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Can EU policy drive decarbonisation in the Western Balkans?

The Western Balkan countries have been exporting significant amounts of electricity to the EU for years, produced, predominantly, by their heavily polluting coal plants. Since the Western Balkans do not participate in the EU Emissions Trading System (EU ETS), and most of the countries do not have a carbon pricing system of their own in place, electricity production costs have been low compared to the corresponding costs in the EU. However, this will change in the next few years due to the new CBAM Regulation, developed to put a price on the carbon embedded in imported goods from at least five sectors, including electricity. 

This new EU climate policy instrument, established to create a level playing field between EU industries and their competitors in third countries, will clearly impact the Western Balkan countries, and especially their coal industry, as well as the local communities that are dependent on it.

The event brought together European-level policy makers, environmental groups and think tanks, mayors and representatives of local municipalities from the Western Balkans to advocate for stricter criteria for CBAM in order to accelerate decarbonisation in the Western Balkans through the establishment of new carbon pricing systems or the integration in EU ETS, as well as to give mayors from coal municipalities in the Western Balkans a platform to discuss their initiatives and to raise the issue of a Just Transition Fund for the Western Balkans.

The discussion was moderated by Sam van den Plas, Policy Director at Carbon Market Watch, and was organised as part of LIFE-ETX, a project co-funded by the European Commission and the European Climate Foundation aiming at making the EU’s Emissions Trading System (EU ETS) work for citizens and the climate.

Petros Kokkalis, MEP, the LEFT, placed CBAM in the broader political context of the Fit for 55 package and underlined its potential to stimulate climate action outside the EU, thus contributing to the global efforts to urgently address the climate crisis. “The EU should take measures to support its financially weaker trading partners such as the Western Balkans and ensure that the necessary funds are in place to shift their electricity model towards clean energy, while also providing a safety net for the local communities in coal regions” he concluded.  

Pasquale De Micco, Policy Officer for Carbon Border Adjustment Mechanism (CBAM) at the European Commission’s Directorate-General for Taxation and Customs Union, presented the economic impacts of CBAM on Western Balkan countries with an emphasis on the power sector, based on the impact assessment accompanying the European Commission’s proposal for the CBAM Regulation.

Ioana Ciuta, Energy Coordinator at CEE Bankwatch Network presented the main findings of a new study on the power sector of the Western Balkan countries. “Coal has been the easy go-to solution for several governments since the crisis started, but the fact is that coal is no longer reliable and CBAM will only aggravate things. It’s crucial that Western Balkan countries receive the support needed to end their reliance on coal and fund a just transition”, she concluded.   

Samir Kamenjaković, Mayor of Živinice, and Mirnes Bajtarević, Mayor of Kakanj, both from Bosnia and Herzegovina, outlined the challenges the local communities in coal regions face in transitioning away from coal, but also presented their initiatives and ideas for new economic activities that they consider essential for a just transition in the post-coal era.

“Local communities will face serious challenges with job losses as part of the transition away from coal, which needs to be addressed through new job opportunities in other sectors. We need targeted support for flagship projects, such as a geothermal district heating system for Kakanj. This and similar projects are examples of desirable investments in coal regions in transition in the Western Balkans”, stated Bajtarević.

Kamenjaković emphasised “It is of paramount importance that a Just Transition fund is established, partially connected to carbon pricing, as it will help materialise the plans that are already in place for Zivinice, thus moving this municipality away from coal dependence.”

Nikos Mantzaris, senior policy analyst and co-founder at the Green Tank in Greece, presented the results of an analysis for a fair distribution of Just Transition Funds among Western Balkan countries.“The new CBAM Regulation will lead to a significant loss of revenue for the coal industry in the Western Balkan countries. Early planning for a Just Transition in coal regions and adequate funding are absolutely essential. However, the Western Balkans should avoid the mistakes made in designing the EU Just Transition Fund. A fair allocation must take into account the speed of transition away from coal for each country”, he stated.

Notes for journalists

  • You can watch the entire event here.  
  • You can read the study by CEE Bankwatch titled The Western Balkan power sector: between crisis and transition here.
  • You can read the joint study by the Green Tank and CEE Bankwatch titled A Just Transition Fund for the Western Balkan countries here. 
  • You can read more about the LIFE-ETX project here.

