Blog entry

Priority energy infrastructure projects for the EU’s neighbours still anchored in fossil fuels

At the end of April, Bankwatch published its comments to the list of Projects of Energy Community Interest (PECIs), and Projects of Mutual Interest (PMIs), as part of a consultation process organised by the Energy Community Secretariat. We highlighted then that over three quarters of the projects presented were fossil fuels with costs estimated at EUR 8.5 billion. Greenlighting these projects would undermine any efforts to decarbonise the EU neighbouring countries’ energy sectors by 2050, and would also pose a real risk of becoming stranded assets.

After the evaluation, five gas projects and two electricity interconnectors have been dropped from the list. Still, the list of projects passing evaluation is dominated by fossil fuels projects – 12 gas and 2 oil projects ones, out of a total of 17.

The non-binding list of PMIs, energy projects that involve EU member states, is now expecting the European Commission’s recommendation. The PECIs list is expected to be approved by the Energy Community’s governing body, the Ministerial Council, at its 27 November meeting, upon the European Commission’s proposal.

Mega projects, mega investment risks. Best avoided.

Two of the projects that have not passed evaluation are White Stream gas pipeline and the Black Sea undersea electricity cable, both connecting Georgia to Romania. The former consisted of new cross-Black Sea infrastructure which would transport gas from Turkmenistan, via the second string of the Trans-Caspian (TCP) and expanded South-Caspian (SCP) pipelines in Georgia, to Romania and further to other EU Member States.

There is very little information available regarding the Black Sea undersea cable from Georgia to Romania, but we can make an educated guess and say that most likely the soaring investment costs outweigh the benefits.

The rest of the projects that haven’t passed evaluation are less megalomaniac, and refer to gas interconnectors between Romania and Serbia; Ukraine, Moldova and Romania, and electricity interconnectors between Serbia and Romania, and Croatia and Bosnia and Herzegovina.

Other harmful projects which did get the green light

There are, however, many other projects that did pass the evaluation, even if they’re not aligned with the EU’s long term decarbonisation goal.

The Albania-Kosovo interconnector, compressor station and internal gas pipeline, for one, is the exact opposite of decarbonisation. So far, gas has made up a relatively small percentage of Kosovo’s energy mix, and this project could make the country more dependent on this fossil fuel. Importing more electricity from Albania, where hydropower is the main source, could help cut Kosovo’s energy related emissions. In addition, Kosovo has very high potential for reducing energy losses, and high potential for renewable energy sources. Investing public resources in gasification at this point would crowd out investments in other urgent priorities such as reducing distribution losses, insulating housing, heat pumps etc. and must be avoided.

Proposed gas pipelines. In orange are PECIs, in blue are PMIs.

Similarly, the Ionian-Adriatic Pipeline would facilitate gasification of Montenegro and Albania, which have until now not used significant amounts of gas. Both countries are in a strong position for leapfrogging towards decarbonisation because of small populations, high potential for reducing energy losses, high potential for renewables, and high shares of electricity generation from existing hydropower plants, which can balance intermittent renewables. The pipeline project’s own feasibility study concludes that it is questionably feasible and shows that it is in partial competition with the LNG terminal at Krk in Croatia, which is already under construction.

All three Energy Community countries involved in these two projects – Albania, Montenegro and Kosovo – seemed to be going in the right direction – Albania with no fossil fuels in their electricity mix, Montenegro having dropped plans to build a new coal unit at Pljevlja and Kosovo needing to make a leap of faith and not resurrect the Kosovo eRe coal project, but rather seek sustainable alternatives and cut current losses.

All this at a time when the European Green Deal highlights the importance of smart infrastructure in the transition to climate neutral economies. To get there, there will also be a need to review the regulatory framework for EU energy infrastructure, including the TEN-E Regulation¹, that’s intended to facilitate a common energy network linking regions and Member States through modern and efficient infrastructure. This Regulation has also been transposed into the Energy Community acquis.

What next?

The European Commission should hold off making a proposal to the Ministerial Council of the Energy Community to approve the list of projects until the revised TEN-E Regulation is adopted on both the EU and the Energy Community levels. The Regulation guides Projects of Common Interest (PCIs) in the EU and PECIs and PMIs in the Energy Community countries.

The context for the public consultation on the TEN-E Regulation that ended a few weeks ago makes it very clear why this revision is needed: “Europe needs modern, clean, secure, future-proof and smart energy infrastructure to deliver the Green Deal. The revision of the guidelines for trans-European energy infrastructure aims to ensure EU energy infrastructure policy is consistent and aligned with the climate neutrality objective of the Green Deal. Our infrastructure framework needs to be revised to reflect new policy developments such as the accelerated take-up of renewable energy sources and ‘smart sector integration’, which links energy sectors to help them reduce carbon emissions.”

