Press release

EU funds fossil gas in Poland and Romania despite climate goals

Continued EU funding for projects in Poland and Romania set to deepen their reliance on fossil gas.
Despite repeated expert warnings that fossil gas worsens the climate crisis, governments are still using EU funds to expand gas infrastructure.
Bankwatch urges the European Commission to revise rules to stop public money being used for new gas projects.

‘Governments seeking to use EU public money for fossil gas projects that are likely to operate for the next 30-40 years, well beyond the point when Europe needs to be free of fossil fuels, are betraying their own citizens,’ says Gligor Radečić, Gas Campaign Lead at CEE Bankwatch Network and co-author of the report. ‘Any fossil gas project enabled by EU funds necessarily comes at the expense of desperately needed investments in energy efficiency and renewables in Poland, Romania and throughout Europe. The European Commission needs to urgently initiate a revision of existing EU funding rules to stop any use of EU public money for new gas projects.’

The full report is available here: https://bankwatch.org/publication/energy-insecurity-eu-funds-for-fossil-gas-in-poland-and-romania-contradict-climate-goals

EU funds such as cohesion policy funds, the Recovery and Resilience Facility and the Modernisation Fund are meant to help EU countries improve their economic standing, among other things, by upgrading energy infrastructure. Yet, spending plans in Romania and Poland for the period 2021 to 2027, analysed by Bankwatch, risk deepening the fossil gas addiction of these countries, in turn undermining their energy transition.

In Romania, the authorities have earmarked roughly EUR 1.7 billion in EU funds for new fossil gas projects, such as a gas-fired unit at the Ișalnița power plant and the expansion of the Bilciuresti underground gas storage facility.

And in Poland, fossil gas projects such as the new LNG terminal in Gdansk, new transmission and distribution networks, and subsidy schemes for gas boilers in buildings could receive over EUR 2 billion in EU money.

The science is unequivocal: greenhouse gas emissions from the extraction, transmission, storage and burning of fossil gas are worsening the climate crisis. The past year and a half has shown that fossil gas is neither a reliable nor an affordable source of energy. Yet, governments are still able to utilise EU funds for the expansion of fossil gas infrastructure because EU financing schemes allow them to do so. As long as EU funding rules make gas projects eligible, they are perpetuating Europe’s vulnerability to future fossil gas crises when either supply is curtailed or prices surge.

‘Any project or scheme that adds new gas consumption blatantly contradicts the EU’s policy attempts to steeply decrease gas use in the EU before 2030,’ the report reads.

EU public money plays an important role in realising Europe’s energy transition. But it must not be spent on fossil fuels. What Europe now needs is a dramatic increase in capital spending on sustainable renewables, electric grid improvements and measures to reduce energy demand that could help tackle both the climate crisis and the energy crunch. To achieve this, EU policy-makers need to urgently update the legislative framework governing EU funds to exclude investments in gas schemes and projects.

Raluca Petcu, fossil gas campaigner with Bankwatch Romania and co-author of the report, says: ‘Between August and January, Romania has managed to cut fossil gas use by approximately 25 percent. This is a remarkable achievement, but government plans could reverse it. The plans we analysed foresee gas projects receiving four times more financing via EU funds than was allocated in the preceding EU budget period. This would be a risky decision that would greatly increase gas consumption. The government must revisit these plans and drop any project that does not contribute to reaching climate neutrality.’

Krzysztof Mrozek, Head of the EU Funds for Climate Programme at Polish Green Network and co-author of the report, says: ‘Switching from coal to gas means replacing one polluting fuel with another. With the climate crisis escalating dramatically, EU funds should contribute to climate action, not undermine it. If these plans materialise, they would only entrench Poland’s dependence on fossil gas, and it is Polish citizens who would pay for it through their energy bills. This massive waste of public money must be avoided. The climate and environment ministry must go back to the drawing board and redirect EU funding away from fossil gas and into renewables and energy efficiency.’

For further information, please contact:

Gligor Radečić
Gas Campaign Lead, CEE Bankwatch Network
gligor.radecic@bankwatch.org
+385977454467

Krzysztof Mrozek
Head of the EU Funds for Climate Programme, Polish Green Network
krzysztof.mrozek@bankwatch.org
+48501793296

Raluca Petcu
Fossil gas campaigner, Bankwatch Romania
raluca.petcu@bankwatch.org
+40770209187

European Commission urged to act on destructive hydropower projects in Romanian protected areas

The hydropower projects would damage two national parks and twenty Natura2000 sites, and were all exempted from environmental impact assessment requirements in December 2022. Several of these projects have already been found illegal by the Romanian justice system, so the contested Government decision is yet another move to legalise them.

