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Macedonian hydropower complaint highlights EBRD’s enduring opacity

[1] Official complaint

In March last year, hidden deep in the EBRD’s web page about the EBRD’s Direct Financing Framework, Bankwatch found an item detailing a EUR 4.1 million loan to a company called Aktuel Energy Group in Macedonia. Further investigation showed that the loan was destined to support a series of small hydropower plants, including one on Krapska river, and our alarm bells started ringing.

The Krapska hydropower project is particularly controversial. Yet after almost a year, we are still no closer to understanding how the EBRD assessed the environmental impact of the project and how it concluded it would be acceptable. This is because the EBRD refuses to release its environmental studies on the project.

Hydropower development in Mavrovo threatened already critically endangered Balkan Lynx. Photo: Dime Melovski ©

Racing against the clock

The EBRD claimed that environmental and social due diligence and an assessment of the aquatic biodiversity had been carried out. On 16 April 2018, our colleagues from Front 21/42 asked for the studies and the assessment, only to be denied in May, with the none-too-informative explanation that the “EBRD does not disclose due diligence reports on category B projects”.

After verifying that the project is within the Emerald site location, we sent the EBRD a report. Once again we asked for the additional environmental studies as well as asking for the EBRD to confirm whether the site is indeed in the protected area. We also asked the EBRD to carry out an urgent site visit. By 7 November, we had heard nothing back, so sent a reminder.

After almost 80 days – double the maximum period the bank’s Public Information Policy allows – the EBRD committed to carry out a field visit in 3-4 months’ time and provide an update.

But the river valley does not have that much time.

Construction of the plant is at an advanced stage, and every delay in information disclosure reduces the chances of meaningful participation of the public in decision-making and making appropriate changes in the project that might help to mitigate its impacts.

Why withhold environmental information?

To try to break the deadlock, today we have filed a formal appeal to the EBRD’s Secretary General. We argue that there is no substantial reason to withhold the environmental studies for the project, just because it falls into environmental category “B” and not “A”. In addition, the fact that the project is potentially in a protected area means it should have been treated as Category “A”, and thus subject to a full environmental and social impact assessment and public consultations.

The usual excuse for the bank not to disclose information is that it contains commercially sensitive information, but this cannot be the case for environmental studies. It can disclose environmental information about higher risk category A projects, so why not for category B?

Will the EBRD’s new information policy help?

The question is especially relevant at the moment, as the bank is updating its public information policy – now to be called the Access to Information Policy. The draft suggests that some improvements are on the table, especially the proposed publication of project summaries for projects financed through direct financing facilities. This would, for example, have allowed us to find out earlier that the EBRD was planning to finance the Krapska project.

But there are also some more worrying signs: The draft no longer makes clear that 20 working days is the standard period for the bank to answer information requests – in fact it is not clear at all what the standard time should be.

The draft of the new Access to Information policy cut out the EBRD’s recognition of the importance of the principles, purpose and ultimate goals of the UNECE Aarhus Convention on Access to environmental information, participation and justice. At the same time there are no commitments to disclose environmental information about category B projects. Bankwatch has years of experience showing that such projects can have serious impacts on nature, so there is really no excuse not to disclose environmental assessments.

The EBRD has claimed that it is serious about improving its information policy, after years of failing to make any significant changes. As we have already shown, this is not an isolated case  and Krapska is a litmus test. If the bank’s disclosure policy cannot allay our concerns about such projects then it is not fit for purpose. How many repetitions are needed to learn this lesson?

Changing lives and doing no harm

Should people have a say when their lives are changed?

The world has come a long way since 1991 when the bank was established after the fall of the Iron Curtain, and citizens nowadays more than ever demand respect for their right to know and participate in decisions that impact their lives.

These rights to know and have a say should be respected regardless if the EBRD lends money for a billion-dollar dam in Georgia’s mountains or 10 million dollar loan for the upgrade to Mongolia’s waste infrastructure through the EBRD’s Green Cities initiative.

While advancements in communication technologies have greatly enabled the sharing of information and soliciting of public opinion, the EBRD policy is still firmly in the last century when it comes to transparent and participatory decision-making.

A young entrepreneur in Egypt, a waste-picker in Serbia, a Svan woman in Georgia or a retired teacher in Mongolia, all have one thing in common. Their lives have been profoundly changed by the investments of the EBRD.