And there’s an important lesson for considering future energy projects for priority status. There are numerous voices, including from within the industry sector, that agree we need a shift in mindset on the PCI status. A new approach and definition to PCIs could genuinely help prioritize new forms of infrastructure projects that take into account the current needs and future trends in the European energy sector: digitalisation, consumer participation, decentralisation, system-market interactions, and that integrate innovative solutions. The curtain is closing on the age of mega pipelines.

On the EU level the PCIs list was approved already, but not before prompting the EU Ombudsman to look into whether the European Commission has committed maladministration in failing to ensure an adequate climate impact assessment for fossil fuel projects already listed as PCIs So it is not too late for the Energy Community to avoid new, costly infrastructure that effectively hampers the continent’s decarbonisation goal .

These projects should be evaluated based on their lifecycle greenhouse gas emissions, not merely as replacement capacity for more polluting fuels. This is of particular importance as estimates of exactly how much natural gas contributes to climate change are continuously being revised upwards and depend on the Global Warming Potential assigned to methane as well as on assumptions about the extent of fugitive emissions during gas extraction and transportation.

The Commission should do everything in its powers to not let the Energy Community countries fall into the same carbon traps that the EU is now struggling to pull itself out of.

¹The TEN-E Regulation, which is the basis for the PECI projects as well, is part of the Connecting Europe Facility package of proposals, and sets out the conditions for identifying projects of common interest (PCIs) that will be eligible for EU funding under the Connecting Europe Facility and other instruments.

In the air tonight: visualising SO2 emissions from coal power plants in the western Balkans

At the end of June, a new Bankwatch report showed that sulphur dioxide (SO₂) emissions from coal power plants in the Western Balkans, which are included in National Emissions Reduction Plans,¹ breached the combined national ceilings by 6 times, for the second year in a row.

However, the extent of the pollution is in fact even higher, as not all the existing plants in the five countries² are covered by these plans. Eight units are allowed to continue operating with no pollution control until the end of 2023 as long as they limit their operating hours.

Continuous measurements and reporting of emissions only became mandatory as of January 2018, when the Large combustion Plants Directive entered into force in the Energy Community countries, but these levels of pollution have been around for decades, putting public health at risk and causing environmental havoc.

Grasping what a 600% breach of allowed SO₂ emissions means is not an easy job, but our data visualisation does just that. In addition to choking the communities where coal power plants are located, SO₂ pollution from the Western Balkans often reaches as far as Russia and the Black Sea Coast to the east and Germany to the West!

Governments of the Western Balkan countries have known since the signing of the Energy Community Treaty in 2005 that they need to take measures to limit the pollution from their coal combustion plants. And while SO₂ pollution in the European Union has been kept under wraps for ten years now, thanks to the very same policy and strict enforcement, in the Western Balkans only baby steps have been made towards compliance. Even those are not yet delivering results.

SO₂ reduction investments in the Western Balkans – a domino of failures

Serbia – Kostolac B and TENT A de-SOx – plenty of headlines, no results

Serbia’s energy utility secured financing for a complete overhaul of Kostolac B1 and B2 in December 2011. A USD 293 million loan was taken by the Government of Serbia on behalf of the energy company from China Exim Bank to, among others, equip the two units with de-SOx and bring the plant’s emissions in line with the legal obligations of the LCPD.

The works were declared completed in 2017, but the plants’ emissions in 2019 were still at 79 113 tonnes, ten times above the legal annual ceiling of 7957.03 tonnes. There is no information available to the public about what is going on – is it a construction mistake, an operation flaw, a mix of both?

At the Nikola Tesla A power plant a loan for a desulphurisation project was signed in 2011, but the announcement of the start of works only came in 2019 and according to the financing agency, Japan’s Export Credit Agency, the rehabilitation should only be finalised by 2022.

Ugljevik, Bosnia and Herzegovina – 11 years of waiting in vain

Financed by a loan from the Japan International Cooperation Agency (JICA) signed back in 2009, works on the de-SOx equipment started only in 2017 and test operation began in December 2019. We hoped that in 2020, SO₂emissions would finally be significantly lower.

However in February 2020 it was revealed that there was a technical problem. The plant’s dust filters, overhauled three years ago by the Czech company Termochem, were not working properly, and their proper functioning is a precondition for desulphurisation. The EUR 83 million desulphurisation investment has been put in jeopardy.