For more information contact:

New report: proposed EU carbon tax to speed up energy transition in the Western Balkans

The report offers an overview of all six Western Balkan countries’ electricity sectors and their trade with the EU energy market. It finds that the six countries exported 88 terawatt hours of electricity into the EU from 2011 to 2020, amounting to 12.7 percent of total power generation in the Western Balkans. Over 60 per cent of this electricity is coal-based, so the EU has played a significant role in sustaining coal-based electricity in the region. 

If the Carbon Border Adjustment Mechanism (CBAM)1 enters into force in 2026 as the EU has proposed, and the electricity exported by the region to the EU is taxed by the EU instead of the Western Balkan governments, the countries would lose over EUR 500 million annually to the EU budget. If the countries are to avoid being hit by CBAM, planning a just transition and introducing carbon pricing is more important than ever. 

‘The energy crisis in the Western Balkans is diverting governments’ attention, but the fact remains that coal is no longer a reliable, cheap and abundant source of electricity, and CBAM will only exacerbate this. Governments must take the initiative now if they want to use carbon pricing to fund the transition instead of letting the EU reap the revenues from CBAM’, said Pippa Gallop, Southeast Europe energy adviser and one of the report co-authors. 

According to the Commission’s proposal, the EU will start imposing charges on electricity imports in 2026, with higher impacts on countries with higher exports, higher emissions and a higher percentage of fossil fuels used in electricity generation.  

Bosnia and Herzegovina is the largest electricity exporter in the Western Balkans and a consistent net electricity exporter, with approximately 20 percent of its electricity going to the EU from 2011 to 2020.  

Montenegro’s electricity exports to the EU were non-existent before November 2019, when it completed its interconnection with Italy. Exports increased drastically to over 50 percent of the country’s entire generation in 2020. This generation is reliant on the illegally operated Pljevlja coal power plant, which has exhausted its allowance of 20,000 operating hours since January 2018 under the Energy Community Treaty. In other words, profitable exports to the EU are encouraging this illegal operation.  

The region was hit hard by a quadruple energy crisis caused by high prices of electricity imported from the EU in the last year, a series of technical problems at coal power plants and mines across the region, a terribly dry year for hydropower production and a massive increase in biomass prices. Still, the energy transition is slowly taking off the ground, as wind and solar development is speeding up in Albania, Bosnia and Herzegovina, North Macedonia and Serbia. However, the threat of a delayed coal phase-out is looming. 

The report recommends that the EU increases momentum towards a just and sustainable energy transition and carbon pricing, especially through the creation of a dedicated Just Transition Fund. It also needs to ensure a stringent CBAM which will persuade decision makers in the Western Balkans to introduce their own carbon pricing and improve compliance with EU energy, competition and environmental law. 

‘The economic reality of coal operation, with stricter environmental standards and carbon pricing must prompt the Western Balkan countries to design just transition plans, to be funded through a dedicated Just Transition Fund. Such a fund is crucial to help the Western Balkan countries end their reliance on coal and address the social and economic impacts of such a change’, concluded Ioana Ciuta, energy coordinator for the Western Balkans, and one of the report co-authors. 

Contacts:

Ioana Ciuta, Energy coordinator for the Western Balkans, CEE Bankwatch Network
ioana.ciuta@bankwatch.org
Twitter: @unaltuser
Mob: +407 24 020 281

Pippa Gallop, Southeast Europe Energy Advisor, CEE Bankwatch Network
pippa.gallop@bankwatch.org
Twitter: @pippa.gallop
Mob: +385 99 755 9787

Romanian decision-makers attempt misuse of REPowerEU funds for illegal hydropower plants

Romania’s Government plans to use funds allocated under the REPowerEU package to build nine hydropower projects in protected natural areas, Bankwatch Romania has warned the European Commission today. Several of these projects have already been found illegal by the Romanian justice system. 

Purporting to tackle the energy crisis, two new draft laws and a draft government ordinance have been published, and may be approved as soon as 5 December. The ordinance would resurrect controversial hydropower plants started decades ago, including the Bumbesti-Livezeni plant in the Jiu Gorge National Park and the Rastolita plant in the Calimani-Gurghiu National Park. All the plants are promoted by state-owned Hidroelectrica.