Projects financed by the bank can bring various improvements, such as new jobs, modernised infrastructure, energy savings and lower production costs for small businesses, cleaner and more reliable public buses or more efficient district heating. But they can also result in adverse impacts, for example through the resettlement of communities, loss of livelihoods and income, loss of cultural heritage, destroyed nature and loss of biodiversity, increased pollution and health risks and higher bills for basic services like water supply.

The EBRD has good governance policies to ensure that the bank does no harm when changing people’s lives. These are the bank’s Environmental and Social Policy, Access to Information Policy and Accountability Policy.

The three policies are currently being revised and one question that the revision raises is ‘Should people have a say when their lives are changed?’

Categorisation and the right to know and participate

According to the bank, a participatory approach is only required for highest risk projects, such as new mines, landfills or waste incinerators, gas pipelines and big dams. These projects are given category A and call for environmental and social impact assessments and formal consultations with project affected people and interested stakeholders. But the majority of EBRD projects are categorised as B, so the bank leaves the responsibility to its clients and local authorities to inform and consult citizens.

An analysis done by the International Accountability Project examined 195 EBRD projects from 1 November 2017 to 30 November 2018 and found that only 13 projects were categorised as A, thus requiring an impact assessment and public disclosure of information by the bank.

How about the rest of the 182 projects in the EBRD’s portfolio?

Category B urban infrastructure projects can impact millions of people and EBRD investments can lead to significant infringements on the rights of citizens. These projects can still cause harm that needs to be assessed and mitigated in a participatory manner, even if they are intended to modernise infrastructure and services, or significantly improve energy efficiency and reduce greenhouse gas emissions.

For example, there are waste-pickers who can lose their livelihoods when a landfill is upgraded. Street vendors or small shops can lose income due to the reconstruction of city streets. People may need to be resettled when new water infrastructure is built or when district heating pipes are renewed. Increased bills for water supply or district heating can hit the poorest the most, as single mothers or retired people can be disproportionately affected by tariff increases.

Often at highest risk are the most vulnerable people who may not have legal title to land or official property ownership, or vendors who lack a license to sell on the street.

Another example of harmful projects that are poorly assessed and consulted with affected communities and the public are small and medium-sized hydropower projects.

These are usually considered lower risk and thus given category B by the EBRD, as often the bank’s investments are channeled via commercial bank clients. The damage these projects can cause on pristine nature and local communities is amplified by the sheer number that are planned, resulting in a “hydropower tsunami” in some Balkan countries.

Weak regulation by Balkan authorities together with opaque political and business interests have underline the responsibility of the EBRD to ‘do no harm’ when handing money to local banks for “green” energy.

Protection of environmental and human rights defenders

In many of the EBRD’s countries of operation companies and authorities lack a culture of transparency, or even worse, are entrenched in corruption, top-down and technocratic decision-making or actively repress freedom of expression.

Human rights and environmental defenders in these countries face numerous threats ranging from smear campaigns, criminalisation and imprisonment on false charges, brutal physical attacks and even murder.

Some of the banks “development partners”, including bank shareholders and recipient countries, show an extremely weak commitment to sustainability, democracy and respect for human rights, a prerequisite for investments according to the bank’s establishing charter.

This context should not be an excuse for the EBRD to delegate responsibilities to its clients and do less on transparency – on the contrary, it should only motivate the bank to provide stronger safeguards for people and nature.

It feels that the bank is constantly learning and then forgetting old lessons, for example the lesson that even when national requirements are met, affected people can still be left without information and the opportunity to influence the design of projects and mitigation measures.

The EBRD’s good governance policies have evolved significantly in the last ten years, and the current revision process has brought a number of important improvements. We welcome the improvements in safeguarding gender and labour rights, as well as the greater independence of the bank’s Accountability Mechanism to provide remedies for policy non-compliance or harm done to project affected people.

Still, every policy is only as good as its implementation. In this regard, the commitments of the EBRD to carry out human rights risk assessments needs clarity about its operationalisation in determining correctly the potential for inflicting harm on people and human rights defenders.

While the bank’s intermediated financing through commercial banks, equity investment vehicles and other financial services funds is on the rise, the new policies are not promising to bring more transparency to these investments.

Backtracking on good standards

In the end, it is noteworthy that the bank is attempting to again drop its recognition of the importance of the principles, purpose and ultimate goals of the Aarhus Convention. The UNECE Convention on Access to Information, Public Participation and Access to Justice on Environmental Matters is an important benchmark for international bodies like the EBRD. Not least because parties to the convention including the European Commission, EU Member States and a number of recipient countries in the Balkans, the EU’s Neighbourhood and Central Asia that hold more than half of the shares in the bank.

