Blog entry

The missing link: Green recovery and energy transition in Hungary and CEE

Today, Europe is grappling with how to reconstruct the economy and societies after the COVID-19 crisis. More than one million Europeans and thousands of civil society organisations and companies believe that a sustainable and crisis-resistant recovery serving European people has to be green and just.

In central and eastern Europe (CEE), it is especially crucial for economic recovery to go hand in hand with energy transition. Czech, Slovak, Polish and Hungarian leaders called for a ‘fair’ EU recovery fund during their first Visegrad-4 (V4) meeting after the lockdown on 11 June in Lednice, Czech Republic. Based on their announcements, this ‘fairness’ is more about the allocation of money per country than about the contents of the plan.

In order to ensure that their countries get the maximum proportion possible from the funds, the V4 wants to change the main criterion of allocation (the Czech Republic wants it to be based on the GDP slump for each member), the balance between loans and funds (Hungary would prefer exclusively funds) and payments (Poland states that sources of additional payments have to be fair and progressive; richer countries need to pay more and there should be no rebates for them in the EU budget).

But besides the allocation and methodology debates, Member States also need to agree on the content principles of this recovery fund. Otherwise, this EUR 750 billion fund will be spent on lost causes, bringing Member States closer to new crises instead of towards a crisis-resilient energy transition.

Partly to encourage a national debate on the content, Friends of the Earth Hungary (MTVSZ), in its petition for a life-affirming society and economy, demands the reduction of fossil fuel dependency and resource use, private and community access to clean energy and the strengthening of local economies.

The following assessment of the European Commission’s budgetary and recovery package focuses on these principles and examines to what extent the package corresponds to the Green 10 call for a green, healthy and just recovery, consistent with the European Green Deal (EGD) and the EU and Hungary’s commitment to transition to carbon neutrality by 2050.

Unfortunately, the EU proposal does not meet the needs of green and just economic recovery, nor the principles of the EGD: it does not exclude support to fossil fuels, tends to rely on technological fixes, is not socially just enough and is brown rather than green.

The failures of the recovery after the 2008-2009 financial and economic crisis, when EU funds were used to reconstruct the pre-crisis polluting, health-damaging economy dependent on assembly-based manufacturing, should not be repeated. The devil is the details; let’s take a look at them.

I. The Next Generation EU recovery package – old-style, with some techno-fixes

The new, two-year Next Generation EU package of EUR 750 billion supplements the regular seven-year EU budget of EUR 1 100 billion for the 2021-2022 period (to be spent by the end of 2024). One of its key elements is the EUR 560 billion Recovery and Resilience Facility, providing grants (EUR 310 billion) and loans (EUR 250 billion) for investments and reforms to support recovery. Member States will be able to access these in accordance with their national recovery plans, which must be tailored to their National Energy and Climate Plans (NECPs), Just Transition Plans, Partnership Agreements and operational programmes.The quality of recovery, and its climate ambition, thus continues to depend on member states.

The Next Generation EU package from a climate and energy perspective

1) The Commission intends to raise new funds to cover the 2021-2022 package from green or digital taxes. A better solution would be the fair and revenue-based distribution of burdens (e.g. the introduction of a fossil fuel consumption quota system as proposed in ‘For a life-affirming economy’), but the Commission’s proposal fails to address this.

2) The use of EU and domestic funds is not conditioned on the exclusion of fossil energy and polluting industries. Beneficiaries are not obliged to reduce their harmful emissions and environmental footprint. Meanwhile, several technological fixes (e.g. hydrogen and carbon capture and storage (CCS)) are supported or serve corporate interests instead of social ones.

3) The package intends to help double the annual average 1% energy efficiency renovation rate through the Renovation Wave, by doubling the financial loan budget of InvestEU. It is unknown whether any support schemes are planned to help low-income, low-credibility families obtain access to deep, complex renovation of residential buildings.

Hungarian plans are no better: there is no targeted state programme for the complex renovation of residential buildings (i.a. the serial-fabricated 800,000 10m2 x 10m2 single family houses built between the 1950 and 1980s). The Residential Energy Efficiency Loan programme, which offers residents a 0% rate on their loans, will run out shortly and has not proven to be suitable for this. The energy efficiency Obligation Scheme proposed under the NECP does not make complex renovation of residential buildings attractive to energy companies; the system has to be adapted to this.