The ordinance would exempt the plants from environmental assessments and allow Hidroelectrica to approve its own feasibility analyses. As well as the two national parks, the plants would seriously damage twenty Natura2000 sites, a Ramsar site and tens of rivers, one of which is the only known breeding site of the endangered Danube salmon in Romania. 

An annex to the draft ordinance also reveals Government plans to finance the plants using EU public funds, via the new recovery plan chapters soon to be submitted as part of the REPowerEU package. This will be subject to approval by the European Commission.

The Romanian Parliament already attempted to legalise these hydropower projects in February this year. A controversial law was adopted, allowing changes to the boundaries of protected natural areas and enabling the completion of the Jiu Gorge and Rastolita plants. The law was challenged by opposition party Union to Save Romania (USR), and in November the Constitutional Court ruled it unconstitutional on procedural grounds. Two senators immediately submitted new draft laws which contain the same provisions as the February law, and the government ordinance comes on top.

Ioana Ciuta, President of Bankwatch Romania: ‘The Government and Parliament’s latest moves to prop up Hidroelectrica’s decades-old illegal hydropower projects are a blatant abuse of the energy crisis. Even if construction resumed tomorrow, the projects would not be ready for at least another three years – far too late to help immediate security of supply. The European Commission must ensure that no public funds are used for this abomination.’ 

Pippa Gallop, Southeast Europe Energy Coordinator, CEE Bankwatch Network: ‘This is unfortunately not an isolated case of mis-using the energy crisis to trample over environmental legislation. It is extremely unhelpful that the European Commission itself is proposing to weaken EU nature safeguards via amendments to the Renewable Energy Directive as well, which sends a terrible signal to the Member States. Still, what Romania is planning is completely illegal and the European Commission must react promptly.’

For more information on the planned hydropower projects and emergency legislation, please see the attached briefing.

Contact:

Ioana Ciuta, President, Bankwatch Romania and Energy coordinator for the Western Balkans, CEE Bankwatch Network  
ioana.ciuta@bankwatch.org
Twitter: @unaltuser
Mob: +407 24 020 281 

 

Moving Western Balkan district heating systems away from fossil fuels   

This winter, surging energy costs serve as a stark reminder that we simply cannot rely on fossil fuels for heating. This is not just about finding energy sources at stable prices, but also significantly reducing carbon dioxide emissions, which make up 50 per cent of total emissions in the Western Balkans. There are better alternatives; district heating systems powered by renewable energy sources aren’t science fiction, but are in fact achievable right now.  

In an effort to help five city officials from Western Balkan countries improve their district heating systems using sustainable models in Denmark and Sweden as examples, CEE Bankwatch Network, Aarhus Center in Bosnia and Herzegovina and Ekosvest in North Macedonia organised a tour with experts who work in the field. The participants – from the cities of Živinice and Tuzla (BiH), Pljevlja (Montenegro), and Kochani and Bitola (North Macedonia) – represent communities already interested in replacing outdated, polluting heating systems based on coal and fossil gas with newer, cleaner systems. 

Over the past week, the officials had a chance to see a solar-based district heating network and a thermal energy storage site in the town of Marstal, as well as a system based on heat pumps at the Copenhagen market and the world’s largest fossil-free district heating grid in Lund, Sweden. Some of these systems have been in operation for almost 10 years and show how sustainable district heating can exist in the form of feasible, affordable and bankable solutions within the community. 

Mayors and representatives of the local authorities shared their experience of shifting from heating systems that run on fossil fuels to others powered by renewable energy sources, including possible financing sources.  

Although the circumstances differ from place to place, all these projects are evidence that overhauling heating systems pays off and local residents feel the difference in the air they breathe and the bills they pay. The experience of municipalities in Denmark and Sweden indicates that embarking on such a transition depends not only on the availability of financing, but primarily on political will. Governments of Western Balkan countries must embark on a dedicated energy transition to secure independent and clean heating solutions for their towns. 