State-owned utility Hidroelectrica has been attempting to build a series of hydropower plants for several decades already. All of the projects covered by the Emergency Ordinance are 20 to 45 years old, but the Parliament and Government have attempted to revive them in recent years. The Emergency Ordinance entered into force on 14 December 2022 and, although still not approved as law by the Parliament (2), it produced legal effect immediately after its adoption. Already on 28 March 2023, the Ministry of Environment in Romania exempted (3) six of the nine hydropower plants from requiring a screening decision for the environmental impact assessment (EIA) process. In addition, the Government intends to use public EU funds for these projects, through the REPowerEU chapter of its recovery plan, which conflicts with EU rules to ensure that recovery projects fulfil so-called ‘do no significant harm’ criteria.

Bankwatch Romania argues that exempting such projects from the requirement to carry out an environmental impact assessment is allowed only under very exceptional and clearly-defined circumstances. ‘But the government vaguely argues that the ordinance is needed due to “energy security”, failing to elaborate how much energy is missing compared to what is needed, over what timeframe, why exactly those specific projects are the key ones which are needed, why applying the EIA procedure would adversely affect this goal, and why energy security could not be achieved by other means instead. It does not explain exactly what the emergency is, nor when the plants would be expected to come online and help remedy the situation’, they state.

Ioana Ciuta, Bankwatch Romania — ‘These projects belong in history books; they have not proved their worth in the decades that they have been around. If the government was honest about security of supply, it would have needed to prioritise measures to make a difference much more quickly, such as energy savings and installing rooftop solar and heat pumps, as well as low-impact utility scale projects outside of sensitive areas. It’s hard to believe anyone would knowingly choose to destroy nature, when we so desperately need it for our water, food and climate regulation’.

The European Commission initiated an infringement procedure against Romania already in 2015 (4) over small hydropower projects built in protected areas, but it still has not been concluded. The destruction potential of the current Emergency Ordinance should encourage the Commission to speed up this case. Bankwatch Romania expects the Commission to open an investigation into the Emergency Ordinance as soon as possible.

Contacts:
Ioana Ciuta, president of Bankwatch Romania,
ioana.ciuta@bankwatch.org

Notes for editors

(1) The list of nine hydro projects in Emergency Ordinance 175/2022:

The hydropower development of the Jiu River on the Livezeni-Bumbești sector
The hydropower development of the Olt river gorge on the Cornetu-Avrig sector
Pașcani hydropower development on the Siret river
Răstolița hydropower development
Surduc-Siriu hydropower development
The hydropower development of the Siret River on the Cosmești-Movileni sector
The hydrotechnical and energy complex Cerna-Motru-Tismana, stage II
The hydropower development of the Olt River on the Izbiceni – Danube sector. Islaz hydroelectric plant
Cerna Belareca hydropower development

(2) https://www.cdep.ro/pls/proiecte/upl_pck2015.proiect?cam=2&idp=20655

(3) http://www.mmediu.ro/categorie/amenajari-hidrotehnice-in-romania/439

(4) https://wwf.panda.org/wwf_news/?248033/EC-starts-an-infringement-procedure-against-Romania-on[1]small-hydropower

EU’s house bank breached environmental standards on Serbia hydropower project

The finding comes as a result of a complaint submitted in January 2022 (2) by CEE Bankwatch Network and the Ecological Association ‘’Rzav’’ from Serbia on the Beli Kamen and Komalj plants, both on the Crni Rzav river. The plants are in the Zlatibor candidate Emerald site, first proposed in 2006, and in Zlatibor Nature Park, established in 2017. Yet no environmental assessment was done before they were built.

By failing to ensure that at least a decision had been taken on whether the Komalj plant needed an environmental assessment, the Complaint Mechanism established that the EIB had failed to abide by its own standards requiring such projects to adhere to both national and EU law.

According to the Complaint Mechanism, ‘The lack of evidence of at least a screening determination for the Komalj (…) sub-project, is in breach of the EIB’s environmental and social standards.’