4) As regards renewable energy, the Commission’s proposal treats renewables and techno-fixes like CCS and hydrogen similarly, which is rather worrying. Hydrogen-based technologies are underdeveloped and risky. Most hydrogen now originates from fossil sources and increasing its use would thus aggravate dependence on fossil fuels, as would CCS. Hydrogen can only play a marginal role in the energy transition. The EU Taxonomy on sustainable investments can thus be crucial in developing a sustainable energy mix.

Hungarian plans for renewables are just as concerning. The low target of 21% of renewables in gross final energy consumption (as stated in the NECP) is problematic mainly because the gross final energy consumption is expected to increase, and because an unsustainably high share of biomass is maintained in the strategy for achieving this target.

II. Where they smell money… the seven-year EU budget and Hungary

Lessons from the past – to what extent was Hungarian spending climate-friendly?

More than half of Hungarian public investments (55% between 2015 and 2017) were covered by EU cohesion policy funds. Between 2014 and 2020, Hungary was eligible for EUR 29.64 billion in cohesion money and spent about 13% of it (EUR 4 billion) on climate action (adaptation and transition to a low-carbon economy).

Source: authors’ graphics based on data from https://cohesiondata.ec.europa.eu/

Although according to EU budget rules, Member States should have spent 15-20% of funds on climate action, Hungary only used 12% for climate and energy (renewable energy systems, energy efficiency, electricity infrastructure, gas infrastructure and research and innovation in climate).

Moreover, the scale and impact of climate-friendly investments supported is much smaller than that of investments without a climate focus (e.g. education, employment, economic development, social infrastructure). Due to the lack of proper safeguards, conditions and monitoring, these investments have often supported the use of fossil energy (e.g. road development), thereby contributing to the destruction of the climate.

However, both the 2014-2020 Hungarian operational programmes and the NECP adopted in January 2020 failed to address several climate-friendly goals supporting energy transition. One such goal is the energy efficient reconstruction of residential buildings, which in Hungary are responsible for 24% of primary energy consumption.

Against this background, it is important for the climate-friendly emissions-reduction measures of current operational programmes not to be sacrificed to crisis-management reallocation.

How can EU funds be spent on energy transition and green recovery by 2030?

According to government estimates, the implementation of the 2030 goals of the Hungarian NECP would cost EUR 44.5 billion (EUR 3.2 to 3.4 billion annually, or 2-2.5% of the annual GDP), which is ten times the amount spent on climate protection from EU funds in Hungary since 2014. By comparison, the EUR 25-28 billion post-COVID economic crisis management package will require EUR 6 billion from the state budget, i.e. 4.55% of Hungary’s GDP this year.

Of course, climate action cannot solely be covered from EU and national funds (grants and loans); considerable private capital needs to be mobilised accordingly. However, it is in our common interest that EU funds (or loans) cover a high percentage of climate-friendly, crisis-resilient investment across central and eastern Europe. For this, smart planning of the new EU budget is needed.

Source: authors’ graphics based on data from https://cohesiondata.ec.europa.eu/, the HU NECP and the National Clean Development Strategy (national long-term strategy for 2050)

Obviously, the current level of support for the energy transition falls very short of what is needed to reach carbon neutrality. The 2021-2027 operational programmes of Cohesion Policy that will be elaborated in the coming months could fill this gap.

Therefore, MTVSZ – Friends of the Earth Hungary, along with many other Hungarian and European NGOs, proposes to devote 40-50% of the 2021-2027 EU budget to climate- and environment-related purposes (climate mainstreaming), for the sake of a green and just recovery.

The Hungarian and other CEE governments should therefore support more transparent, climate- and environmentally-friendly planning and use of EU funds through strong support for the European Green Deal and green recovery, and apply the same principles to the development and implementation of domestic and EU-wide budgetary and recovery plans.

Friends of the Earth Hungary, just like other Bankwatch member groups, follows domestic Cohesion Policy planning (including for the Partnership Agreement and operational programmes) and related public participation processes closely to help integrate the above aspects in line with the long-term interests of our societies.

Cities for citizens

Michelle Bachelet, UN High Commissioner for Human Rights, has called COVID-19 ‘a colossal test of leadership [that] demands decisive, coordinated and innovative action from all, and for all’. With 55% of the world’s population and 74% of Europe’s population living in urban areas, the leadership and governance of cities has been put to the test.