QUOTES FROM THE PARTICIPANTS OF THE STUDY VISIT: 

Nataša Kovačević, District Heating Coordinator at CEE Bankwatch Network, said: ‘With the enormous gas price increase looming and upcoming taxes on carbon emissions, there has never been a better time to start developing modern and completely new district heating systems based on renewables. This requires supportive policies, a strong legal framework and the capacity to use all available financing mechanisms, including the EU, the Western Balkans Investment Framework, the European Bank for Reconstruction and Development and other funds from international financial institutions that are already available for all Western Balkan countries.’ 

Denis Žiško, Aarhus Center in Bosnia and Herzegovina, said: ‘It’s time to distance ourselves from the cavemen’s fascination with fire and accept that we don’t have to burn something to generate energy. The fact is that solar and wind energy combined with energy efficiency, heat pumps and heat storage are real, accessible and sustainable solutions for heating.’ 

Samir Kamenjaković, Mayor of Živinice Municipality, said: ‘The town of Živinice is committed to renewable energy sources, the circular economy and a just transition. The projects and plans that are already underway in Živinica have created the perfect platform for us to embark on projects and investments like those we have seen in Denmark, namely biomass projects and solar power plants.’ 

Ivan Chulakoski, City Councilor of Bitola Municipality in North Macedonia, said: ‘We had an opportunity to see with our own eyes that sustainable district heating can take different forms, but it is as feasible and affordable in Denmark and Sweden as it is in my town. Because Bitola is one of the most polluted cities in Europe, I think we must immediately prioritise this crucial transition.’ 

Dejan Rashkov, Secretary of the Municipality of Kochani in North Macedonia, said: ‘Kochani is currently developing a feasibility study for geothermal-based heating for the region’s agricultural area and a few urban locations. However, to fully develop this highly technical project, we need more substantial EU investments. Kochani has the advantage of having direct access to water at 78° Celsius, so we do not need to construct solar thermal storage facilities. However, heat pumps like those used in Marstal’s district heating system could increase efficiency and have a great positive effect on the local environment.’ 

Amel Husić, Chief of the Development Sector for Central Heating in Tuzla in Bosnia and Herzegovina, said: ‘The decentralisation and diversification of heat energy sources is extremely important for Tuzla’s district heating system needs to work on. The current global geopolitical situation shows that it is not good to be tied to one source of energy. On the study visit, we saw the city of Marstal, where solar collectors, thermal energy accumulation and heat pumps are all used in the district heating system. Each of these technologies is also applicable in Tuzla.’ 

Mervan Avdović, Executive Director of Heating Company ltd. in Pljevlja, Montenegro, said: ‘The visit was very successful; I saw with my own eyes technologies that I had only seen previously in energy magazines. I am grateful to CEE Bankwatch Network for enabling me to see all this. My task now is to try to apply everything I saw in my city and country.’ 

For more information contact: 

Natasa Kovačević, CEE Bankwatch Network  
natasa.kovacevic@bankwatch.org
Skype: natasa.green
Mob: +382 67 030 033     

Denis Žiško, Aarhus Centre in Bosnia and Herzegovina
denis.z@bih.net.ba
Skype: denis.zisko
Mob: +387 61 140 655 

Renewables to needlessly endanger EU protected natural areas: Reaction to today’s European Parliament committee vote on the Renewable Energy Directive

Among the measures backed in the committee vote is an extremely controversial article that would see all renewable energy projects presumed to be of ‘overriding public interest and serving public health and safety’ [1]. The vote still needs to be confirmed by the EU Parliament in plenary.

If these proposals make it into law, they would undermine rules that have been in place for decades and have proven their worth for protecting Europe’s stunning biodiversity. Currently, if a project is likely to have a significant impact on a Natura 2000 site, it is generally not allowed to go ahead, but there are exceptions, which are assessed on a case by case basis. 

The new rules create a special regime for renewables projects and render environmental assessments largely toothless, as no project will be deemed too harmful to go ahead. 

Andrey Ralev, Biodiversity Campaigner at CEE Bankwatch Network, said: ‘The new rules would trash decades of hard-won EU environmental safeguards. The revised Directive would only allow projects to go forward in areas where they should be prohibited, such as Natura 2000 sites with priority species, rivers with good water status, and areas crucial for bird populations.’

