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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.

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.

Cautionary tales: how the new EU Biodiversity Strategy 2030 can make good on the European Green Deal

Read our full report and set of recommendations here. 

One of the deal’s key initiatives is a biodiversity strategy for 2030 to protect nature, restore damaged ecosystems and promote the sustainable use of forests and other ecosystems. Though the Commission had planned to announce the strategy on 29 April, it has been delayed like many other initiatives of the day. Too long of a delay of this initiative would have significant consequences, as new research shows just how quickly wildlife species and natural ecosystems could collapse. 

Yet in spite of a growing chorus to ensure that the EU’s pandemic response is tied to the principles of the deal, several Member States have used the moment to call for culling the initiative entirely. Unsurprisingly, those states most in favour of dropping the deal and going back to business as usual are the ones who regularly flaunt existing rules on biodiversity protection.

Across central and eastern Europe and the EU’s southern and eastern neighbours, countries are continuing to pursue projects harmful to the environment and in violation of European laws on nature protection, often using funding from the EU. 

To be sure, in many cases the Commission has not actively checked the consistency of this funding with its own environmental legislation. Instead of trying to reinvent the wheel of biodiversity protection, the EU should pick the low-hanging fruit and focus on shoring up gaps in enforcement.

At present it relies on what is called the “presumption of legality”: a project is approved for money if it is in line with national legislation, even though it may be at odds with EU laws. This led to Poland building the S7 expressway over a Natura 2000 area and destroying the habitat of key species. With every second kilometre of road built in Poland being financed by the EU, this creates an untenable situation for the country’s rich biodiversity.

Outside the EU, a significant source of funding for projects that damage nature come from the EU’s public banks, the European Bank for Reconstruction and Development and the European Investment Bank. Whilst both are mandated to align their lending with EU principles, the two have found themselves funding projects at odds with nature protection, like the Nenskra hydropower plant in Georgia.

It is imperative that the EU’s new biodiversity strategy ensures that European environmental legislation is complied with and that no EU funding supports projects or practices that adversely affect biodiversity in Member or non-Member States. Outside the EU, additional funding for future Natura 2000 sites and the inclusion of the nature protection directives into the Energy Community Treaty would be a way to circumvent current practices. 

Any new biodiversity strategy should make the most of the legal tools already at the disposal of the EU in order to allow more space for nature to strive, even when the regular pace of life returns.

 

How Bulgaria’s Mining Strategy can make the ICT industry more sustainable

The electronic device industry has changed the way the world works. Yet it relies on huge quantities of metals like copper, gold, silver, and other rare-earth elements for its products. The very basis of the ICT supply chain, the primary extraction of these raw materials, has been found to have significant negative environmental and social impacts.

Biodiversity degradation, landscape destruction, toxic pollution, indigenous land grabbing, labour issues and massive health problems are permanently associated with the impacts of the mining and smelting of metals. Furthermore, the extraction and production of these mineral resources requires a lot of energy and often transportation over tens of thousands of kilometres.

These persistent issues highlight the need for the continuous strengthening of the environmental and social obligations related to metal mining in national and global regulations, strategies and policies, as well as those of economic and financial mechanisms. This includes putting stricter rules for public procurement in place and encouraging changes to consumer behaviour through increased public awareness.

Currently, the Balkans are receiving massive investment interest from local and international metal mining companies. Thousands of exploration concessions have been granted, new mines are opening and existing ones are expanding their production.

Bulgaria is one country experiencing rapid growth in the mining industry. We looked at the Bulgarian Mining Strategy in order to analyse the existing problems in the mining sector and the government’s approach to them. Although Bulgaria is just one country, most of the issues identified are relevant to the entire Balkan region, due to similarities in the geological context, the level of social and institutional development and the legacy of the mining sector inherited from the past decades of state management.

Although Bulgaria is a member of the EU and its strategic documents should be in line with the relevant EU policies and legislation, our research concludes that the Bulgarian Mining Strategy does not properly consider these. The Strategy should be adapted to reflect the economic and environmental goals and standards defined in the UN Sustainable Development Goals (2015), Paris Agreement (2016), EU Green Deal (2019), EU Industrial Strategy (2020), EU Circular Economy Action Plan (2020) and EBRD Extractive Mining Industry Strategy (2017) and EBRD Environmental and Social Policy (2019).

In particular, important issues such as the pollution legacy of metal mining, public opposition to mining projects, the implementation of labour standards, and the import and export of toxic materials are not addressed by the Strategy.

After the adoption of the Strategy in 2015, deficiencies in the related national legislation led to infringement procedures launched against Bulgaria regarding possible breaches of leading EU legislation in the mining sector: the Mining Waste Directive and Environmental Impact Assessment Directive. This serves to highlight that the EU has long been aware of the issues our research identifies, and yet nothing has changed. At the same time, according to the Ministry of Energy’s response to a recent access to information request, the Minister of Energy has not issued biannual reports and action plans as required by the Strategy!

We call for a revision of the Strategy to reflect the aforementioned strategic demands and tackle the problems with clear goals, measures and action plans. In this way, the Strategy can ensure the Bulgarian mining sector becomes more sustainable and resilient to crisis, as well as a valuable part of the European circular economy.

Montenegro must stop incentivising the destruction of its precious rivers

In 2009, Montenegro had seven hydropower plants of less than 10 megawatts capacity. By the end of 2018, it had twenty-three. In 2018 they generated just 2.3 per cent of the country’s energy, and cost EUR 7.3 million in renewable energy incentives. 