Cities are undergoing unprecedented changes as lockdowns are being lifted and citizens are learning how to live with the novel virus in crowded urban centres. The recovery process is adding new challenges to city infrastructure and municipal services, yet with those challenges come new opportunities. For example, some cities are ‘clamping down on cars’ and people are turning to cycling, not only as a more climate-friendly mobility option, but also as a way to avoid crowded public transport.

With the new challenges and opportunities comes billions in public money to be invested in new safer, more sustainable and resilient urban infrastructure. Transparency, public participation and accountability must be the building blocks of urban recovery and transformation.

A new briefing from Bankwatch presents the results of mapping sustainable municipal infrastructure investments made by the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) in the Western Balkans and the Eastern Neighbourhood from 2016-2019. Our findings show that the public questions the green credentials of these investments, as the sector is underpinned by a lack of transparency, accountability and participatory decision-making at the local level. These are important lessons for the COVID-19 recovery, as well.

Governance gaps in CEE cities

Much-needed infrastructure investments in Eastern Europe’s big cities tend to be surrounded by too many controversies. Lack of transparency in tendering, low quality for high cost, corruption scandals, and political resignations are part and parcel of the current governance model.

For example, in Sofia, Bulgaria’s capital, #NiceButNotReady and #ReadyButNotNice trend on Bulgarian social media in relation to urban infrastructure projects characterised by delays and dissatisfaction. ‘Repairs of repairs’ are what people call the repairs of flaws made during infrastructure renovation works. Of course, the ‘repairs of repairs’ are not done for free, but come out of the city’s budget, i.e. out of the taxpayer’s pocket.

The questionable value for money goes hand in hand with mixed results for city-dwellers’ quality of life. The affordability of municipal services, the safety and accessibility of infrastructure and services for vulnerable groups or those with special mobility needs, impacts on local businesses’ operations: these are all issues that need to be discussed at the early stages of designing urban projects, well before discussing contract terms with construction companies and municipal service providers.

Unfortunately, after thirty years of transition, transparency and participatory decision-making are still not practiced in our region. Popular ‘revolutions’ still fight to overturn corrupt governments in some parts of the Balkans and Eastern Neighbourhood, and autocratic regimes still rule other countries that lack political pluralism and free democratic elections.

The EIB and EBRD investing in cities

This governance vacuum is the political context in which the EIB and EBRD operate. Like most multilateral development banks (MDBs), the EIB and EBRD are keen on stepping up their investments in the municipal and environmental infrastructure sector (MEI) with the aim of making cities more inclusive, resource efficient and resilient to climate change impacts. They have increased both their emphasis on the sector and their funding for it over time, recognising its importance for climate change mitigation and adaptation goals, and claiming positive impact with regards to greenhouse gas emissions reductions.

Between 2012 and 2018 the EIB invested nearly EUR 150 billion in urban areas, as about 30% of our total annual lending is dedicated to the EU Urban Agenda. Within the EBRD’s municipal and environmental infrastructure sector, there have been 505 operations to date totalling EUR 9 billion, in areas such as energy and energy efficiency, solid waste, transport and water and wastewater.

Banks know all too well that governance is a challenge in the sector, so they attempt to address governance weaknesses with various forms of technical assistance. For example, many of the EBRD urban projects are paired with grants from dedicated donor funds set up by the banks’ shareholders. These technical assistance grants are used for various studies and assessments and for providing additional expert capacity for municipalities.

In addition, the EBRD provides policy advice and support for city-wide planning. The Bank has pioneered the flagship Green Cities initiative, which helps cities achieve their green financing goals through the development of Green City Action Plans. The EBRD has partnered with the Green Climate Fund to co-finance the Green Cities Framework.

Bankwatch has tracked the developments in the MEI sector, recognising the opportunities and the challenges. Bankwatch’s study covers two regions in which the EIB and EBRD finance municipal projects, the Western Balkans and Eastern Neighbourhood, during the period from 2016 to 2019. During this period of analysis, the EIB financed EUR 1.73 billion for 24 different operations and the EBRD financed EUR 919 million for 50 different operations. Included in these totals are 24 separate framework loans, 10 approved by the EBRD and 14 by the EIB.

