Blog entry

As human rights declaration turns 70, development banks have a ways to go to respect and protect rights defenders

Since the adoption of the Declaration on Human Rights Defenders (HRD) twenty years ago, an estimated 3 500 human rights defenders have been killed because of their peaceful work defending the rights of others. In 2017 alone, at least 312 human rights defenders were murdered, 67 percent of whom were working in defense of land and territory in the context of large investments, extractive industries and big business.

States and big businesses are often behind rights violations. Large infrastructure and development projects are pursued in the name of state interest and in disregard of the human rights of locals. The same governments who have signed the Universal Declaration of Human Rights are shareholders in international institutions that were created to promote development, yet are far from being supporters of human rights.

In recent decades, some human rights considerations have made their way into the safeguard policies of these institutions in the form of social and labour rights guarantees. But such measures are not sufficient for development banks, as they operate in countries where human rights are systematically violated and locals do not have freedom to speak up for their rights. Both the European Bank for Reconstruction and Development and the European Investment Bank have improved their policies designed to protect the rights of potentially-impacted peoples, but there is still more to be done.

Project affected people need to be involved in an informed and meaningful process of planning and decision-making at the earliest stages of project development. Once investments have caused harm, the banks’ accountability and redress mechanisms must provide effective redress in a way that does not put complainants at additional risk.

Years of monitoring international finance have given us insights into these problems and at the same time, demonstrated the courage of human rights defenders who stand up to protect the rights of entire communities. These brave people often face threats, humiliation and even violence in spite of not receiving necessary protections from the state. This is the case in eastern Europe and especially so in Central Asia.

The EBRD and EIB operate in countries where human rights violations are systemic. In such an environment it is impossible for the banks to fulfil their policies on public engagement and human rights protection.

The EBRD has a detailed methodology for assessing a country’ commitment to democracy, pluralism and respect for human rights and is encouraging political and economic reforms through a “more for more”, and conversely “less for less” approach to investment. In cases like Uzbekistan where the country’s international partners have expressed cautious optimism about on-going reforms, the EBRD should go the extra mile and conduct proper human rights due diligence on all its investments. In countries like Turkmenistan, where there is no sign of progress, the EBRD should be clear to the government of what ‘less for less’ means and scale down all forms of investments towards halting operations entirely.

Even in the relatively open democracies of this region, the violation of human rights as part of infrastructure developments is still a reality, and the ability of staff at the public banks to respond is limited, given the tools at their disposal. In Ukraine, Bankwatch follows a number of cases where local activists are under pressure for opposing industrial agribusiness. While an independent audit organised by the EBRD pointed out the need to improve communication with impacted communities, the bank is limited in the leverage it can exert over its client. In Georgia, the native Svan population has continually opposed plans of the government to build dams that would force their displacement, and as a result have been the subject of intimidation and harassment.

A positive development at the institutions, as seen recently at the International Finance Corporation, has been the formulation of ‘no tolerance to retaliation’. The IFC has recently released a statement expressing intolerance of any action by an IFC client, which amounts to retaliation- including threats, intimidation, harassment, or violence. This is an important step, not only to minimize risk in project implementation, but also to ensure that stakeholders are able to engage freely and safely with the IFC and its clients to ensure positive project outcomes. To avoid and mitigate potential risk of retaliation, the EBRD and EIB must develop internal guidance on integrating assessment of such risk into its project assessment procedures. This would involve analysis of the political and economic operating context, and awareness raising among Bank and client management.

The upcoming revisions of the safeguard policies at the EBRD and the EIB offer an opportunity to mainstream during the appraisal of a project an assessment of how human rights are being respected by the client.

A lack of protection for human rights defenders undermines the effectiveness of a bank’s grievance mechanisms, as it is too risky to submit complaints. The revision of the EBRD’s accountability policy therefore should in addition ensure that its Project Complaints Mechanism is independent and safe for human rights defenders and communities who request redress for harm done by bank investments.

