on disowning the project’s contribution to the climate crisis.

Not least, the Complaints Mechanism’s response to the civil society complaint comes around the same time as the bank has reportedly approved another tranche, worth USD 270 million, of its loan to the TANAP project.

The EIB’s approach is particularly worrying as it shows that the bank’s recent climate commitments risk being watered down by the continuous underestimation of the climate impact of the projects that it supports. It raises serious questions regarding the bank’s ability to assess the full extent of emissions of its projects, including its new energy projects such as hydrogen, and their compliance with the Paris Agreement. As this emblematic case demonstrates, the EIB’s commitment to the United Nations Framework Convention on Climate Change remains a mere declaration.

Informing women is the first step to empowering them

Knowledge is power. Informing women and men about the opportunities and risks of development projects should be the first step to empowering them to protect their rights. However, getting gender impact information from the European Bank for Reconstruction and Development (EBRD) has proven a challenge.

The EBRD prides itself on being the entity with the largest share of approved funding from the Green Climate Fund (GCF), with a total of USD 831 million – nearly 15 per cent of the GCF’s total portfolio. One of the EBRD’s flagship climate investment initiatives, the Green Cities Framework, secured support from the GCF in October 2018. The Framework prioritises sustainable, green investment, improving the resilience of vital urban infrastructure in countries from Tunisia to Mongolia. By May 2020, the GCF had made two disbursements under this framework, totaling USD 17 613 636. It appears that no Annual Performance Report has been produced yet for 2019, however.

According to the EBRD and GCF’s Gender Action Plan for the Green Cities Framework, the EBRD has committed to conduct Gender Impact Assessments on the country, sectoral (for the municipal environmental infrastructure sector), and project levels.

Since January 2020, Bankwatch has been requesting the disclosure of EBRD Gender Impact Assessments. Bankwatch member groups in EBRD Green Cities like Tbilisi and Skopje have closely followed the developments of the Green City Action Plans (GCAPs) and projects financed under the Framework, also requesting gender impact information.

After six months of repeated requests, calls and appeals, the EBRD has not disclosed a single Gender Impact Assessment. Well, with an estimated lifespan of 23 years of the GCF-funded Green Cities Framework, the EBRD has still another 21 years to get its act together. We are not holding our breath though, as many of our cities are already very advanced in the preparation of GCAPs and are starting transformative climate investment projects – without adequate assessment of gender risks and clear plans for mitigation and prevention of gender-based violence.

Tbilisi case study

The Tbilisi Metro project is the first operation expected to be co-financed by the EBRD and GCF under the Green Cities Framework. A sovereign loan of up to EUR 75 million to Georgia will be on-lent to the city of Tbilisi for the benefit of the Tbilisi Transport Company (TTC), which operates buses, the metro system and cable cars in Tbilisi. The GCF states that the project is kicking off an initiative to support low-carbon, climate-resilient urban development in the city. The project follows a number of previous EBRD investments in the public transportation system of Tbilisi and the development of the Tbilisi Green Cities Action Plan.

Green Alternative, Bankwatch’s member group in Georgia, analysed the EBRD supported GCAP for Tbilisi and the subsequent Green Cities Framework projects, hoping to shed light onto how gender has been addressed. On the positive side, the EBRD has made efforts to establish equal employment opportunities for men and women. As a proof of that, the Non-Technical Summary of the Tbilisi Metro Project and Tbilisi Bus Extension states that TTC has developed an Equal Opportunity Strategy. The Bank has helped TTC to set up training courses specifically for women drivers. Twenty-five women have already participated in the program, some of whom are already working as drivers.

Tbilisi is one of many cities where women report high levels of sexual harassment on public transport. Source: Addressing Gender-Based Violence and Harassment, Emerging Good Practice for the Private Sector publication Disclaimer: The material in this work is copyrighted. The EBRD, CDC and IFC encourage dissemination of their work and readers may reproduce and distribute these materials for educational and non-commercial purposes, provided that appropriate attribution is given and this disclaimer is included.

However, a major concern raised in the briefing is the lack of opportunities for public participation, including for women, in the research and design of new modes and routes for public transport. This problem and wider concerns about governance standards in Green Cities planning and project investment were highlighted by a Bankwatch briefing on the EIB and EBRD’s investments in the Balkans and EU Neighbourhood, published in June.

Another matter of concern is that the projects, as well as city planners, have not been addressing the unique risks for women using public transport, such as the need to safeguard women against the sexual assaults that occur there. The Asian Development Bank (ADB), another important investor in Tbilisi’s transport system, raised the issue of gender based violence risks in its 2015 study. It reported that up to 45 per cent of interviewed women said that they had experienced sexual harassment or felt harassed or uncomfortable on public transport in the previous six months. In addition, 62 per cent of respondents considered sexual harassment in public transport and its environs a matter of concern.

Although a new bill was introduced in 2019 to make sexual harassment a punishable offence, numerous supplementary activities still need to be implemented by city planners and international financial institutions. While the Tbilisi Metro and Bus Extension Non-Technical Summary mentions TTC’s Equal Opportunity Strategy, there is no suggestion that an assessment of risks for gender based violence was done by the EBRD, its client or consultants.