Public perceptions of green MEI projects

The reported energy efficiency and greenhouse gas reductions of these projects can indeed be impressive. Unfortunately, given the aforementioned governance gaps in the countries where the two European banks operate, it is no surprise that some of the projects and initiatives have run into trouble.

At the end of 2019, Bankwatch conducted 16 structured interview surveys with representatives from environmental organisations in the Western Balkans and Eastern Neighbourhood. The aim was to collect the views of civil society working in municipalities that have been the site of one of EIB’s or EBRD’s investments and to understand how they perceive IFI-funded infrastructure projects and strategic plans. In addition to the survey data, in-person participant observation and interviews, as well as desk research, were conducted to develop case studies of three cities (Belgrade, Skopje and Tbilisi).

According to our respondents, international financial institutions (IFIs) are not able to hold local authorities accountable for ensuring transparency, public participation, strategically-guided development, the implementation of the most sustainable technology, and in some cases local laws or the terms of the projects. CSO representatives pointed out that as a result, authorities may misuse IFI funding, failing to adequately plan and implement projects that are environmentally-friendly and support human rights.

One reason for these problems is that municipal projects are frequently categorised within the banks’ system as projects that have limited risks and impacts on their surroundings (as were 63 out of the 74 projects analysed for this study), and thus are subject to less stringent requirements and monitoring. Our analysis raised the following key issues.

The EIB and EBRD do not publish sufficient information on these projects and rely to a great degree on their clients – municipal authorities or service companies – to disclose information locally and to consult in a meaningful and culturally appropriate manner with people who will be impacted by the project. This is justified by the assumption that clients have better means to reach the public, for example in local media, in the local language etc. The practice, however, shows that local decision-makers lack the capacity to consult design choices and decisions with the public, or that perhaps the policy of doing so has not been well established. Therefore, projects sometimes lack social license and face broad public criticism, protests and legal challenges.

For example, during our interviews, we heard that in Mariupol, Ukraine, an EBRD project resulted in protests due to more expensive tickets on the newly purchased trolleybuses. The decision did not take into account the affordability concerns of the public and people complained that the cost increase was not related to improvement of the quality of the public transport services. Affordability concerns were raised in an EBRD-financed district heating project in the city of Banja Luka in Bosnia and Herzegovina, as the controversy reached the Constitutional Court. In Tirana, Albania, the heavy construction required to construct new water pipes for the city, funded by an EBRD loan, has contributed to the city’s already intense construction, adding dust, noise pollution, safety risks and traffic to the streets. In Serbia, the EBRD-funded Green Boulevard in Belgrade has had similar construction impacts, and is not expected to reduce air pollution or increase green spaces in the city.

These examples clearly show that the EIB and EBRD cannot rely on disclosure by their clients. They need to disclose all studies on environmental and social impact, but especially those developed with technical assistance grants that sometimes equal the size of the loan.

Green investments in cities risk getting a bad name if the EBRD and the EIB will not address the governance gaps through more capacity building at the local level. In addition, the banks need to set an example of transparency by disclosing more project information themselves and requiring meaningful public participation at every stage of designing and decision-making on projects.

These concerns have become increasingly relevant in the current context. The COVID-19 pandemic has shifted urban development priorities and has changed our perceptions of safe personal and public space. It has increased our awareness of sustainability and resilience, of social interdependencies and social responsibility with regards to the protection of high risk and vulnerable groups. The physical distancing will require new technologies, but also new models of communication, public consultation and stakeholder engagement.

The way our cities invest in sustainability and resilience is not simply a matter of efficiency, nor about return on investment. More than ever, it is test to democracy and, ultimately, a matter of survival.

For more information, please read our new briefing on the EBRD and EIB’s sustainable municipal infrastructure funding.

The Balkans are decarbonising, why aren’t Serbia and Bosnia?

This year’s World Environment Day sees cleaner air in many countries, courtesy of their responses to COVID-19. This issue is crucial for the Western Balkans, whose 16 lignite power plants in 2016 emitted as much sulphur dioxide and dust as all the EU’s 250 coal plants together. Read our new briefing on the Western Balkans’ two-speed energy transition here.

Montenegro and North Macedonia are prioritising renewable energy, scaling up solar and wind power. Hydropower-dependent Albania is also diversifying, mainly with solar.

Kosovo is in flux after its government fell earlier this year, but the collapse of the Kosova e Re coal power project in March has opened up space for alternatives.