Pljevlja, Montenegro – judgement clouded by nepotism?

The 40 year old plant is expected to undergo a full overhaul in 2021, bringing its emissions in line with the EU’s best available techniques. In November 2019 a consortium comprising China’s Dongfang and Montenegro’s BB Solar, Bemax and Permonte was chosen.

The choice raised eyebrows within Montenegro, especially for the significantly lower price compared to the other bids, but also as some of Dongfang’s staff were suspected by the Chinese government of accepting bribes from suppliers; BB Solar is half-owned by the President of Montenegro’s son, and Bemax is another well-connected company that often wins government contracts. One cannot help wonder if this project will have the same fate as Kostolac B and Ugljevik.

North Macedonia: all investments in pollution control on hold

Fitting a desulphurisation unit at the country’s largest coal plant, Bitola, is still stuck in the feasibility study phase, and according to the latest draft IPPC permit for the power plant, it is planned to be put into operation in December 2026. However, the National Energy Strategy adopted earlier this year, foresees a coal exit in 2025 in two out of three scenarios. This is probably why the Government isn’t keen on investing in SO₂ only to shut the plant in a couple of years, so the logical move would be reducing operating hours to get the emissions down.

Meanwhile, in just one year, SO₂ emissions from North Macedonia’s coal power plants have doubled. Total emissions in 2019 were 108,032 tonnes – twice as high as in 2018, when they were 53,855 tonnes.

In a reaction to Bankwatch’s report, the North Macedonian energy company does not dispute the volume of SO₂ emissions in 2019 per se – which was nearly 7 times higher than the national ceiling – but is more fixated on the “wrong” use of the word “doubling”.

The company’s response explains that the 2018 emissions were measured at longer intervals compared to 2019, which makes the margin for error in the calculations higher. According to them, this, in combination with the 20 per cent increase in operating hours should account for the higher volume of emissions. This makes one wonder how different the reported emissions will be after installing continuous measurements at the stacks– as required by the LCPD.

Kosovo: No plans for desulphurisation

The ancient Kosova A plant has been planned for closure for years, but successive governments tried to delay this until the planned Kosova e Re plant was built. With this plan now cancelled, however, it is time to stop procrastinating and make a definitive plan for Kosova A.

Given Kosovo’s near-complete dependence on coal, however, Kosova B will have to stay online for several more years. There is so far no clear plan to invest in bringing down SO₂ levels at the plant, as all eyes are on an ongoing investment to reduce the plant’s eye-watering dust emissions.

How bad is SO₂ for the environment and human health?

Sulphur dioxide is classified as very toxic for humans when inhaled. It can cause severe irritation of the nose and throat. High concentrations can cause a life-threatening accumulation of fluid in the lungs (pulmonary oedema). Symptoms may include coughing, shortness of breath, difficult breathing and tightness in the chest. Even a single exposure to a high concentration can cause a long-lasting condition like asthma.

SO₂ is also responsible for the formation of acid rain. This impacts our environment by changing soil composition and damaging crops and by inducing changes in the chemistry of rivers and lakes, often in remote locations, which are linked to declines in the health of aquatic organisms.

What to do?

Such daunting data on emissions as well as such flagrant displays of neglect from all countries about proper spending of public money and compliance with laws calls for decisive and immediate action. Those responsible for failed projects, mis-reported emissions and disregard for the rule of law must be held accountable, for sure. But the pollution also needs to be cut, immediately.

In some cases this will mean installing desulphurisation equipment, but Kostolac B and Ugljevik have shown that this is not a risk-free option. It bears considerable costs, both for installation and operation, and in some cases it will be more viable to close the plants.

Until then, we rely on communities on the ground to report how these projects are moving forward, and on governments to finally enforce the law and and bring the operating hours down in order to decrease the exposure to such life threatening levels of SO₂.

We also count on the Energy Community and European Commission to enforce large combustion plants legislation and penalise current and any further breaches, both directly and indirectly. Non-compliant plants should not be able to continue exporting electricity to the EU without paying their external costs, and EU funding support for the countries’ energy sectors must be made conditional on compliance with the Energy Community legislation.

¹A flexible implementation mechanism under the Large Combustion Plants Directive in the Energy Community whereby emissions can gradually be reduced by totalling their combined emissions and ensuring they are lower than the decreasing ceilings mandatory set for 2018, 2023, 2026 and 2027.
²Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia. Albania has no coal power plants.