The new Access to Information Policy fails to mention the Aarhus Convention, and we’ve already heard the bank’s excuses at the last policy revision in 2014 when the bank attempted to remove the reference to the Aarhus Convention from the Environmental and Social Policy. Push back from civil society, some EBRD shareholder countries and the Aarhus Convention Secretariat persuaded the bank then to reinstate in its policies a commitment to the Aarhus Convention.

As consultation meetings began this week in Kyiv and Tbilisi, hopefully stakeholder inputs will again motivate the EBRD to improve, not degrade, its commitment to transparency and participation.

The weight of gold

This is an extended version of an article that first appeared on The Ecologist with minor edits for coherence. 

The  technologies applied in the new gold mine in Krumovgrad rate among the most advanced in the world, states Lyubomir Haynov, Operation Director of the local branch of the Canadian ore mining company, Dundee Precious Metals (DPM). Konstantina Gradeva-Vassileva, the company’s Director for Sustainable Business Development, agrees: “We have learnt a lot about the environmental and social impact of mining”. For the past 15 years since Dundee extracts ores in Bulgaria, the company’s relationships with the public and authorities have truly evolved.

The turmoil at the end of the totalitarian regime ceased the operations of the Chelopech ore mine, one of the biggest deposits of gold and copper in Europe. DPM, controlled by the Canadian billionaire Ned Goodman, bought its concession rights in 2003 for USD 26 million, and in several years it scored annual sales amounting to hundreds of millions. Yet due to the stark public dissent, the company failed to expand its production in Bulgaria because of its use of cyanide technologies. The Canadians acquired instead a smelter in Namibia where they ship the Chelopech concentrate containing gold, copper, and large amounts of arsenic.

FEATURE

Bulgarian gold in offshore paradise linked to European public lender

The profits of the richest Bulgarian gold mine are “optimised” through several Caribbean offshore companies and a Dutch cooperative. The European Bank for Reconstruction and Development is one of the shareholders.

Jobs and dust 

The ore mine in Krumovgrad in the Eastern Rhodope Mountain is the next phase of DPM expansion. Firstly, the locals opposed the new extractive site on their rural land. Yet the prospects of employment in a region with scarce opportunities, in addition to a cunning PR strategy and some pressure from the authorities, gradually changed their attitudes. Vasvi Ibriam, the mayor of the Sarnak village in the viccinity of the gold mine says: “It’s true, people get annoyed by the rock blasts and the dust. But we have to endure this for the jobs’ sake. In my village alone, there are already three or four men employed”. According to Vasvi, every man who wants to work now may get a job in Krumovgrad – not only at Dundee and its contractors but also at the new rubber factory or in the new big municipal projects.

Firstly, the locals opposed the new extractive site on their rural land. Yet the prospects of employment in a region with scarce opportunities, in addition to a cunning PR strategy and some pressure from the authorities, gradually changed their attitudes.

Unofficially, the operation in Krumovgrad will commence in full in the spring of 2019 with the opening of the flotation factory, a couple of months delay from the initial schedule. The technology envisages lower environmental impacts: there will be no tailing pond, and the water used in the production process will be purified to drinking quality before poured back into the Krumovitsa River. “We are certainly the first ore mine (in Bulgaria) to do this”, proudly states Haynov.

The online system for environmental monitoring developed by the company reveals many cases of overshooting the allowed limits of fine particles around the mining site – yet this is the inevitable price of employment. In addition, DPM created a fund worth USD 5 million to back up the small and medium-scale local businesses. This social support might be inspired by the EBRD – last year the development bank entered the Dundee family by swapping an extended credit line for a 10-% share in the company.

No doubt, the investor’s efforts in Chelopech and Krumovgrad deserve praise, but still the Canadian company cannot turn into a saint overnight – neither in environmental nor in social or fiscal sense.

Toxic piles in Africa

In the summer of 2015, a mission of Bulgarian environmentalists visited the town of Tsumeb in Namibia to get a firsthand view of the DPM smelter situated there. Unlike Bulgaria where public communications seem to be of highest priority to the company, the management of the African branch denied a meeting with the European guests. Nevertheless, local activists assisted the mission in its inquiries, and it registered a number of setbacks during the transportation and stockpiling of the Chelopech concentrate.