The Western Balkans’ neighbours are also upping their game. Hungary and Greece will phase out coal power within the next decade, even though Greece’s Ptolemaida V coal plant is still being built.

In Slovenia, the loss-making and corruption-riddled Šoštanj unit 6 was completed in 2014, while Croatia and Romania have both abandoned plans for new coal power plants.

Where once it was a resource, coal is now a liability. But Serbia and Bosnia-Herzegovina are still pinning their hopes on it.

The China Engineering and Machinery Corporation is building a new unit at Kostolac B in Serbia. Its chimney is nearly complete, like an obelisk standing in defiance of environmental and economic logic.

This initially looked like the last gasp of new coal in Serbia, based on deals signed a decade ago. But in March this year, state-owned utility EPS signed a preliminary agreement with PowerChina to resurrect the long-dead Kolubara B coal power project.

Construction at the plant started in the 1980s, and was halted in 1992 by sanctions against Serbia. In 2013, a resuscitation attempt failed when the European Bank for Reconstruction and Development decided not to back the project. But instead of letting sleeping dogs lie, the Serbian government has revived it.

Bosnia-Herzegovina, too, is bucking the trend. The infamous Tuzla 7 plant is financed by a China Eximbank loan backed by an illegal state guarantee, and the authorities are planning at least four more new coal plants.

The drivers for these plans – at a time when most of Europe is planning coal phase-outs – are manifold. Resistance to change and scepticism about variable renewables play a role, as does fear of job losses in the lignite mines. But plans for new coal only persist because the public energy utilities are willing to tolerate financial losses.

No new coal plant is likely to be profitable, but the Kostolac and Tuzla 7 feasibility studies underestimate carbon pricing and coal prices in order to conceal this. China’s state banks, among the few sources still willing to finance coal, are unconcerned as long as they can obtain state loan guarantees.

For as long as the countries can access affordable loans and do not pay for carbon emissions, coal projects will divert resources from sustainable alternatives. But take one of these factors away, and the situation changes quickly.

Click on the dots to view more graphs.

This was the case in Montenegro. A few years ago the government presented the Pljevlja II power plant as an imperative. But after the Czech Export Bank declined to finance the project, the story changed, and the future turned renewable.

North Macedonia too, has moved away from new coal plans, becoming the first country in the region to put concrete coal phase out dates on the table earlier this year.

The region’s transition has a long way to go, and is paved with potential pitfalls. The countries are learning the hard way that renewable energy is not always sustainable energy, as their rivers are carved up by numerous small hydropower plants. And gas, which has not been widely used across the region so far, threatens to be an expensive and climate-damaging distraction.

The important thing, however, is to decide and declutter. If an energy-efficient economy based on sustainable forms of renewable energy is the goal, then decades-old projects that devour resources and prevent transition have to go.

Slovene prosecutors file charges over coal plant corruption

Šoštanj unit 6 appeared on a government wishlist of infrastructure development projects back in 2006, at a time when Slovenia had no real energy strategy. At the time it was estimated that it would cost EUR 600 million, and extravagant promises were made about long-term employment in the nearby Velenje coal mine.

Initial concerns by civil society groups like Focus centred around the plant’s climate impact, particularly for a plant that was set to be financed with public money from the EIB and EBRD – European banks that should set high standards for financial markets to follow. However it later became clear that the plant was likely to become an economic liability as well.

An analysis carried out by consultants CE Delft in 2011 showed that the projected price of coal was unrealistic and that the project would be very sensitive to electricity prices.

The project rolled on, however, but in February 2012, the Slovenian Commission for the Prevention of Corruption issued warnings that the project had been designed and implemented in a non-transparent manner, lacked supervision and was subject to political and lobbying influences, and as a result there was a high risk of corruption and conflict of interest.

In 2013 it was reported that the final price of the project would most likely amount to EUR 1.43 billion, more than twice the initial cost cited.

After a lengthy investigation, in October 2014 ten people were charged with fraud in relation to the project.

From then until now, there has been very little news about the course of the investigation. But last week’s announcements revealed that the number of accused people is now 12, and that two companies – one Slovene, and one from abroad – have been subject to charges for 24 criminal offences. Unofficial information reported by the media suggests that the two companies are Slovenia’s Sol Intercontinental and France’s Alstom Power.