The visualisation is based on atmospheric modelling with the European Monitoring and Evaluation Programme Meteorological Synthesizing Centre – West (EMEP MSC-W) computer model, which is also used by the European Environment Agency for European Commission assessments of health impacts from air pollution in Europe.
Simulations and data visualization by Rosa Gierens and Lauri Myllyvirta.

Bosnia-Herzegovina: Illegal lignite mine expansion at Gacko must be halted

The town of Gacko is dominated by its lignite power plant and open-cast mine, which sprawls messily for kilometres across the landscape. But even further expansion is now planned, by opening up the so-called Central Field, which would bring the mine even closer to the town.

Lignite is well-known for the air pollution belching from power plants – indeed a Bankwatch report launched earlier this week showed that Gacko – run by Elektroprivreda Republike Srpske (ERS) – is one of the Western Balkans’ worst offenders when it comes to dust pollution. But what many people are not aware of is that open-cast lignite mining adds to this, with dust, noise, vibrations and water pollution.

An environmental impact assessment process for the opening of the Central Field is ongoing, with a public hearing held this week, which should be assessing whether the impacts of the planned expansion are acceptable, and if so, how to keep them to a minimum.

There’s just one catch: Works on the Central Field have already been ongoing for quite a while.

The environmental impact assessment study itself admits that several kilometres of the River Mušnica have already been rerouted, and satellite images show that considerable parts of the mine have already started excavations.

Pulling the central bar to the right shows the situation as it was in 2014, with the planned Central Field in the centre of the picture, with a red border, and the River Mušnica flowing through it. Pulling the bar to the left shows the situation in 2018, with a long stretch of the River Mušnica redirected and excavations having taken place across at least one third of the Central Field.

This completely defeats the point of an environmental impact assessment and the works undertaken so far on the Central Field appear to be completely illegal, considering that no permits have been issued.

There is now no way to understand the baseline situation before the expansion in order to carry out an assessment of the likely impacts on the environment, nor is any public consultation meaningful when significant damage has been done already.

The works need to be stopped immediately, and ERS and its subsidiary RiTE Gacko deserve a hefty fine. They also need to restore the environment to its prior state, as far as possible. Treating environmental assessments as a formality is a problem across the Western Balkans, but doing one after works have begun really takes the biscuit.

For more information, see the Center for Environment’s website: https://czzs.org/the-mine-and-thermal-powerplant-gacko-are-digging-for-coal-without-a-valid-permit/?lang=en

SLAPPd: the Armenian activists fighting a mining multinational’s lawsuits

The truth is born of argument. Healthy debate underpins good governance, democracy and social cohesion. The rights to free speech, public participation and petition are enshrined in international law and the constitutional acts of democratic states. But what happens when these human rights interfere with corporate rights and business attempts to override democratic decision making?

SLAPP stands for “Strategic Lawsuit Against Public Participation” and refers to a lawsuit filed in retaliation for speaking up or organising public opposition against a business activity. SLAPPs are usually brought up by developers against activists who oppose their projects. The claims range from defamation, reputational or moral damage, to accusations of corruption, interference in business relations and material damages amounting to thousands or millions of dollars.

SLAPPs are rarely intended to compensate project promoters for damage, because those accused do not have the financial means, cases can get stuck in the legal system and often fail to conclude, legal and staff costs invested by the company in a lawsuit can significantly exceed the money collected as a result of it. The purpose of SLAPPs then is to intimidate activists, force them to “measure their words” by preoccupying them with lengthy and expensive court cases, and ultimately to silence and paralyse public criticism.

One instance in which SLAPP suits are being deployed is the case of the Amulsar gold mine in Armenia, a project backed by the European Bank for Reconstruction and Development. Here, Lydian international has attempted to stifle criticism from lawyers, civil society and local communities speaking out against the damages wrought by the project. Lydian has filed no less than 15 suits against dissenting voices, largely as an attempt to silence criticism. In spite of the clear malicious intent of the complaints, the EBRD, which has a mandate to promote democracy, has refused to intervene in support of the right to free speech.

We interviewed several members of the fight to protect Amulsar who are currently tied up in litigation with Lydian, and they shared their experiences in navigating the precarious territory of SLAPP suits.

A fight I will continue to the very end

Nazeli Vardanyan is a lawyer and the head of Armenian Forests NGO. She was assigned by the government to write a legal analysis of all the suspected violations related to the Amulsar project, which would then be sent for discussion to various stakeholders. During a public presentation of the document, Vardanyan raised one example of suspected corruption related to the Lydian’s Jermuk foundation that operates in the town near the mine. In December 2018, Lydian brought suit against her for criticising the Amulsar project and accusing it for dealings with authorities.