Yet the biggest problem in Tsumeb turned to be the arsenic – both for the smelter’s staff and the local population. The polymetallic ores of Chelopech have a very high (over 5 %) arsenic content, and the technology used in the smelter is not suited to process them safely. According to the International Agency for Research on Cancer, arsenic and its compounds are “group 1 carcinogens”. When the high-grade arsenic concentrates from Bulgaria started to enter the Namibian smelter, the workers felt the difference and energetically protested. The authorities felt obliged to intervene, and production volumes were halved. Yet from the beginning of 2014, the volumes were not only restored to their former level but also additionally doubled.

In 2012, on the request of the union activist Oscar Kakunga (latter dismissed) a full-scale health examination of the smelter’s workers took place. 1 722 probes were taken, and in 69 % of the cases the concentration of arsenic in the workers’ blood and urine exceeded 100 μg/g. In the neighboring South Africa, the reference value for over-exposure to arsenic is 50 μg/g, yet since the exposure to arsenic is extremely hazardous, the World Health Organization holds that “a safe level of arsenic (in air) cannot be established”. The smelter’s management states that after 2014 the levels of arsenic in the workers’ urine have diminished without citing concrete numbers.

Johannes decided to have an independent health check in South Africa. The doctor who examined him said, “You are too young to kill yourself with this job”.

Instructive is the experience of Johannes Amutenya, now 33-years old, who has worked for some months with the Chelopech concentrate. Prior to DPM acquiring the smelter, the staff underwent health examinations every two months, but with the new owner – only twice a year. The workers received no more documents on their health status but only verbal assessment that everything is OK. Johannes decided to have an independent health check in South Africa. The doctor who examined him said,” You are too young to kill yourself with this job”.

A satellite image showing the close proximity of the dump site to residential houses in Tsumeb.

The Bulgarian mission managed to get hold of photos of the storage site for the surplus arsenic (several thousand tons of arsenic trioxide from Tsumeb are sold to Malaysia and South Africa to be used as pesticides – a practice not allowed in the EU). Only several hundred meters from residential buildings, thousands of tons of arsenic are stored in ordinary sugar bags in the open – decaying under the African sun.

Highly toxic waste stored in sugar bags.

Genady Kondarev, who took part in the Tsumeb investigation, recalls, “There was a colossal quantity of toxic dust piled on the site. After a couple of years under the hat of Dundee, this facility had almost entirely used up its storage site for arsenic waste. Since the shocking results of the medical tests in 2012, we haven’t heard about newer health checks with publicly accessible results regarding the arsenic levels in the worker’s organisms”.

FEATURE

The good life – Interactive documentary on Tsumeb and Chelopech

The documentary explores the meaning of progress, development and well-being in two places on two continents that are connected through the Chelopech copper mine and the Tsumeb smelter.

Slow boat to China

In addition to its low environmental standards and cheap labor, Namibia attracts foreign investors with zero tax rates. The smelter of Tsumeb lies in a Special Processing Zone, freed from corporate taxes and VAT. The Human Development Index ranks Namibia 129th in the world, yet DPM – and thus the shareholder EBRD – do not feel embarrassed by the fact that they deny the national budget the funds that might be used for healthcare or education purposes.

Until recently, the output of the smelter was brought to the market by the Louis Dreyfus Company. This huge Switzerland-based company constitutes the letter “D“ in the so-called ABCD group comprising four gigantic corporations that dominate the world’s food trade. The Metal Department of Louis Dreyfus had operations in Peru, Namibia, Australia, Mexico, China etc., and scored high profits. However, due to some strategic reasons, in the middle of 2018 this metal division was sold to the Chinese NCCL Natural Resources Investment Fund. Prior to this, Dundee Precious Metals had stated that it has a long-term trade contract with Louis Dreyfus. Most probably, the new destination of Bulgarian gold is China.

The Tsumeb smelter processes – in addition to the Chelopech concentrate – also concentrates from the El Brocal mine in Peru (they have even higher arsenic content) as well as other sources. The output of the smelter is not pure metal but “black copper” – an alloy refined up to 98.5 %, which contains not only copper and gold but also several valuable rare earth metals. It is a mystery where the final processing to marketable ingots is taking place and, correspondingly, who collects the value of the rare earths unaccounted neither in Bulgaria nor in Namibia. The only hint we get is from the corporate website of DPM stating that it supplies „refineries in Europe and Asia”.