The projects, which started operating in 2016 and 2018 respectively, were financed by the EIB via loans for small and medium enterprises channelled through Banca Intesa Beograd and Crédit Agricole Srbija (3). In 2020, after the plants had started operating, WWF Adria organised hydrobiological studies of eight rivers in Serbia, including the Crni Rzav, which showed that the river’s status was graded ‘poor’ in sections (4).

An October 2021 report by Bankwatch (5) found that in southeast Europe, the EIB had provided at least 27 loans for small hydropower plants through financial intermediaries since 2010, though the exact number and many of the names of the plants remain unknown due to a lack of transparency by the Bank.

Andrey Ralev, Biodiversity Campaigner at Bankwatch – ‘In July 2022, the EIB published a new exclusion list that virtually stops intermediaries from financing high-risk projects like hydropower (6). This was highly welcome as they often aren’t able to properly assess compliance with EU law. But the EIB needs to help mitigate the damage caused by the projects it already financed as well.’

Nataša Milivojević, Rzav Ecological Association – ‘Even now, Serbia’s environmental impact assessment legislation is nowhere near compliant with that of the EU – in breach of the Energy Community Treaty (7). If they want to make a positive impact, international donors can’t just pretend that EU standards are being applied here – they need to stick to low-risk, no-regret investments instead of high-risk ones like hydropower plants.’

Contacts

Andrey Ralev, Biodiversity Campaigner, CEE Bankwatch Network

andrey.ralev@bankwatch.org, +359884268552

Nataša Milivojevic, Ecological Association ’’Rzav’’, Associate at WWF Adria

nmilivojevic@wwfadria.org +381(64)5740856

Notes for editors

The report can be found at: https://www.eib.org/attachments/complaints/sg-e-2022-03-small-hydropover-projects-serbia-conclusions-report-28-03-2023.pdf
For more on the plants and the allegations, see: https://bankwatch.org/blog/new-complaint-on-hidden-eib-hydropower-financing-in-serbia-shows-need-for-tighter-standards
The EIB approved a credit line called Intesa SMEs and Priority Projects II in December 2012, and the Credit Agricole Loan for SMEs and Other Priorities II in November 2014. Zlatiborske Elektrane d.o.o. Čačak, the investor, applied for loans for the Beli Kamen and Komalj plants separately via these intermediaries.
For a summary of the study results on the Crni Rzav, see Bankwatch’s blog post ‘Scientific studies reveal river ‘sickness’ from small hydropower plants in Serbia’. The full study by WWF can be accessed here.
Public money vs. pristine rivers – The European Investment Bank’s hydropower financing and the need for tighter environmental and social standards, October 2021
In July 2022 the EIB published a new exclusion list that excludes multi-beneficiary intermediaries from financing hydropower projects, except in rare cases when exceptions may be specifically approved by the EIB.
In November 2021, the Energy Community Ministerial Council declared that Serbia was in breach of the Treaty for failure to transpose Directive 2014/52/EU amending Directive 2011/92/EU. Serbia has not rectified this breach in the meantime.

Latvia abandons plans for controversial LNG terminal but still needs to ditch fossil gas

Plans for the Skulte LNG project involved a facility with a regasification capacity of 4.1 billion cubic metres per year, similar to the volume of the Klaipeda terminal in neighbouring Lithuania.

An analysis by Latvia’s Ministry of Climate and Energy, which guided the government’s decision, concluded that the region has sufficient LNG import capacity as it stands and that ‘it is not possible to build a commercially self-sufficient liquefied petroleum gas natural gas terminals’. This announcement effectively means this fossil gas project has hit a dead end.

Civil society groups, who have been warning that the Skulte LNG project is not fit for purpose – at a time when the imperative is to end Europe’s dangerous dependence on fossil gas and when Europe is clearly overbuilding its LNG import capacity – have welcomed the decision by the Latvian government. But they also caution that relying on fossil gas from Estonia, an option the two governments are now exploring, is a false solution.

Environmental groups Green Liberty (Latvia), the Estonian Green Movement and CEE Bankwatch Network are now calling on the Baltic and Finnish governments to work together to double down on energy transition and create the conditions for phasing out fossil gas.

Liene Krauja, environmental expert with Green Liberty, says: ‘We are relieved that our government has taken the logical step towards sustainability and international cooperation by cancelling the Skulte LNG project. While at the beginning of Russia’s war on Ukraine this was deemed a project of national security, now it is clear that, with sufficient LNG capacities in the region, another fossil gas terminal would create overcapacity and strengthen the fossil gas market for decades to come. However, it is crucial that this cooperation does not lock us all in fossil fuel dependency – a joint energy system must be built along with the deployment of renewables. Only in this way can we avoid the worst consequences of the climate crisis.’