While we welcome steps taken by some states to support and protect rights defenders, it is concerning that governments may actually be undermining these efforts through the actions of their national development banks, bilateral development cooperation, and other development financial institutions in which they participate.

European Parliament warns Balkan countries to stop destructive hydropower

The Resolution on Montenegro asked the banks “to withdraw funding for all projects which are undertaken in protected areas” while the one on Albania asks for a review of the projects that “lack sound ex ante strategic environmental assessments and environmental impact assessments”. All other Resolutions on Western Balkans countries (namely Serbia, Kosovo and Macedonia) include strong language emphasising the risks that hydropower bring if the strictest EU environmental standards are not applied.

The Parliament’s stance is not the only recent example of international concern about hydropower in the Balkans. At the same time, the Bern Convention Standing Committee, the Council of Europe’s environmental watchdog, decided to open a case-file and called on the Albanian government to halt the hydropower plant projects on the Vjosa River. Also, reacting to the repeating controversy over hydropower plants being built in Emerald protected sites, the Standing Committee recommended that the issue should be examined by a Group of Experts in order to develop principles for hydropower plants in Emerald sites.

This is a continuation of a growing trend. In June 2018, MEP Thomas Waitz (Greens/EFA) convened a screening of Blue Heart, a feature-length documentary produced by activist company Patagonia. In the following debate, European Commission representatives Nicholas Cendrowicz (DG NEAR) and Hans Stielstra (DG Environment) agreed that there are other ‘low hanging fruits’ aside from hydropower that should be considered in order to resolve the energy equation in the Balkans, such as energy efficiency and reducing losses in the grid. In support of this action, policymakers raised the issue of hydropower becoming increasingly uneconomic, saying that, compared with 20 to 30 years ago, today, they couldn’t see a strong business case for it.

Photo credit: Jason Alden, Patagonia, 2018

This is all the result of people in Europe and worldwide standing up to defend Balkan rivers. Following Bankwatch’s report that identified the main financiers of the Balkan dam tsunami, in June 2018, the Blue Heart of Europe campaign, Bankwatch and Patagonia handed over 120,000 signatures, asking European public banks to halt their support for destructive hydropower in the Balkans.

The wave of opposition to destructive hydropower cannot be easily tamed. Communities are becoming more and more vocal and persistent in defending their right to decide the fate of their rivers, as in the cases of Kruščica in Bosnia, Valbona in Albania or Stara Planina in Serbia.

The financial institutions are starting to listen. In its reaction to the 120,000-strong petition, the EBRD said that it has issued a new guidance note on the incorporation of minimum environmental and social policy requirements during hydropower project implementation. The Bank also agreed to organise a joint event in February 2019 with civil society and its own commercial bank partners to discuss the sustainability of financing hydropower. Meanwhile, the EIB also took CSO recommendations into consideration as part of its ongoing formulation of EIB Guidelines on Lending for Hydropower Projects.

Now it is time to capitalise on this new understanding and growing evidence that neither small nor large hydropower plants are a panacea for the climate crisis. Both the EBRD and EIB are currently revising their environmental and social policies. We expect that they will take resolute steps forward the most destructive projects from their portfolio.

Just last week the Blue Heart of Europe campaign provided a blue-print: an Eco-Masterplan for Balkan Rivers, encompassing no-go zones for new hydropower plants within a river network of over 80,000 kilometers in length, but also pointing out energy alternatives.

2019 is going to be a hot year for the future direction of hydropower development in the Balkans. Let’s hope it is the beginning of the end of a chaotic hydropower tsunami, and the end of the beginning of turning our attention to more sustainable alternatives such as demand response, wind and solar.

Eleventh hour for protected Kresna Gorge as Bulgaria presses on with destructive motorway

With construction advancing in Bulgaria’s Kresna gorge, discussion happening now at the Bern Convention in Strasbourg [1] having taken on an increased sense of urgency. The Convention’s Standing Committee is debating the possibility of requiring an independent review of the selected route of the Struma Motorway, an important step that would give a boost to years of campaigning by civil society and locals against the controversial routing of this section of the Pan-European transport corridor.