The UNCTAD database – the United Nations body for trade and development – reveals that up to 2017 the annual copper exports from Namibia to Switzerland amounted to an average of USD 150 million, besides USD 100 million  copper concentrates. This trade flow will probably turn to Asia with the selling of the metal division of Louis Dreyfus. China already buys from Namibia uranium ores and other radioactive materials worth USD 100 million per annum.

The metal flows passing Namibia evaporate in enormous global merchant companies. Yet it is clear that both producers and intermediaries use to exploit the zero tax rates and the “liberal” environmental legislation in the African country. Even the EBRD – the development bank that explicitly states its environmental and social commitments – sees nothing worrying happening between the model ore mines in Bulgaria and the shiny golden ingots in the treasury.

Black Tax Holes  

… the state manages to collect only 6% of the value of the gold extracted from its earth.

Dundee is an old enthusiast of tax optimizing. For the six years between 2012 and 2017, the ore mine in Chelopech generated nearly EUR 1.1 billion incomes and EUR 380 million profits before taxes. For the whole period, the company paid the Bulgarian budget EUR 38 million in corporate taxes and EUR 30 million in concession fees. Excluding the taxes and social contributions on salaries, the state manages to collect only 6 % of the value of the gold extracted from its earth.

Moreover, it is disputable whether the real profit of DPM in Bulgaria is only EUR 380 million for six years. The company declares heavy depreciations; pays interests on loans granted by connected entities, has administrative expenses in order of EUR 100 million, there are also many other expenses that raise doubts. The issue of unaccounted rare metals was presented above.

Tax optimization gathers pace when profits leave the low-tax Bulgarian environment. The Bulgarian Trade Registry reveals that DPM uses two companies registered on the Curacao Island and another company based on the British Virgin Islands – both jurisdictions are well-known tax havens. The latter company called Vatrin Investment Ltd. is 100 % owned by a cooperative with headquarters in the Netherlands – Dundee Precious Metals Cȍoperatief U.A. According to the Dutch trade law, there are several cases when cooperatives are not obliged to pay dividend taxes, there is also an option to avoid the tax on profits.

For this scheme to be applied the Dutch cooperative must include another company registered in the Netherlands – DPM also owns such. It is worth mentioning that the rights to develop the golden deposit in Chelopech in 2003 were acquired by another Caribbean branch of the Canadian extractive company, this time abiding in the Barbados Island.

When having such an elaborate offshore network it is no wonder that in 2016, the Chelopech ore mine recorded a profit of EUR 35 million after taxes, and the mother company based in Toronto declared USD 147 million loss. The same happened one year before: the net profit from Chelopech was EUR 45 million, but that of DPM in Canada – only USD 7.6 million.

Across the seas

The ores and concentrates processed in countries with low environmental standards arrive there by ship. Millions tons of crushed rocks circle around the globe in pursuit of somewhat cheaper smelting while marine transportation emissions remain excluded from the global climate schemes. They consist far not only of carbon dioxide, but also of soot and Sulphur and Nitrogen oxides. The German Naturschutzbund calculated that marine transportation is responsible for 22 % of the world’s Nitrogen oxides emissions, and the soot for 50 % of the Arctic warming. The highest allowed Sulphur content in the ship fuels is 3 500 times above that of car fuels.

A hundred thousand tons of concentrate from Chelopech travel for 9 000 miles every year to reach Namibia, that same amount arrives in Tsumeb from other places, including the Pacific coast of South America. Europe closes its eyes not only for the accompanying contamination but also for the development impacts: poor countries specialize in delivering raw materials, the processing remains for regions with loose environmental standards, and the surplus value in the final phases is being collected by the rich. The free trade agreements of the EU just cement the inequality in global industrial development.

The Krumovgrad ores will not be shipped to Tsumeb since their arsenic content is low. Indeed, there is something different in their case. A long and hard opposition of the stakeholders at last guaranteed the acceptable quality of the DPM extractive operations. Daniel Popov, a Bulgarian NGO mining expert, said: “The management of DPM saw potential in being environmentally responsible. The right person in the right place and time was Adrian Goldstone, the DPM Sustainability Director, who saw the potential of being environmentally responsible. Krumovgrad is a lesson of how interacting with the locals and the NGOs might alter the initial business plans until they become acceptable for the whole society”.