Compared to many other countries’ incentives schemes, the number of hydropower plants and the sum used to support them may seem tiny. But in a country of 600,000 people it was enough to cause an outcry. 

In the last few years, protests against the construction of small hydropower plants have increased, sometimes feeling like a new flashpoint is emerging every week. Outraged locals have stood up against the destruction of their local rivers and streams. Roads and forests have been churned up by heavy machinery. Entire rivers are dry downstream from the intakes, having been diverted into pipes to increase the water velocity. 

Almost as often as protests have erupted, the country’s more independent-minded media have reported on scandals involving the approval of incentives for hydropower plants built by businesses close to the ruling party.  One small hydropower plant company, BB Hidro, is even half-owned by the son of Montenegro’s President, Milo Đukanović.

The country’s current Law on Energy stipulates that no new renewable energy producers will be admitted to the incentives scheme if Montenegro meets its renewables target. Considering that Montenegro had already fulfilled its 2020 target, largely by adjusting its biomass data, the Government in 2017 decided not to accept any new requests for energy permits for renewables, with some minor exceptions, and in 2018 repeated the decision.

In January 2019 a new regulation entered into force, which foresees a gradual decrease in incentives to plants already in the system, starting in 2020, and the Government announced that it would continue to promote renewable energy without guaranteed buy-off of electricity.

So what has changed?

Despite the amount of digging the Government had to do to get itself out of the hole its incentives system created, a new draft Law on Energy, the public consultation for which ends today, looks set to relaunch Montenegro’s controversial foray into the world of renewable energy incentives.

The country could in any case have restarted the approval of new entrants to the incentives system once it set 2030 renewable energy targets, but the new amendments would allow it to grant incentives in the meantime, as long as they are “according to market conditions” and based on a “competitive procedure of collecting bids on the basis of clear, transparent and non-discriminatory criteria”. This sounds like a nod to the EU’s Energy and Environment Aid Guidelines, but the proposals are so sparse that it is hard to tell what exactly is being proposed and whether it is in line with EU rules. 

Several provisions on incentives are left untouched compared to the current Law, so for example Article 23’s provision that the Government will stipulate the price level paid for incentives still gives no hint whether it will create an auctions and premium methodology in line with EU rules or merely continue approving administratively set tariffs, or both. 

Likewise, the reference to a competitive procedure does not make it clear whether the selection of bidders would be based on a strike price to define a premium or it would in fact be a tender for a concession, as was the case so far. While not every detail should be defined in an umbrella law such as this, the lack of clarity is worrying.

Watch out, here comes the “public interest”

What is clear, though, is that the Government plans to make sure it can push through any renewable energy project it wants to. A new provision in Article 18 would declare it a matter of “public interest” to achieve renewable energy targets committed to in international agreements. 

If there is any phrase which makes active citizens across the Balkans roll their eyes, it is surely the dreaded “public interest”. The concept is invariably invoked by decision-makers when using fast-track procedures to push through unpopular projects that mainly serve narrow private interests.

So as much as we in Bankwatch want to see the advance of sustainable and carefully-sited renewable energy, the appearance of this provision in the Law is not going to help. Energy policy has to be formed by consultation and developing a public consensus. 

“Public interest” status may occasionally be needed to allow exceptional projects to go ahead but must not be an excuse for arbitrarily exempting entire sectors from democratic scrutiny. Surely it should be clear by now that this approach often generates public resistance and ends up counterproductive? Is Montenegro about to repeat the same mistakes all over again?

Incentives regimes require public trust and strong safeguards

Wind and solar prices are dropping fast and in 2018 Montenegro was the first Western Balkan country to launch a tender for a utility-scale solar plant without feed-in tariffs or premiums. The tender for the 250 MW plant at Briska Gora was won by a consortium of state-owned EPCG and Finland’s Fortum. The plant is not yet built so its feasibility cannot yet be assessed, but it raised the question of how many other projects could now go ahead in the Western Balkans without support schemes.

So far there are very few examples and certainly smaller projects for prosumers and energy communities look set to need incentives for the foreseeable future. For this reason, in Bankwatch we generally remain supportive of well-designed incentive schemes with strong environmental and integrity safeguards.

But this is certainly not how many people would describe Montenegro’s incentive regime so far. And as long as President Đukanović’s son keeps his hydropower and solar businesses, any kind of support scheme is likely to be viewed with suspicion, especially if it leaves a trail of environmental destruction in its wake. 

The EU tries to maintain a balance between renewable energy development and environmental protection by applying legislation like the Birds and Habitats Directives and the Water Framework Directive. Its rules on subsidies for energy projects explicitly state that any hydropower plants receiving incentives need to be in line with environmental legislation, and specifically mentions the Water Framework Directive. 

But so far the approach in the Western Balkans has been to cherry-pick EU legislation. So while 2020 renewable energy targets were set, adoption and implementation of nature protection legislation trails far behind, with alarmingly destructive consequences. Without strong nature protection rules being adopted and implemented, soon it will not just be hydropower causing a public outcry.

But there are other reasons to stop incentivising hydropower as well. For one, it is a mature technology, so prices are not dropping, unlike for solar or wind, so the support is simply a subsidy for construction, not an investment into a developing technology.

In addition, large hydropower plants generate 45-60 per cent of Montenegro’s electricity, depending on the year, so the country’s electricity system is already excessively dependent on this highly fluctuating and climate-vulnerable source of energy. If it wants to look towards the future it needs to work much harder on energy savings diversification of renewable energy sources, not just adding more of the same.