We call upon you to ensure that European laws for the protection of nature are respected and the pristine valley of Kresna Gorge in Bulgaria is saved from destruction.

The decision by the Bulgarian government to extend the southbound routing of the motorway through the Kresna gorge alongside the existing E79 route has been called a compromise to enable a speedier and more economic completion of the motorway.

Yet according to our analyses, the costs of construction of this ‘version’ will be the same – if not more – than if the motorway was constructed entirely outside the gorge. This is because our calculations include more than just the construction costs of the project, but also the economic opportunities resulting from lost livelihoods of local farmers whose lands in the area of Kresna will be appropriated and destroyed, and as well as costs to tourism like rafting, which is a key contributor to the economic activity of Kresna.

struma motorway cost estimates - kresna gorge

1. The calculation for the cost of route slected by government is based on official tender documents: http://www.aop.bg/ng/form.php?class=F02_2014&id=864986&mode=view
2. The calculation of the alternative route is based on JASPERS, Struma Motorway Lots 1, 2 and 4 Application Form – Supporting, Document Capital costs estimate 6417, Draft 9, November 2011

Furthermore, the construction of the last and most technically challenging section of the motorway – the area of the Kresna gorge – is now planned to be contracted to at least four different construction companies in the territory of NATURA 2000 site, which increases further the risks of negative impacts. Tenders are ongoing for two sections in the northbound direction of the motorway, passing east of the gorge, one for the rehabilitation of the current E79 road and one for a tunnel, all of which are happening at the same time.

The Bern Conevntion field visit to the Kresna gorge in 2002 was instrumental in shedding some light on the impacts of the Motorway construction on the gorge. The Convention’s recommendations for the Kresna gorge to be bypassed and the existing route to be used just for touristic purposes are still not implemented.

See what is happening in the gorge with this new video, and take action to help #SaveKresna.

Lessons learned from Germany’s 20-year experiment in energy transformation

First steps

As early as 2000, Germany introduced the Renewable energy act, which envisioned extra financial support to those who produced decentralised energy and fed it into the common network, thus receiving a special component of the tariff.

Energy intensive industries were exempted from this feed-in tariff, in order to not harm the economy. But every other electricity consumer paid a certain amount for the renewable electricity with this slightly elevated feed-in tariff. Currently consumers pay extra 6.79 euro cents for each consumed kWh (from 2019 – 6.405 cents/kWh).

The introduction of this support scheme for renewable energy resulted in, first of all, a rapid increase in the number of renewable energy producers and the proportion of renewables in the overall energy mix – from both bigger producers and prosumers. Second, the expanding renewable technology sector created new businesses and jobs.

As the costs of renewable technologies went down, the proportion of produced renewable energy went up, and energy got cheaper. Thus, around 2008 the feed-in tariffs were reduced: first, for solar installation, and a few years later – for wind and biomass cogeneration stations.

The Energiewende’s main achievement is that the proportion of renewable energy in the overall consumed electricity rose from 3.4 % in the 1990s to almost 40 % today. The rest of the electricity is mostly produced from coal and gas.

“It was carried out by people. Everybody could be part of the Energiewende by installing their own renewable energy sources. This really made up the success of the Energy transformation and brought acceptance that we are still relying on”, told Frank Peter, Deputy Executive Director of Agora Energiewende.

It was not a road without pitfalls. Energiewende has been heavily criticised for inducing a significant increase in electricity prices. Initially, no one forecasted such a rapid expansion of renewable energy production, which burdened electricity consumers during these years.

However, German environmental organisations and state institutions do not view this as a failure. It was unavoidable and necessary, and the investment will definitely pay off. The threats of uncontrolled climate change would be a lot more expensive in the long term.

And the public seems to be on board: Energiewende still enjoys public support. As many as 85-90 % of German citizens support transition towards cleaner energy.

Other support mechanisms and alternatives

Besides the feed-in tariff for renewable energy, other support measures include:

Auction mechanisms for larger projects, such as wind park construction;
Support for installing decentralised renewable energy sources;
Possibility to install renewable energy source in one’s property without initial investment by signing a long-term contract with a state agency that covers the initial investment, provides maintenance and gradually recoups their investment.