The proposal for an LNG import terminal in Skulte was first floated a few years ago and revived by the Latvian government last year in response to the fossil gas crunch triggered by Russia’s war on Ukraine. In late September 2022, the Skulte LNG project received national priority status via a special law intended to fast-track the planning and realisation processes by mid-September 2024. Two weeks ago, environmental groups petitioned Latvia’s Constitutional Court, contending that the special law is unconstitutional [1].

Earlier, the project was met with local protests amid concerns about financing, which led to media reports in January 2023 suggesting the state could build the terminal on its own.

A briefing published by Bankwatch and the Estonian Green Movement this month showed there is simply no room for any new LNG capacity in Finland and the Baltic region [2]. The combined capacity of existing and planned LNG infrastructure substantially exceeds demand in the four countries. So, any new LNG projects would either cement their dependence on fossil gas for decades to come or risk becoming stranded assets.

In 2022, Lithuania, Latvia, Estonia and Finland managed to slash fossil gas use like no other EU region. But to improve energy security and tackle the climate crisis, they must enhance regional cooperation by directing more investments towards energy efficiency, scaling up renewables and improving power connections between countries in the region to help ditch expensive and polluting fossil gas. The governments should recognise that, in the current situation, a terminal in Paldiski would be just as unnecessary as a terminal in Skulte.

Johanna Kuld, advocacy expert with the Estonian Green Movement, says: ‘The Latvian government’s decision finally brings some clarity to the chaotic LNG terminal saga in the Baltics. The Estonian government should follow Latvia’s example in acknowledging that additional LNG infrastructure in the region is simply unnecessary and publicly announce that the Paldiski LNG quay will not be utilised unless in an emergency. Increased energy cooperation should not prolong our dependence on fossil gas and does not excuse inaction in phasing out fossil gas.’

Gligor Radečić, fossil gas campaign leader at CEE Bankwatch Network, says: ‘The Baltic countries have shown great determination in cutting their fossil gas consumption. The Latvian government’s decision to abandon plans for LNG Skulte is a rational step in the direction of cutting fossil gas demand. This decision reflects an awareness that energy security and climate goals cannot be met by overreliance on fossil fuel imports.’

Notes to editors

[1] Environmental organisations appeal to Latvia’s Constitutional Court against the Skulte LNG Law https://www.zalabriviba.lv/wp-content/uploads/Press_release_SkulteLNG.pdf

[2] Briefing: LNG rush threatens Baltic energy transition https://bankwatch.org/publication/lng-rush-threatens-baltic-energy-transition-why-new-lng-infrastructure-is-a-false-solution-for-energy-security-in-the-baltics

NGOs take Romania to court in the country’s first climate lawsuit

On 10 April, the initial hearing for the trial will take place in the Cluj Court of Appeal. Two additional NGOs – Bankwatch Romania and 2Celsius – have joined Declic in support of the lawsuit.

Roxana Pencea Brădățan, Declic’s campaign coordinator, says: ‘We are filing a lawsuit because Romanian politicians have simply made promises for years now. They sign international treaties, attend climate change conventions and then return to Romania with no plans to go ahead. It’s about our future and our children’s future. As a result, we demand justice in court. To make them care, we demand that representatives of the Romanian state be fined for inaction: a 20 per cent pay cut for each day they fail to act.’

The plaintiffs seek an order from the court that requires the authorities to take all necessary actions to reduce greenhouse gas emissions by 55 per cent by 2030 in comparison with 1990 levels, and to attain climate neutrality by 2050. In addition, they demand that the Romanian Government increases the share of renewable energy in final energy consumption to 45 per cent and improves energy efficiency by 13 per cent by 2030.

This historic lawsuit is part of a global litigation movement that aims to hold governments accountable for their legal responsibilities. Previously, civil society organisations have won court cases against their respective governments in France, the Netherlands and Ireland, compelling their nations to implement effective climate-neutral policies. In addition, the UK’s High Court declared in 2022 that the government’s Net Zero Strategy violated the Climate Change Act. The British government was required to revise its climate plan to include a quantifiable assessment of how its policies would achieve climate targets.