Vardanyan says the suit has been especially difficult because as the lawyer responsible for others facing suit from Lydian, she has been restricted in what she can and cannot disclose about the cases, effectively tying her hands.

She believes the suit is frivolous and is a direct result of her work in defending many other activists involved in the movement against Amulsar. On 11 June 2020, the Court of First Instance upheld the lawsuit filed by Lydian against Vardanyan. Yet Vardanyan is confident the suit will be dismissed eventually, so long as the Armenian judicial system adheres to its principles. She has said she is prepared to appeal the case for as long as possible to ensure a fair outcome.

I have sacrificed my time, my job, my life

Tehmine Yenoqyan is a journalist from the village of Gndevaz, which sits just opposite the Amulsar mine. She has long supported the blockade of access to the mine, and because of her dissent, she has been the subject of abuse and harassment.

Yenoqyan filed a second complaint to the police in September 2018 about video and photos along with abusive comments that circulated on Facebook. She alleged that the materials were captured by a neighbour employed by Lydian to surveil and discredit her. Though the court eventually ruled in her favour, she appealed to a higher court because compensation for the damages from the SLAPP suit were not commensurate with the difficulties she had faced. Yenoqyan believes the case was meant to sow division in the communities and detract her from her work as a journalist.

This is not an environmental campaign. It is an assertion of community rights.

Levon Galstyan believes the battle over the Amulsar mine has entered a new phase since Lydian began its strong arm tactics. The movement has gone beyond simply trying to prove that the mine is damaging: instead, winning these court cases is putting the whole integrity of the Armenian judiciary on the line. He was charged with defamation by Lydian in August 2018 for interviews he’d given with the national outlet Civilnet.am, some of his Facebook posts and articles that had appeared on the site of partner organisation ArmEcoFront.

He believes he has been targeted by Lydian because he has been a vocal critic of the project since 2011. The financial difficulties and the hurdles placed on people in having to attend court hearings are but a few of the problems associated with fighting Lydian, but Galstyan is confident in the end he will prevail.

His trial is ongoing.

Eventually there is justice, right?

In spring 2019, Gagik Grigoryan was charged with defamation by Lydian for questioning their operations in a Facebook post and during a public gathering. Like the others, he is being asked to pay a fine of one million Dram in damages. But he says he has yet to receive any court documents, so the litigation has not started.

In addition to these suits, in 2018 Lydian filed a claim against the Armenian Environmental and Mining Inspection Body. The inspection body had identified a range of violations related to mine’s operation and obliged the company to stop certain activities in the Amulsar area. In particular, the body noted the presence of red-listed species, project deviations during construction works, the inappropriate land use, unauthorized atmospheric emissions, failure to draft and approve hazardous waste passports during construction, the storage of hazardous wastes without a license and failure to pay environmental taxes for dust emissions. In 2019, the company also filed a lawsuit against two Armenian media sources – Lragir and Skizb – for defamation.

How to better apply the law to small hydropower in the Energy Community?

In the EU, a whole series of Directives govern whether a small hydropower plant can be built at a particular spot, including the Water Framework, Habitats and Birds Directives. Public consultations take place at different stages under the Strategic Environmental Impact Assessment (SEA) Directive and Environmental Impact Assessment (EIA) Directive.

As a result, only in very rare and exceptional circumstances can hydropower plants be built in locations where they will decrease water quality or damage Natura 2000 protected areas. When properly applied, this EU legislation ensures a high level of protection.

The Energy Community Treaty, which applies in the Western Balkans, Ukraine, Moldova and Georgia, currently includes only a limited range of EU environmental legislation. The EIA and SEA Directives are the most relevant for small hydropower plants.

This leaves precious natural areas, including many of the Western Balkans’ stunning rivers, terribly under-protected. In the coming years, therefore, the Energy Community needs to adopt all the remaining Directives mentioned above to provide the same level of protection to its rivers as those in the EU.

The pristine upper Neretva is threatened by eight hydropower plants. Photo: Amel Emric

But a lot of damage could already be prevented if the existing rules were properly applied in the Energy Community. It is this that the Secretariat has been consulting the public on for the last few weeks, with its new draft guidelines on small hydropower plants.

In recent years, Bankwatch has unfortunately witnessed numerous breaches of the EIA Directive and State aid legislation in the region. Below we cite some of the most frequent problems emphasised in our input for the consultation.