The feed-in tariff is not necessarily the best way to support renewables. The most fair and sustainable solution would be the introduction of CO₂ tax for all commodities and services, across all sectors. It would be an actual implementation of the ‘polluters pay’ principle, which would automatically make polluting activities financially disadvantageous. Currently, this matter is not on the national agenda in Germany, as it would require radical changes in the tax system as a whole. However, in the future Germany could follow the example of France and the Netherlands, which have introduced such principle in one way or another.

Going beyond green energy production

Despite the early successes of Energiewende, Germany’s greenhouse gas (GHG) emissions have increased, putting it below the GHG reduction target for 2020.

Partly, it is due to the economic growth, increasing population and intensifying transportation sector, which is reducing emissions too slow. But it is also due to insufficient energy efficiency promotion. The goal was to renovate and insulate at least 2 % of residential buildings each year, yet currently the figure is at 0.8 %.

There is no shortage of financial support. It is effective and available for individuals and companies; for multi-apartment residential buildings, private housing, and industries; for construction of new buildings, as well as renovating the existing ones.

However, current implementation of insulation projects is slowed down by the fact that half of all dwellings are being rented out, which hinders the insulation activities in these apartments and props up rent prices by approximately 11 %. At the same time, the savings on heating bills do not cover the increase of the rent price.

For Germany, it is crucial to continue phasing out coal, which requires not only developing renewable energy sources, but also addressing the issue of employment of whole regions. At present the government views natural gas as a bridge from coal and nuclear energy to renewables. Thus, the Nordstream 2 project will most likely be implemented despite its obvious flaws. Projects of this scale operate for at least 30 years, effectively eliminating the possibility of reaching the 2050 zero GHG emission target. If we wish to achieve the climate and energy targets, natural gas must be abandoned now.

As Germany makes its way forward, we can learn by observing. Energiewende gives away the wealth of knowledge accumulated over the past 20 years to create shortcuts for other countries that are just starting their energy transformation journeys.

Will the long-awaited bypass road pave the way to reconciliation?

Residents are hopeful that the new bypass will give them some respite from constant dust and smells from passing trucks, growing pot holes and vibrations so strong they have caused cracks in nearby homes. Beyond that, many villagers are still waiting for deeper action to address other ongoing impacts and fears about the air, water and soil pollution from MHP’s industrial farming activities.

Road impacts, by the numbers

MHP’s intensive use of local roads is connected to the sheer size of its operations. Its local Vinnytsia Poultry Farm currently includes over 450 chicken houses, which hold over 17 million chickens at a time. It also leases 25,000 hectares of local farmland, on which it grows grains to feed the chickens. Until now, the main road through Olyanytsya has been a primary transit route for MHP’s chickens, chicken parts, manure, fodder, waste water and other cargo between the buildings of its intensive poultry farm. Since construction of the farm began in 2010, this road has served as the most direct route between MHP’s manure storage facility and half of its local chicken houses on one side, and its hatchery, slaughterhouse, fodder plant, waste water treatment plant and remaining chicken houses on the other side. Now, MHP has begun construction on an expansion of the farm, which will double its size. MHP has boasted that the Vinnytsia Poultry Farm is the largest poultry farm in Europe.

The traffic problem was documented in a 2017 video. Villagers complain that the size and weight of MHP’s agribusiness vehicles has caused damage to the road and surrounding properties, which were not built with the expectation of having to sustain vibrations from so many passing trucks. Houses near the main road now have noticeable cracks in their walls and roofs, which were not present before the arrival of MHP. These cracks are seen consistently in houses bordering the road, regardless of when they were built.

MHP road use has also led to noise and dust pollution, as well as strong odors from vehicle cargo, causing a constant nuisance for local residents. Matters are made worse by the speed of passing trucks and lack of effective speed control and road safety measures, causing a safety concern for local residents who frequently walk along the roadway.