A New Year’s resolution for Novaci – clean air

The village is home to Macedonia’s REK Bitola complex consisting of a 675 MW lignite power plant, a large part of  mines and ash disposal sites. Spread out to the east of the village, they create a high concentration of polluters on a small area. Novaci and several other surrounding villages are taking the main blow. To assess the severity of the problem, we included Novaci  in our independent air quality monitoring of Balkan pollution hotspots.

In November-December 2018, we monitored air quality in Novaci over a 30-day period. The measurements show that the limit values for both coarse (PM10) and fine (PM2.5) particles were exceeded almost every day. On many occasions, they were two to three times over the established limits. With the EU Directive on Ambient Air Quality completely transposed in Macedonian legislation, the limits are the same as in the EU.

The 50 micrograms/m3 daily average limit for PM10 was exceeded on 22 days in one month. This makes up nearly ⅔ of what is allowed for the whole year –  35 exceedances. Half of those exceedances were two or more times over the limit. A deeper analysis of the results shows hourly mean values up to 400 micrograms/m3, with short-time values regularly going up to 800 micrograms/m3.

While combustion is also a source of PM10, the significant difference between the PM10 and PM2.5 values indicates that a large share of the air pollution comes from the lignite mines and the ash disposal sites.

The situation with fine particles (PM2.5) is even worse. The daily average limit recommended by the World Health Organisation is 25 micrograms/m3, and only three exceedances per one calendar year are allowed. During the observed period, we registered 27 exceedances, with values going up to three times above this limit and pushing a monthly average to 47 micrograms/m3 during the observation period. At this point, reaching the established annual limit of 25 micrograms/m3 seems like a distant dream.

December 7 saw the highest hourly average of PM10 values. The wind direction analysis between 15:00 and 23:00, when the peaks were recorded , shows the wind blowing from the east, where REK’s mining and ash disposal facilities are located. The same repeats on December 2, between 16:00 and 22:00, the day with the second highest PM10 spikes.

While Macedonia is fairly advanced in the transposition of the EU acquis in the national legislation, the implementation lags behind. The REK Bitola complex is a perfect example of several governments’ failure to implement any of the relevant pollution control legislation. The Integrated Pollution Prevention and Control (IPPC) permitting process has been constantly postponed for more than a decade and the complex is still a long way from being in line with the Large Combustion Plants Directive (LCPD) which came into force in January 2018. The plant’s electrostatic filters are more than 30 years old; it is operating without desulphurisation equipment, which makes it one of biggest polluters in the region. Similarly to  most other plants in the Western Balkans, it does not even have a continuous air quality monitoring system in place.

The year 2018 showed some signs of progress on the air pollution frontlines in Macedonia. The government published a two-year Clean Air Plan in which REK Bitola is vaguely included. ELEM, the state-owned company that manages the plant, started some improvements to the ash disposal site and announced plans to change the electrostatic filters and to build a desulphurisation unit. However, the timeline for these activities is unclear and ranges from three years for the filters to more than five years for a desulphurisation unit. Waiting this long for the improvements that are already way overdue is unacceptable.

New reports add details to investigation of Armenia gold mine

Earlier in the day, Armenia’s prime minister, Nikol Pashinyan, whose popular movement swept to power in April by toppling the kleptocratic rule of Serzh Sargsyan, had called on his supporters to stand against the opposition Republican Party’s calls for a dissolution of the National Assembly. The power grab was seen as a last ditch attempt by the old guard to hang on to the authoritarianism that had stifled political life in the country for nearly two decades. The peaceful demonstration and spirit of optimism and revolution on display that October evening served as the backdrop to our visit to Armenia, where we had travelled to survey opinions about the operations of Lydian International, the largest foreign investor in Armenia whose flagship Amulsar gold mine and its chequered history has been a flashpoint of conflict across the country.

A constant source of conflict

As part of his rise to power, Pashinyan had promised to investigate whether Lydian’s operations were in line with Armenian legislation, which the company believes will contribute USD 185 million annually to GDP, though critics had said was a bad deal for the the country’s coffers and the environment. During our visit, there was a general sense that Armenians expected him to make good on this campaign promise. The Amulsar mine is situated near Jermuk, a resort town two hours southeast from the capital made famous for its natural beauty, hot springs and health spas. Locals have long contended that the gold mine, which has already caused dust pollution and would use cyanide leaching technology to separate the concentrate from the ore, poses a serious threat to tourism in Armenia’s ‘little Switzerland’ and could be detrimental to Armenia’s water resources, such as Arpa river and lake Sevan. Residents of Jermuk were not consulted during the environmental and social impact assessment in 2015 and 2016, which led the Compliance Advisor/Ombudsman of the International Finance Corporation to conclude that the impact of the mine on Jermuk’s water and tourism brand was not properly assessed.