Small hydropower is driven by an outdated and imbalanced incentives system

Small hydropower has disproportionately benefited from feed-in tariffs in the Western Balkans, receiving 70% of renewable incentives in 2018, while generating only 3.6 per cent of electricity. Solar and wind have been subject to restrictive quotas on how many plants can receive incentives, but small hydropower plants have had much higher – and in some cases unlimited – quotas.

In North Macedonia, solar and wind must now undergo auctions, while an unlimited amount of small hydropower can still benefit from feed-in tariffs. This provides an unfair advantage for hydropower, especially as the level of support has not changed since 2007.

Likewise in the Republika Srpska entity of Bosnia and Herzegovina, small hydropower is practically the only form of renewable energy that can still receive support, since wind incentives were suddenly cut in 2019 and solar has always had a very low quota.

Feed-in tariff schemes are no longer allowed for renewable energy plants of more than 500 kW in the EU (though wind has a higher threshold) under the EU’s Energy and Environment State Aid Guidelines (EEAG), but some of the Balkan governments are dragging their feet about changing their incentives systems.

Importantly, the EU rules also contain sustainability criteria, requiring incentives only to be provided for plants which are in line with the Water Framework Directive and other EU environmental legislation. Such criteria are mostly absent in the national legislation in the Balkans.

Lack of strategic planning and assessment

Strategic planning in the Western Balkans suffers from a lack of continuity, a lack of meaningful public debate, and a tendency to carry old projects over into new plans ad infinitum without reconsidering whether they are still relevant.

Strategic Environmental Assessments are still not regularly carried out in some countries, and where they are, there is usually no real attempt to critically analyse the situation or take public comments into account. Sometimes they are carried out after the plan or programme they are analysing is already finished, so they cannot impact on choosing more environmentally acceptable options.

This results in a situation where planning is in reality stipulated by the development of a collection of individual projects, rather than projects being defined by the overall plan. In the case of small hydropower plants, this has resulted in “death by a thousand cuts” as concessions and permits have been distributed individually without considering the overall consequences for the region’s rivers and the people and animals who depend on them.

Small hydropower too often exempted from environmental impact assessment

Experience shows that even very small hydropower plants can cause serious damage when sited in sensitive areas, especially if several are built close together.

The EIA Directive aims to take this into account by making sure that large plants are always subject to environmental impact assessments, while smaller hydropower projects are screened according to criteria laid out in Annex III of the Directive.

But this second requirement is often ignored in the Western Balkans. In some countries, hydropower plants below a certain capacity threshold are automatically exempted from environmental impact assessments. In other countries, screening to see if an EIA is needed is required in theory, but is often mis-used in practice.

Country	EIA exemption threshold for small hydropower plants
Albania	None
Bosnia and Herzegovina	2-5 MW (Federation of BIH) N/A (Republika Srpska)
Kosovo	None
Montenegro	1 MW
North Macedonia	None
Serbia	2 MW

Serbia has not even transposed the Annex III criteria into its domestic legislation. Others like the Republika Srpska entity of Bosnia and Herzegovina have reasonable criteria in theory, but screening decisions like the recent one for Phase 1 of the Upper Neretva plants show that they are not used for decision-making in reality. Even within the same country, decisions on similar projects are often inconsistent with one another.

One of the issues the draft guidelines need to emphasise more is that potential cumulative impacts with other planned or existing plants must trigger an EIA. This issue is very often ignored in the Western Balkans, for example in the case of Jošanička Banja in Serbia, where 14 small hydropower plants have been built in a very small area.

In the EU, even in cases where no full EIA is needed, under the Habitats Directive there is a requirement to carry out a so-called Appropriate Assessment in cases where projects are sited in Natura 2000 areas or could impact protected species. This option is missing in most of the Energy Community countries, because the Habitats Directive has not yet been transposed. It is therefore especially important to take a precautionary approach and require a full EIA even when the domestic legislation is ambiguous on whether it is needed or not.

Common problems with EIA studies for small hydropower

One of the areas where the draft guidelines could be more explicit is about common mistakes made in developing EIA studies. Bankwatch’s experience shows that EIAs for small hydropower plants, where they are carried out at all, usually suffer from the following issues:

Baseline data is missing. Biodiversity fieldwork is needed in locations that are not well-researched – ie. most of them. For too many EIA studies the authors have needlessly spent time and resources measuring the air quality in pristine mountain regions (eg. for the Ulog and Upper Neretva plants in Bosnia and Herzegovina) but failed to do biodiversity fieldwork. This makes it impossible to assess the real impacts.
The use of old data eg. for hydrological measurements and biodiversity is extremely common and must be avoided as it tells us nothing about the current situation. Guidance from the Energy Community on what constitutes sufficiently updated data would also be useful.
The cumulative impacts of existing and planned projects must be analysed. We have observed a trend of mentioning the word “cumulative” in EIA studies without actually analysing what other projects are planned or existing and what impacts these would have all together.
Project alternatives need to go beyond claiming that there is no alternative and seriously examine the options.
Maps need to be clear and show in detail what land is affected.
Mitigation measures need to be realistic, effective, and enforceable (see below). If no such measures exist, the project should not be allowed to proceed.