A November 2017 study of traffic impacts set up a video camera to collect footage of vehicles traveling on the Olyanytsya main road over a 7-day period. Through visual observation and by cross-referencing the vehicles shown in the video against the vehicle types registered to the company, the study found an average of 400 heavy vehicles (weighing 3.5 tonnes or more) traveling on the road each day that were either distinctively or likely related to MHP’s operations. This means that vehicles related to MHP accounted for approximately 70% of all heavy vehicle traffic. This is likely an underestimate, as the study only counted vehicles traveling during daylight hours and only those types of vehicles that are registered with MHP, not its contractors.

A solution eight years in the making

The bypass road opening comes after years of complaints and protests by local villagers, dating back to 2010. In 2015, MHP responded to these concerns by developing a draft plan to build a bypass road. Over the following years, the project suffered from repeated delays, even while MHP’s huge expansion of the Vinnytsia Poultry Farm has continued at pace.

In 2016, the Trostyanets Rayon State Administration established a commission of experts to investigate and identify the cause of damage to local residences along the road. The commission found “massive damage to building structures” and found that road use by heavy vehicles, speeding, and breaking and accelerating during traffic were among the primary causes of the damage. Local community members have also held a number of protests about the traffic issues, including an event in September 2017 in which villagers from Olyanytsya blocked the road to all traffic.

Most recently, in June 2018, villagers filed complaints to the accountability offices of two public international banks that provided financing to MHP’s operations in Vinnytsia region, the . These complaints detailed the impacts from MHP’s Vinnytsia Poultry Farm and Zernoproduct Farm. They requested a dialogue process with MHP to discuss community concerns and negotiate solutions directly with the company. Now, eight years after villagers first began to raise their voices, the bypass road is finally complete.

Villagers see the new bypass road as a welcome first step in resolving traffic issues linked to MHP’s operations, but for them, the bypass road was long in coming, and cannot be a stand-alone measure. The bypass road will only make a difference if it is consistently used by MHP employees and contractors. The Olyanytsya main road will still be the most direct route between many MHP facilities, and any significant and lasting reduction in heavy vehicle traffic through the village will require MHP to impose and enforce a policy requiring use of the bypass road rather than the road through Olyanytsya. MHP also has a responsibility to address the past impacts of its constant road use over many years, which has left the road in a bad state of disrepair, full of deep and growing potholes, and caused damage to local homes.

Additionally, while traffic impacts to Olyanytsya have been particularly severe, it is not the only village that has suffered impacts from MHP’s operations. Other villages have also had to put up with impacts from heavy vehicle traffic and foul odors and dust from MHP’s chicken rearing, slaughtering, and grain production facilities. Local villagers throughout the area also fear other impacts, such as pollution to local air and water, and to the region’s prized fertile soil.

The complaint submitted to MHP’s international financers has now been found eligible and local villagers will begin negotiations with MHP in earnest in the coming weeks. The bypass road is a positive step that local villagers hope will signal the start of a genuine process to develop solutions for the many challenges of living next door to Europe’s largest poultry farm. Yet with MHP’s expansion already underway, the company must address the concerns of local villagers with more urgency and make concrete its commitment to sustainable development and responsible business practice.

Leaked World Bank report depicts Georgia’s Nenskra hydropower project as major liability

Community members, experts and civil society groups have long been warning about the heavy toll that the controversial Nenskra hydropower project in Georgia could take on both pristine river ecosystems and the local indigenous communities. But a leaked World Bank document now reveals it is also likely to become a heavy burden on public coffers.

The World Bank’s analysis, dated February 22, 2018, assesses power purchase agreements (PPA) the Georgian government had already signed for a range of energy projects – mostly hydropower – as well as for three other hydropower plants that are currently under consideration. Specifically, this analysis looks into the fiscal costs of these contracts and their possible impact on energy tariffs in the country.

Primarily, the analysis foresees that between 2022 and 2041, the Nenskra hydropower plant (HPP) alone would incur over EUR 1.8 billion in fiscal costs.