New research sheds light on disputes

These allegations were the focal point of our visit. Together with the Armenia social NGO ‘Community Mutual Assistance,’ we went to Jermuk and the surrounding villages of Kechut and Gndevaz to conduct first-of-its-kind independent research into what local people know and think about the operations of Lydian. In addition to this sociological research, we were accompanied by biologists from the Balkani Wildlife Society in Bulgaria who were conducting an independent analysis of the environmental impact assessment prepared by Lydian as a prerequisite to begin mining operations at Amulsar.   The results of this research provide insights into the conflict between the mining company and local communities and suggest that more work on assessing the environmental and social impacts of the mine are needed, should Lydian want to secure consent from the new Armenian government. The European Bank for Reconstruction and Development is providing CAD 10.5 million (EUR 7 million) in equity to Lydian, ‘earmarked for financing of Environmental and Social Mitigation Measures,’ such as the establishment of the Jermuk National Park to offset biodiversity losses resulting from the project. In the case of the research into the ESIA prepared by Balkani, a number of findings should be considered as part of a government’s revision of the agreement with Lydian. In particular, Balkani found that the existing assessments were at odds with the Bern Convention on the Conservation of European Wildlife and Natural Habitats. For instance, a portion of the mine is sited inside an Areas of Special Conservation Interest. This area received this designation because of a number of unique species and habitats situated in this region that could be damaged by the project, a situation which Lydian fails to address entirely in its documentation. The sociological research found that the awareness about the social consequences of the mine is highest in Gndevaz, due in part to Lydian presence in this community and having employed a number of the villagers at its projects. Residents in Kechout and Jermuk felt less informed, and perceptions and assessments have been formed by observation, like of the dust and noise from construction, and the activists protesting against the mining. Substantial concerns about impacts to agricultural lands and pastures were expressed by nearly three quarters of respondents, while 80 per cent were concerned about further future impacts. People related their concerns about the destruction of apricot orchards, pastures, as well as fear that fruit is covered with dust. A similar number of respondents, 85.7 per cent, expressed concerns about the potential impacts of mines on their health. The biodiversity and sociology experts recommend that the new government in Armenia should request new environmental and social impact assessment and consultations with local communities on potential risks of harm to their environment, livelihoods and health. As a protester against the mine said “I’m sure that the government will hear us, otherwise the revolution will be useless if the government is going to treat us the way the previous government did.”

Belgrade incinerator plans raise burning questions

Belgrade’s Vinča landfill, by the river Danube, has been piling up over more than 40 years with no lining or collection of the water leaching out underneath it. It is home to more than 80 people living in informal accommodation and trying to eke out a living from waste-picking at the site.

Action obviously needs to be taken to rehabilitate the site and to set up a socially and environmentally sustainable waste prevention and recycling system in the city.

Incineration lock-in

But in September 2017 the City of Belgrade signed a contract for a 25-year public-private partnership with Itochu and Suez. Although it includes a partial rehabilitation of the landfill and construction of a new one, its main feature is a 340,000 tonnes per year “waste-to-energy” incinerator that would burn around 66 % of Belgrade’s communal waste. Its only recycling component is a construction waste facility.

There was no public discussion about the plans before the contract was signed, nor have non-incineration alternatives for solving Belgrade’s waste problems been considered in the environmental assessment or elsewhere.

Documents obtained by Transparency Serbia seem to indicate that no less than 29 % of Belgrade’s waste is food waste. Paper and cardboard make up another 18 %, plastics 14 %and green garden waste 7 %. Almost none of these need to be disposed of and should be prevented, recycled or composted.

Not only will this EUR 326.5 million project render it highly unlikely that Belgrade can afford to develop a waste prevention, recycling and composting system alongside the incinerator, but the project will be in direct competition for recyclable resources with some of Belgrade’s most vulnerable residents – informal waste collectors.

Up to 12,000 informal waste collectors affected

The project is hailed as introducing private sector involvement to the provision of solid waste management services in the city. But this rather tactless statement renders the estimated 12,000 people already engaged in informal waste collection in Belgrade completely invisible. Some of these people work individually, some of have contracts with private companies, but there is no doubt: Belgrade is not terra nullius.