Public excluded from decision-making

In cases where no EIA is carried out, there is often no public consultation on the project level at all (eg. North Macedonia, Serbia). This is a risk for local people, the environment and the investor, as it often leads to unpleasant surprises later, ranging from public resistance to landslides and floods damaging the projects.

Even where there is an EIA process and public consultation, this does not take place when all options are still open as required by the Aarhus Convention. Instead of truly consulting the public, it is carried out as a pro forma procedure. Where public hearings are held, local people often do not know. Sometimes they are only advertised on the Ministry’s website, or in obscure publications, or not at all or only specific people are invited. Sometimes they are held far from the project site.

Deadlines for commenting on EIA studies are often too short (ie. often 20 days in Serbia) and not clearly stated on the consultation announcement. Announcements are commonly made just before the summer or Christmas holidays when people are least likely to notice them.

Public comments are hardly ever really taken into account. Even when comments are “accepted”, they do not lead to reconsideration of the project or real improvements in the project design. At best they lead to some text being added to the EIA, without any change to the overall conclusions.

The draft guidelines therefore need to underline the need for decision-makers to lose their fear of truly consulting the public. They also need to emphasise the need to duly take public comments into account, and the need for all options – including no project – to still be open when public participation takes place.

Lack of public participation often leads to protests – in this case at Bukovica, Montenegro. Photo: Katja Jemec, Balkan River Defence

Access to justice

Given all the above deficiencies, it is frequently necessary to challenge permitting decisions for small hydropower plants. The EIA Directive, following the Aarhus Convention, is supposed to ensure access to justice on environmental issues. But in the Western Balkans there are two main problems with this:

becoming aware of a decision on time to mount a legal challenge and
the judiciary’s lack of independence and knowledge about environmental law/issues.

Screening decisions on whether an EIA is needed are not always available to the public, so it is very hard to challenge them. E.g. in Republika Srpska the law requires publication only 30 days after the decision is made, and in reality not all decisions are published. Decisions on whether EIAs are needed after changes in projects are not required to be published at all.

In Serbia, poor legislative wording enables construction permits to be issued before EIA decisions are made, thus prejudicing the outcome of the EIA process and any legal challenges made afterwards. Appeals can be made against EIA decisions, but are unlikely to be successful if a construction permit has already been granted.

Going beyond the hydropower sector, in Bosnia and Herzegovina, access to justice provisions were clearly violated in 2019 when a legal challenge against an environmental permit by a Sarajevo-based NGO on a coal power project in Tuzla was dismissed, based solely on the organisation’s address.

Construction permits often cannot be challenged in court because the deadline is too short to really allow this and it is not known on time that they have been issued. In Serbia, they can be challenged in theory, but unsuccessful challenges can lead to the complainant having to pay damages and lost profits to the investor, thus representing an implicit threat against those considering such action.

Mitigation measures, monitoring and inspection

The guidelines need to be strengthened with regard to mitigation measures, monitoring and inspection. Too often EIAs and environmental permits for small hydropower plants prescribe unrealistic, ineffective or harmful mitigation measures, while implementation is not monitored and violations are not penalised.

Too often fish passes are prescribed as a mitigation measure despite the lack of evidence that they can be effective. Stocking is also a commonly stipulated measure, despite its ineffectiveness and negative impacts on the genetic structure of autochthonous fish populations, while requirements for how much residual flow needs to be left downstream from the water intake are usually woefully inadequate across the region.

High-jumpers-only fish pass at Vladići small hydropower plant in Serbia. Photo: Pippa Gallop, Bankwatch

Monitoring is very difficult given the locations of most small hydropower plants, and the use of ad-hoc measures such as blocking fish passes with boards. Operators can also install automated systems to increase the residual flow when someone approaches. This has to be taken into account when deciding whether the impacts of a project will be acceptable. If it is impossible to ensure that a project can be monitored to the extent needed to keep its impacts at a reasonable level, it should not go ahead.