If there is one good thing that came out of the Šoštanj 6 case, it was that the EIB and EBRD learned that investing in coal was likely to come back and haunt them and virtually withdrew from the sector in 2013.

But meanwhile, Slovenia is saddled with the costs. The Šoštanj plant’s overall loss of more than EUR 58.5 million in 2018 was mainly due to low electricity sales prices, unchanged prices of coal and CO2 emissions prices, but no-one could say this was unforeseeable.

What was less expected was the cost to the public purse of alleged wrongdoing in the process of construction, estimated at 250 million euros. Two hundred and fifty million euros. Just think how many houses could have been insulated for that money, how many solar photovoltaics fitted, how many heat pumps installed…

The Šoštanj 6 case vividly illustrates the fact that lignite is no longer cheap, and that ignoring economic warning signs early on will most likely backfire later on. After ten years of watching Slovenia’s Šoštanj 6 debacle, it is galling to see Serbia and Bosnia-Herzegovina making similar mistakes with projects such as Kostolac B3 and Tuzla 7.

Both these projects exhibit glaringly incorrect economic assumptions at the heart of their feasibility studies, about carbon pricing – and, in the Tuzla 7 case, coal costs. They are a financial calamity waiting to happen, yet the respective governments are forging ahead. Can it really be that they really cannot see what is coming, or will we also soon be reporting on fraud charges in these cases?

Bosnia and Herzegovina: Assault on the Neretva basin runs into blockades and lawsuits

Bosnia and Herzegovina’s stunning river Neretva stretches from the high mountains in the Republika Srpska entity, through Konjic and Mostar in the Federation of Bosnia and Herzegovina and down to the Adriatic Sea in Croatia.

Despite its middle stretch being impacted by four large dams built in the second half of the 20th Century, the lowest part of the river, its tributaries and its upper sections are still extremely rich habitats, with no fewer than 17 species of fish that are either listed by the IUCN in a threatened category, or protected under the Bern Convention or European Habitats Directive.

The Neretva basin is also home to the endangered white-clawed crayfish as well as numerous other species, including otters, bears and wolves, and the upper Neretva is a candidate Emerald Site under the Bern Convention – a potential future Natura 2000 area.

Despite this, dozens more hydropower plants are planned in the Neretva basin. Among the more immediate plans are:

Seven plants planned by Marvel d.o.o. on the upper Neretva in Republika Srpska
The Ulog plant planned by EFT and built by China’s Sinohydro just downstream from these, also in Republika Srpska, near the boundary with the Federation
No fewer than 15 small hydropower plants planned by Elektroprivreda Bosne i Hercegovine on the Neretvica tributary system that joins the Neretva at the Jablanica reservoir below Konjic
Delaso d.o.o’s Hotovlje plant currently under construction on the Vrhovinska river, a tributary of the Neretva in Republika Srpska.

Neretva River

Photo credit: Robert Oroz & Eko Akcija

The upper Neretva. Photo credits: Amel Emric, Robert Oroz and Eko Akcija

All of these except Ulog are under 10 MW and thus stand to benefit from generous feed-in tariffs that guarantee the buy-off of their electricity at a higher-than-market price. But while their capacity may be small, their impact will not. One of the upper Neretva dams, Uloški Buk, is expected to be more than 40 m tall, and the cascades of dams will turn tens of kilometres of rivers into successions of dams and pipelines.

The European Bank for Reconstruction and Development rightly declined to finance both the Ulog and Neretvica projects, leaving the financing for all the projects above shrouded in mystery.

For Ulog, the Republika Srpska Concession Commission reported that talks with the Industrial and Commercial Bank of China (ICBC) were ongoing in 2017 and then the China Development Bank in 2018, but it is unclear whether any final decisions have been taken. For the other projects, no financiers have been mentioned publicly.

This has not stopped the projects moving ahead however. Just this week, the diggers turned up to start work on two of the Neretvica plants, Gorovnik Ušće and Srijanski Most, and were stopped by local people.

Resistance against the Neretvica plants has blown up this year after local people heard about plans to start construction. The projects’ environmental permits, issued back in 2011, had been quietly renewed by the Ministry of Environment and Tourism without notifying any local organisations or residents. The concept of “renewing” environmental permits does not exist in the Federation’s legislation, so the assessment process should have been started again from the beginning, but was not.