The Georgian government is keen to expand the country’s hydropower capacity but, as the report stresses, if these grand plans materialise – and that’s a big ‘if’ – they would far surpass the domestic demand. In turn, these excesses would entail substantial fiscal costs

“The fiscal cost from Nenskra HPP is the largest,” the report states. “Nenskra HPP has the largest impact because it has the highest indicative PPA tariff starting at 7.55 USc/kWh with 3% annual escalation, off-take liability of 34 years, and estimated annual generation of 1.2 billion kWh per year, which is 9 percent of projected total domestic demand in 2023.”

In other words, the Georgian government committed to pay the developer a total of USD 90.6 million on the first year of electricity generated from the Nenskra HPP, and then increase this rate by 3 percent every year during the following 33 years.

In addition, the power purchase agreements for Nenskra and the other projects considered in the report use US cents for electricity tariffs, and therefore future currency exchange rates will mean additional costs due to anticipated depreciation of the Geogian lari (GEL). The authors believe that only this component will range from GEL 350 million (EUR 113.6 today) to GEL 500 million per year between 2023 and 2026.

They also expect that the energy surplus would generate serious liabilities to Georgia’s electricity operator. In 2023, the annual liability of the Nenskra HPP alone is foreseen to be USD 90.6 million. By 2041, this figure is expected to reach USD 154.2 million.

Exporting electricity to Turkey, as Georgian policymakers as well as the international financial institutes involved envisage for Nenskra and other hydropower plants, should diminish the burden on the state budget but not eliminate it. “The average wholesale electricity market price in Turkey is about 4.5 USc/kWh whereas the PPA tariffs for these projects are higher,” the authors of the analysis explain.

And there’s more to it. The report stresses that Nenskra and the other projects could become even more expensive with delay payments and other unplanned expenses. As if to illustrate this point, late last month it has been confirmed that Salini Impreglio, the construction company hired to build the Nenskra hydropower project, is on its way out – a development that almost certainly means jumping the project’s costs. In fact, the project’s expected costs have already nearly doubled since 2015, and international financial institutions estimate its price tag at over a billion dollars – a figure that is only likely to grow further.

FEATURE

Price tag of Georgia’s Nenskra dam goes through the roof

New information reveals the disproportionate price that Georgia’s government guarantees to pay for electricity from the Nenskra dam. The increasingly unfavourable economics strengthen calls to finally make the project’s contract publicly available.

A dam construction visible between tall green mountains in Georgia.

The International Monetary Fund’s fiscal transparency evaluation report on Georgia from September 2017, already sounded the alarm on the Nenskra project’s threat to the country’s very fiscal stability, and the World Bank’s findings echo these concerns. Ultimately, this analysis makes clear that the Nenskra hydropower project would become a major liability even before it is completed, and it will be Georgian citizens who will be footing the bill.

Similarly, the conclusions of the World Bank’s analysis should make for a major red flag for those international investors that are already involved in the project or still consider backing it. Earlier this year, both the European Investment Bank and the European Bank for Reconstruction and Development approved loans totaling over USD 350 million for the Nenskra project, but the latter has since decided to suspend the process in light of the Italian constructor’s departure. Nevertheless, the Asian Infrastructure Investment Bank and the Asian Development Bank are still mulling support for the Nenskra hydropower plant.

Not least worrying is the fact the terms of this grandiose project have been shrouded in secrecy. The power purchase agreement for the Nenskra hydropower project had been signed between the government of Georgia, the state owned JSC Electricity System Commercial Operator (currently “Electricity Market Operator”), the state owned JSC Partnership Fund and JSC Nenskra Hydro (the latter being a joint venture of K-Water, Korea Water Resource Corporation, and the JSC Partnership fund). This contract has since been kept confidential, and the new revelations make it ever clearer it has to be made public.

The World Bank analysis of this contract was undertaken at the request of the Georgian finance ministry but, similarly, hasn’t been made public until last month. The leaked document has received massive media attention in the country as it shows how overwhelmingly unsustainable the Nenskra project is.

« Previous Page