Fish pass at Klupci hydropower plant Serbia, blocked by a board to direct water towards the turbines. Photo: Pippa Gallop, Bankwatch

Enforcement is key

The issues above result from lack of knowledge on environmental issues and legislation by government bodies and courts, coupled with corruption and a lack of political will to properly implement existing legislation on environment and State aid.

The Energy Community’s guidelines on small hydropower can therefore play a role in educating relevant actors but need to be coupled with continued enforcement efforts. The Energy Community Secretariat is playing an active role through its dispute settlement mechanism and activists across the region are stepping up the pressure on national authorities to do their job. There is still a long way to go, but it can and must be done. The region’s unique rivers depend on it.

EBRD’s Green Economy Transition must not be a fig leaf for fossil fuels investments

The EBRD is currently in the process of renewing its commitment to facilitating environmentally sustainable economies through its Green Economy Transition (GET) strategy. At the same time it is also considering over EUR 700 million in financial aid to coal-based energy utilities and gas infrastructure projects from Tunisia to Kazakhstan, at least in part in the context of the COVID-19 response. The EBRD has argued that crisis recovery is an opportunity to “tilt to green”, but can the bank kick its own fossil fuels habit?

Introduced in 2015, the EBRD’s GET initiative was intended to enable an increase in financing for projects that facilitate the energy transition to up to 40% of the bank’s annual portfolio by 2020. To a large extent, this approach was meant to embody the EBRD’s commitment to the 2015 Paris climate accord.

A new Bankwatch analysis finds that in the period 2010-2019, of the EBRD’s total energy-related lending of EUR 51.4 billion, 23% went to renewables, primarily in the EU. Countries in southeastern Europe, where coal remains a major source of energy, have seen the smallest share of the EBRD’s renewables investments – though rather due to lack of interest from governments than from the bank.

Nevertheless, although investments in renewables kept growing after 2015, when GET was introduced, this strategy has done nothing to curtail the EBRD’s fossil fuels spending.

Over the same period, the hottest decade on record, 41% of the EBRD’s energy-related lending went to the fossil fuels industry. The bank has been extending public money to various oil and gas projects across eastern Europe and the Caucasus, Central Asia and the Mediterranean. The main beneficiary, receiving a total of USD 1.7 billion in EBRD support, was the controversial Southern Gas Corridor, a chain of gas pipelines from Azerbaijan to Italy.

EBRD financing for fossil fuels seems to have peaked in 2018 at EUR 1 billion, the same year the Intergovernmental Panel on Climate Change warned that humanity has until 2030 to halve its emissions to avert the worst impacts of a runway climate breakdown. Last year, the EBRD’s support for fossil fuels was surpassed by investments in renewables for the first time. With fossil fuel lending still so high at the EBRD, GET risks serving as merely a fig leaf.

This needs to change. At least eight of the countries holding EBRD shares, as well as the European Union, have already declared a climate emergency. It is high time that the EBRD takes a page from the European Investment Bank, itself an EBRD shareholder, which in November 2019 decided to cease support for fossil fuels by end of 2021.

We are now at a turning point. Top economists – including Joseph Stiglitz and Lord Nicholas Stern – have argued that the best way out of this pandemic is a green stimulus, stepping up investments in energy efficiency and renewable energy. In the wake of the COVID-19 pandemic, electricity utilities in at least three Western Balkans countries could be benefiting from EBRD support. Among them is Serbia’s coal-reliant EPS, which has been enjoying generous EBRD funding for nearly two decades, despite the fact that it is expanding lignite mining and building new coal power capacities.

The COVID-19 emergency must not become an excuse for the EBRD to double down on financing for fossil fuels.

In fact, the EBRD’s own economists have said much the same thing: ‘Governments – while protecting their citizens medically and economically in the short term – must also look to the long term; they should not be seduced into supporting fossil fuel use due to the currently low oil prices,’ they wrote in a report published in early April. ‘Governments should put climate action and resilience at the core of economic stimulus packages and prioritise support towards green firms. This will ensure that public spending helps address both the current economic crisis and the ongoing climate crisis.’

The EBRD also needs to ensure that projects under its renewables portfolio are in line with the EU’s climate mitigation and adaptation taxonomy criteria. The bank needs to avoid funding unsustainable projects such as hydropower facilities that damage natural habitats, or waste incineration projects, which conflict with circular economy goals.

Business as usual is no longer an option. If the EBRD is serious about enabling a genuine transition and sustainable recovery, the next generation of the Green Economy Transition strategy, currently being prepared, needs to ensure that the bank’s investments facilitate not just a low-carbon transition, but actual decarbonization and energy, water and materials savings. At this point, anything else would be plain greenwashing.

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