In addition to its findings on gender, Green Alternative’s analysis raises the issue of the vast number of initiatives and parallel planning processes ongoing in the city. It notes that ‘the GCAP has both failed to launch an integrated approach to urban development in Tbilisi and to become integrated into the city’s urban planning more broadly.’  As a result, it appears that the Tbilisi GCAP has turned into an urban mobility improvement plan, rather than the comprehensive plan for Tbilisi’s integrated future green development.

The EBRD’s Gender Strategy needs to catch up with the GCF’s

One promising development has been the newly updated EBRD methodology for the development of the Green Cities Action Plans. The updated methodology places greater focus on governance and on gender mainstreaming. Moreover, EBRD-commissioned consultant teams hired to help cities develop Green City Action Plans need to have gender specialists. New Terms of Reference for consultants’ assignments reflects the need to analyse gender opportunities and risks, and to plan public consultations that provide space for women, gender organisations and vulnerable groups.

The EBRD, together with its sister institution, the International Finance Corporation (IFC) of the World Bank, recently published a good practice guide on Addressing Gender Based Violence and Harassment for the private sector. Although many of the EBRD’s clients and partners in the Green Cities initiative are public institutions, local municipalities and public services companies, there are a lot of tips in this guide that are relevant for our Green Cities. The guide includes a special focus on public transport, which is also relevant.

The question is, when can we expect to see all these good practices and effective prevention of gender based violence in our cities? When will the EBRD include gender risk assessment in its analysis for Green Cities plans and projects?

The Bank has focused its Gender Strategy on economic inclusion and has successfully demonstrated in the last decade that gender equality works. However, so far the Bank has shied away from committing to integrate gender protection alongside this promotion. It has artificially separated safeguards from its Gender Strategy, so unsurprisingly, there is a lot less to show for the effective implementation of its gender safeguards than for its economic inclusion work.

The EBRD’s Gender Strategy is at odds with the much superior and more comprehensive gender policy framework of the GCF. The GCF’s Original Gender Policy and Action Plan adopted in 2015 created a policy framework for assessing and addressing ‘risks for women and men associated with adaptation and mitigation activities financed by the Fund’. The Updated Gender Policy and Action Plan adopted in 2019 similarly seeks to promote climate investments that minimise social and gender-related risks. Gender assessments at the project level are required by both the 2015 and 2019 GCF policies.

The EBRD is well capable of implementing GCF standards, although the evidence that they have done so is still to be seen. Furthermore, the EBRD is well capable of developing its own robust policy framework. The Bank prides itself on having some of the highest safeguards policies among MDBs. The 2019 Environmental and Social Policy is a testament to the Bank’s commitment to sustainability and the protection of human rights.

Effective implementation of gender safeguards needs a strong commitment streamlined across a comprehensive policy framework. The new EBRD Gender Strategy, expected to be approved by the end of this year, needs to dovetail with the EBRD’s existing safeguards and to be harmonised with the policies of partner financiers like the GCF.

If the Strategy is to be effective, it must guarantee the right for all to be informed about its operations, and it must require the inclusion of the very people most at risk in decision-making, regardless of gender. With the support of the GCF, the EBRD can already begin to implement these as part of its Green Cities plans and projects.

Controversial plans for Estonian shale oil pre-refinery cancelled

Eesti Energia, Estonia’s national energy company, has announced the cancellation of a planned shale oil pre-refinery, a joint venture with the private company VKG. The decision came after a feasibility study deemed the project non-attractive. The study found that the project would generate unexpectedly low additional financial value in the process of refining Estonia’s sub-standard shale oil. The plant was supposed to produce 1.6 million tons of shale oil per year and increase Estonia’s total use of fossil gas by around 50 per cent. 

The feasibility study’s analysis makes its conclusions based on the requirements of the new EU Sulphur Directive, which limits the amount of sulphur that is allowed to be in shipping oil to 0.5 per cent. Estonian shale oil, which is primarily used in the maritime industry, contains between 0.6 and 0.7 per cent sulfur. 

Instead of building a pre-refinery, Eesti Energia and VKG’s new plan is to use ‘alternative methods’ to improve the quality of the current shale oil output. However, their exact plan is hidden from the public. Thus, we can only speculate as to whether their new approach utilizes some legislative loophole or whether the dirty oil will simply be exported to refineries abroad.

The total cost of the investment was estimated at around EUR 650 million, including  EUR 200 million from the government. Now that it has been cancelled, there is an opportunity for these resources to be allocated elsewhere: they could be used, for example, to solve the pressing issue of local renewable energy related to conflict with defence radars and the prohibitive cost of offshore wind park connection cables, or to support the just transition of the oil shale region in Northeastern Estonia. 

While the scrapping of the pre-refinery is good news for people and the planet, public uproar against a new planned shale oil plant by the same national energy company is still ongoing. Public figures have signed petitions to stop the plans, citizens collected over 1,000 signatures to push the issue to the parliament, NGOs submitted an inquiry to the European Commission, and local climate youth activists filed a legal complaint to annul the plant’s building permit. The plant’s investors should pay attention to the voices of the public and the case of the pre-refinery and cancel these plans as well. And ultimately, any meaningful just transition must start with setting a phase-out date for fossil fuels.