Roxana Mândruţiu, coordinating lawyer from law firm Revnic, Cristian and Associates, the legal team that drafted the action, says: ‘The European Climate Law was adopted at the EU level in June 2021. Almost two years have passed and Romania still doesn’t have a climate law, much less one that matches European greenhouse gas emissions reduction targets. We believe that the current objectives are insufficient and that they violate the legal obligations assumed under the Constitution, the Paris Agreement and the European Climate Law.’

Ioana Ciuta, president of Bankwatch Romania, says: ‘The time has come to reshape the question of responsibility for the climate crisis. Romania ranks third from bottom in the EU when it comes to installed capacity of solar and wind per capita. Practically no new capacity was installed between 2016 and 2021, and the CO2 intensity of its economy is way above the EU average. Instead of turning towards sustainable solutions, the Romanian Government has offered numerous blank cheques to the biggest polluters, always putting individual responsibility above the real responsibility of the polluters – many of whom are state-owned companies. We are hopeful that this case will set the record straight.’

Raul Cazan, president of 2Celsius, says: ‘Romanian transportation has been reduced to an enormous swarm of gas-guzzlers, whilst smart solutions for public transport, electrified railways and active mobility have been lost in a smog of uninspired and carbon-intensive policies. Moreover, in recent decades, Romania has become a cemetery for second-hand vehicles whose imports have been utterly encouraged by fiscal policies and governmental programmes. As a result, Romania’s transport emissions are growing in contrast with other sectors of the economy. This representative action lawsuit is civil society’s last resort, evidence that our advocacy for sensible climate action has hit the wall of irresponsible policymaking.’

Contacts

Declic: Roxana Pencea Brădățan, +40 723 024 300, roxana@declic.ro

Revnic, Cristian & Associates: Roxana Mândruţiu, +40 722 740 113, roxana.mandrutiu@revnic.ro

Bankwatch Romania: Ioana Ciută, +40 724 020 281, ioana.ciuta@bankwatch.org

2Celsius: Raul Cazan, +40 731 001 248, raul@2celsius.org

Western Balkans: EUR 3.5 billion gas build-out poses economic, energy security risks and threatens green transition

Download the report (PDF)

A review of data in the Global Gas Plant Tracker and the Global Gas Infrastructure Tracker show:

2,442 megawatts (MW) of planned gas-fired capacity would dramatically deepen the region’s dependency on gas for electricity, nearly tripling the 779 MW of such capacity today;
The region’s first two LNG import terminals in Montenegro and Albania would increase exposure to a tight, volatile LNG market with over 0.5 billion cubic meters (bcm) of regasification capacity; and
2,715 kilometers of new gas pipelines would draw gas into the Western Balkans from Greece, Croatia, and other neighbours.

In 2021, the six countries of the Western Balkans—Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia—consumed a mere 3.7 bcm of gas, or four per cent of what Germany used that same year.

But the proposed expansion to the gas infrastructure network, backed by European Union and U.S. institutions, would expose the region to the volatile price swings and gas shortages experienced by much of Europe last year. Albania, Montenegro and Kosovo are not currently connected to gas networks, so new infrastructure would create entirely new gas dependence.

At the same time, renewed warnings this month from the Intergovernmental Panel on Climate Change that no new fossil fuel infrastructure can be built in order to limit planetary warming to 1.5° Celsius mean that the planned gas build-out represents billions of euros in potential stranded assets.

For a region with significant solar and wind energy potential, the plans for new gas infrastructure would also introduce fresh hurdles to EU accession efforts, as the move runs counter to provisions of the Energy Community Treaty that seek among others to align the green energy efforts of the region with that of the EU’s.

Pippa Gallop, Southeast Europe Energy advisor at Bankwatch, said ‘Fossil gas infrastructure built now will be a liability for the Western Balkans. Either it will increase import dependence and fossil-fuel lock-in, or it will end up as stranded assets. If the EU and its banks have learnt anything from recent supply problems, they must stop peddling fossil gas in the region.’

Robert Rozansky, Research Analyst at Global Energy Monitor, said ‘Countries around the world are rethinking their plans to import this volatile, dirty fuel amid the global energy crisis. If the Western Balkans forge ahead with new gas infrastructure, it will only make it harder to transition to clean, domestic, and affordable energy.’

Contacts

Pippa Gallop, Southeast Europe energy advisor, CEE Bankwatch Network, pippa.gallop@bankwatch.org

Robert Rozansky, Research Analyst, Global Energy Monitor, rob.rozansky@globalenergymonitor.org

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