As well as the 80 or so people living at the landfill site – for whom a so far highly inadequate Resettlement Action Plan has been adopted, that fails to provide details about livelihood restoration – thousands more people’s already precarious livelihoods are at risk from this project.

This is because the city of Belgrade is contractually obliged by Article 102 of the PPP contract to hand over its municipal waste to the PPP consortium. At least this is what the draft version obtained by Transparency Serbia says – the final version is not publicly available.

Unless the city’s waste generation starts growing at an accelerated rate, sooner or later Belgrade may either be forced to change the law to allow waste imports or to clamp down on informal waste collection in order to fulfill its contractual obligations.

Ne Davimo Beograd asked the EBRD what happens if the city does not generate enough waste to fulfill its contract. The answer, in a written response of 16 October 2018, was not reassuring: “Should the City deliver less than 340,000t of waste to the landfill, there is a compensation mechanism stipulated by PPP Agreement which would restore the economic equilibrium for the investor.” In other words, the public would have to pay the incinerator not to work.

Pretty puzzling for an EU candidate country

It seems that Serbia has not been watching the EU’s steady progress on waste management in the last ten years. Not only will the country soon have obligations to recycle 50 % of its municipal waste, but the EU has also adopted recycling targets of 55 % by 2025, 60 % by 2030 and 65 % by 2035.

Serbia might get a few years’ extension on the earlier targets but will have to catch up within a few years, so there is no time to lose. If Belgrade, as Serbia’s capital city, is burning 66 % of its waste then even the 50 % target will be well out of reach. It is not exactly likely that the rest of the country will make up for it.

Presumably the idea is that Belgrade’s overall amount of waste will grow and so it will still be possible to increase the percentage of waste recycled. But this assumption is not only unproven – the environmental assessment fails to even mention Belgrade’s current and expected waste generation, prevention and recycling rates – it is also totally unsustainable and out of line with the EU’s circular economy legislation.

As usual, the public pays

Belgrade’s residents will have to pay twice for this incinerator – once through a fee for waste management and once more through a feed-in tariff for the electricity generated at the plant added to their electricity bills. And if Belgrade fails to deliver enough waste, they may even have to pay thrice due to the compensation clause in the contract.

It is still unknown how much the waste management fee will cost households, according to the environmental and social assessment. This seems highly unlikely. Did the city authorities really sign a concession contract without knowing this, or are they just hiding it? Fortunately, the EBRD has been more forthcoming and in its letter of 16 October put the cost at approximately EUR 1.50 per month per inhabitant. We will see…

The feed-in tariff is based on the outrageous idea that incinerating the biodegradable fraction of municipal waste to produce electricity is a form of renewable energy, even though most of it would not burn without a hefty dose of gas or diesel.

However it is no longer allowed to use feed-in tariffs for new facilities in the EU countries, except the very smallest, and the system is also being phased out in Energy Community countries like Serbia. In fact, Serbia’s feed-in tariff system was supposed to be halted for new installations from the end of this year but was recently extended for another year.

And from 2021 when the new Renewable Energy Directive comes into force, no financial support at all will be allowed for energy produced from incinerating the biodegradable part of waste, if the separate collection targets have not been met. The project consortium had better do some re-calculations to see if they really want to go ahead.

European banks vs. EU rules?

Unfortunately second-rate, oversized infrastructure projects using outdated technology are standard fare for southeast European governments. But it is still disappointing to find European banks still considering support for them.

Both the European Bank for Reconstruction and Development and European Investment Bank are considering loans for this project, while the World Bank Group’s International Finance Corporation both assisted with designing the PPP tender and is interested in financing the implementation.

The project’s collision with EU waste prevention and recycling targets, and the banks’ previous relatively unsuccessful experience with Belgrade authorities’ approach to resettlement and livelihood restoration for Roma settlements for the Gazela Bridge reconstruction are already sufficient grounds for the banks to reconsider their involvement in this project.

But the issues mentioned above barely scratch the surface: We recently submitted 92 pages of comments and questions during the public consultation on the Environmental and Social Impact Assessment.

From the quality of the landfill rehabilitation, to the misrepresentation of the project’s climate impact, to Serbia’s lack of hazardous waste facilities to deal with the residues from the project and its lack of capacity to carry out proper monitoring and enforcement, there are tens of questions that remain unanswered.

We will keep on asking for answers until we get them. In the meantime, we urge the banks to catch up with EU circular economy policy and help Serbia to increase its waste prevention and recycling instead of helping international companies inflict their so-last century technology on us.