Pippa Gallop, Southeast Europe Energy Advisor at CEE Bankwatch Network, added: ‘EU legislation is already flexible enough to allow many renewable energy projects to be deemed of overriding public interest, so it is not even clear what will be achieved with these changes. Building damaging projects in Natura 2000 sites, areas crucial for birds and on pristine rivers will not massively increase the EU’s overall renewables output – it will just cause additional destruction of nature for very little gain.’  

Contacts:

Pippa Gallop
Southeast Europe Energy Advisor
CEE Bankwatch Network
pippa.gallop@bankwatch.org
+385 99 755 9787
Skype: pippa.gallop

[1] Bankwatch briefing Renewables automatically of ‘overriding public interest’ – a counterproductive attack on EU nature legislation

Reaction to European Parliament vote: Ensnaring the EU in a fossil fuel trap

Instead of leading the EU towards the phase-out of fossil fuels and towards just energy transformation, today’s vote opened the door for a new round of fossil fuel investments by exempting them from the ‘do no significant harm’ assessment.  

By exempting some fossil fuel projects, the European Parliament failed to ensure that the ‘do no significant harm’ principle, an environmental safeguard tool, applies to all EU funds investments. Although it tightened the rules compared to the European Commission proposal, Member States will still be allowed to exempt some fossil fuel investments such as gas pipelines and LNG terminals from complying with the principle.  

In terms of public participation, the European Parliament made significant improvements compared to the European Commission’s proposal, strengthening the provisions on public consultation, by including clear and mandatory guidelines to be followed in the preparation and implementation of the REPowerEU chapters.  

In the upcoming trilogue process on the recovery plan chapters, the Council of the European Union [2], the European Parliament and the European Commission [3] must stop financing fossil fuels from EU public funds and improve other problematic aspects of REPowerEU to ensure clear requirements for public participation, nature and climate protection.  

In parallel to the recovery fund chapters, the European Parliament is currently examining proposals to amend the Renewable Energy Directive, with the Industry, Research and Energy Committee (ITRE) expected to vote next week. The proposals undermine fundamental parts of EU environmental law protecting nature and the climate by creating a special permitting regime with exemptions and special treatment for the renewables sector. 

Christophe Jost, Senior EU Policy Officer at CEE Bankwatch Network, said: ‘Without public scrutiny, investments that have long-term and far-reaching consequences will continue to be approved behind closed doors. Although Parliament’s proposal improves the public participation aspect, the fight for the voice of people to be heard is not over. EU institutions must set an example for all Member States and open the process to the public.’ 

Pippa Gallop, Strategic Area Leader – Biodiversity and Finance at CEE Bankwatch Network, said: ‘The increase of renewables can’t be at the expense of nature. Undermining environmental safeguards to support REPowerEU’s renewable goals is a major and needless setback for nature protection. Existing EU legislation is more than flexible enough to allow renewables development and the European Parliament and the Council must uphold it if the EU is committed to the European Green Deal.’ 

Gligor Radečić, Gas Campaigner at CEE Bankwatch Network, said: ‘Some Member States are trying to solve the energy crisis with business-as-usual solutions – although it’s proven that they don’t work – instead of using public funds to speed up energy transition. Without the necessary safeguards in place REPowerEU national plans will exacerbate reliance on imported fossil fuels and deepen the existing energy crisis.’

For more information contact: 

Christophe Jost
Senior EU Policy Officer
christophe.jost@bankwatch.org
+32 (0)489 69 03 56 

Pippa Gallop
Strategic Area Leader – Biodiversity and Finance
pippa.gallop@bankwatch.org
+385 (0)99 755 9787 

Gligor Radečić
Gas Campaigner
gligor.radecic@bankwatch.org
+385 (0)97 745 4467 

Notes for editors 

[1] Text of the regulation –  REPORT on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans and amending Regulation (EU) 2021/1060, Regulation (EU) 2021/2115, Directive 2003/87/EC and Decision (EU) 2015/1814 | A9-0260/2022 | European Parliament (europa.eu)  

[2] Position of the Council of the European Union on REPowerEU – st12662-re02-en22.pdf (europa.eu) 

[3] European Commission’s proposal – EUR-Lex – 52022PC0231 – EN – EUR-Lex (europa.eu)