Legal corners have also been cut in Republika Srpska, where the relevant Ministry decided, in March and April respectively, to exempt Marvel d.o.o and Delaso d.o.o. from needing to carry out environmental impact assessments for some of the upper Neretva plants and the Hotovlje plant, despite the fragility of the upper Neretva’s ecosystems and the undoubted cumulative impact of the planned plants. The Centre for Environment has submitted court cases against both of these decisions not to require EIAs.

The particularly surreal part about the Hotovlje plant is that it has been under construction since at least last summer, so it is unclear why a decision was taken only now. The mystery is unlikely to be resolved any time soon as the Republika Srpska environmental inspectorate cited Covid-19 as a reason not to be able to carry out a site visit.

The hydropower companies continue to build, the nature defenders continue to resist. But if the Neretva basin’s stunning diversity and beauty is to be saved, the Ministries responsible for the environment in Bosnia and Herzegovina are going to have to do their part too.

Drina hydropower plants’ impact on Montenegro cannot be ignored

Plans for the Buk Bijela dam on the Upper Drina have been around since at least the 1970s, and attracted opposition even back then. The current version of the project, with a capacity of 93 MW, and a reservoir stretching right up to the Montenegrin border, is planned by Elektroprivreda Republike Srpske (ERS) as part of a series of four plants, along with the Foča (44 MW), Paunci (43 MW) and Sutjeska (44 MW) dams.

But where hydropower developers see wasted electricity potential flowing down the river unused, nature-lovers, scientists, anglers, kayakers, tourists and others see a stunningly beautiful river with clear blue water that together with its tributaries forms the longest remaining habitat of the endangered Danube Salmon – Hucho hucho – with around 553 km of rivers containing around 30 per cent of the total global Danube Salmon population.

And it is precisely the impact on one of the Drina’s main tributaries, the river Tara, that is the subject of a complaint to the Espoo Convention Implementation Committee submitted on Friday by non-governmental organisations Green Home, Ozon, the Center for Environment, and the Aarhus Center Sarajevo.

The UNESCO-protected Tara Canyon – often said to be the deepest gorge in Europe – is one of Montenegro’s most famous landmarks and part of the Durmitor National Park. Reaching a depth of 1300 metres at its deepest point, the canyon starts to widen out as it nears the Bosnia and Herzegovina border. Joining with what is left of the river Piva since it was dammed in the 1970s, it forms the majestic Drina.

The Tara Canyon’s inaccessibility for humans makes it a haven for wildlife, including numerous species of fish. But since it is a relatively high-volume, fast-flowing river, with few accessible tributaries, it has few places where fish can spawn, and they therefore rely on the Drina downstream.

This was one of numerous issues that was ignored or downplayed in a substandard environmental assessment carried out for the Buk Bijela project in 2012. Despite the study authors having done no primary fieldwork to establish what species actually lived at the site, they concluded that the dam would be acceptable for the environment, and concluded, without any evidence, that there would be no impact on Montenegro.

In 2013, ERS’ foreign partner withdrew and the project seemed dormant for some time. But the search for partners continued and in July 2017, a memorandum on construction of the project was signed with China National Aero-Technology International Engineering Corporation (AVIC-ENG).

In 2018 the Republika Srpska Ministry of Spatial Planning, Construction and Ecology illegally extended the project’s environmental permit, despite ERS having missed the deadline for renewal. After a court challenge by the Aarhus Center from Sarajevo, the decision was annulled in May 2019. But in December a new environmental permit was issued with no new environmental impact assessment being done, in spite of Montenegro having stated its interest in participating in a transboundary impact assessment and requesting that a new study be carried out. This decision too is being challenged in court.

The constant renewal of outdated permits based on old and inadequate environmental studies for projects has become a habit across the Western Balkans and needs to stop. It leads to unnecessary damage, often without knowing exactly what is being destroyed, and prevents much-needed debates about whether it is of greater public interest to go ahead with decades-old projects or to look for more contemporary alternatives.

While better legislation is certainly needed, with the EU Water Framework Directive and Nature Directives sorely missing in the Western Balkans, the first step is to implement what is already in place, including the transboundary consultation requirements of the Espoo Convention. We hope that it will not only be left to NGOs to insist on this but that the Montenegrin government will also insist on its right to be consulted – the stakes for the Tara Canyon are too high not to.

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