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Ukraine reconstruction: why we need electric urban transport investments now

A sustainable transport reconstruction in Ukraine’s cities should be a priority not only in long-term post-war recovery plans, but also in urgent support programs. On the occasion of the International Expert Conference on the Recovery, Reconstruction and Modernisation of Ukraine in Berlin on 25 October 2022, Bankwatch is releasing a video (embargoed till 25 October), explaining why electric urban transport should be a priority in the reconstruction of Ukraine’s cities.  As illustrated in the case of Chernihiv, the heavily damaged cities in Ukraine are left to rely on their own scarce resources to address the most urgent transport-related needs. 

While Ukraine’s 2030 National Transport Strategy envisages a full transition to electromobility, low-carbon transport was not a priority for the Ukrainian national and municipal governments before the war started. Now, with Ukraine’s road into the EU, the alignment of Ukraine’s transport system to the Green Deal becomes ever more important. 

However, to successfully rebuild the urban transport infrastructure, municipalities are in dire need of financial support. As of 1 June 2022, the country’s transport sector needed an estimated USD 74 billion for reconstruction, which is higher than in any of the major sectors, according to the World Bank’s Rapid Damages and Needs Assessment. 

Although Ukraine’s cities are still vulnerable to potential damage resulting from Russia’s aggression, there is a clear need for rebuilding critical infrastructure now to allow people to move around and help those that have been displaced return home.  

Vitana Oliinyk, CEE Bankwatch Network / Ecoaction – “With the help of international investors and donors, Ukraine has a unique chance to build a safe, reliable, green and effective urban transport system independent from fossil fuels imported from Russia.”  

Viktor Zagreba, head of NGO Vision Zero said – “The Ukrainian government should implement the National Transport Strategy’s Action Plan. There are 17 tasks targeting sustainable urban mobility, and there has been almost no progress on them at all.” 

Daniel Popov, CEE Bankwatch Network – “Reconstruction funds should be used for a profound transformation of the Ukrainian transport system. Its main result should be zero emissions and public wellbeing as required by the EU strategies and legislation. The investments should support Ukraine’s and EU economies by choosing and promoting the highest standards for a green reconstruction. Such transformation with broad benefits has to be based on a decentralised electricity supply from renewable energy sources instead of big thermal power plants or nuclear.” 

 

Contacts 

Viktoriia-Anna Oliinyk, National Coordinator – Ukraine, CEE Bankwatch Network
vitana.oliinyk@bankwatch.org
+380996105949 

Viktor Zagreba, head of NGO Vision Zero
viktor@zagreba.com 

Vladlena Martsynkevych, Project leader, CEE Bankwatch Network
vladlena@bankwatch.org
+421950828133 

Notes for editors: 

  • On average, 50 per cent of Ukraine’s urban dwellers commute via public transport. 
  • Private cars are the biggest polluters in Ukrainian cities, responsible for as much as 84 per cent of air pollution.  
  • The latest missile shelling of cities across Ukraine on 10 October damaged 70 facilities and left a huge hole in Kyiv’s central road, where people were commuting to work. Further shelling continues to damage critical infrastructure.  
  • So far, only five cities have developed and adopted sustainable urban mobility plans (SUMPs) to raise the attractiveness, safety and security of walking and cycling.  
  • The Draft Ukraine Recovery Plan: Recovery and development of infrastructure presented in Lugano on 4-5 July 2022 does not sufficiently address electric urban transport, cycling and charging infrastructure for electric vehicles. The plan focuses on automobile traffic, supporting further dependency on fossil fuels and funnelling money into the road sector. 

Reaction to the European Parliament Environment Committee vote on amendments to the Renewable Energy Directive

The Commission’s proposal to automatically declare renewables as being of ‘overriding public interest’ is a particularly gratuitous attack on the EU’s nature legislation. It would seriously undermine the Habitats Directive without significantly increasing overall renewables capacity. 

We urgently need to speed up sustainable forms of renewable energy, but exempting them from environmental rules won’t help. EU environmental law is already flexible enough to allow rapid renewables development; further eroding it will just cause legal chaos and public resistance. 

If these proposals make it into law, the public will no longer be consulted on individual renewables projects in go-to areas. Damaging projects will be able to go ahead in Natura 2000 protected areas, irrespective of their impact. Trying to force them through without consulting people will inevitably end in lengthy court battles. 

We’ll have two parallel environmental law regimes for renewables – one in the EIA Directive, Habitats Directive etc. and a hyperspeed one in the Renewable Energy Directive. This will increase complications for Member States and increase legal uncertainty for project developers. 

Pippa Gallop, Southeast Europe Energy Advisor with CEE Bankwatch Network, said, ‘In its vote on amendments to the Renewable Energy Directive, the Environment Committee succumbed to the European Commission’s poorly thought-out proposals to bulldoze EU environmental safeguards by the back door.’  

For more information contact:   
Pippa Gallop, Southeast Europe Energy Advisor, CEE Bankwatch Network
pippa.gallop@bankwatch.org 

New report: Southeast Europe hydropower investment risks are high and rising

The report is available at: https://bankwatch.org/publication/why-hydropower-in-southeast-europe-is-a-risky-investment

Although hundreds of small hydropower plants – which are highly damaging for biodiversity – have been built across the region in the last decade, attempts to build greenfield hydropower plants of larger than 10 MW have largely been unsuccessful, with only Albania and Slovenia managing to do so.

Vulnerability to drought, legal issues, increasing public resistance and lack of financing are among the factors which have stopped a slew of large hydropower projects in recent years, including two on the Vjosa river in Albania, two in North Macedonia’s Mavrovo National Park, and several on the rivers Morača and Vrbas in Montenegro and Bosnia and Herzegovina.

Hydropower, together with coal, has traditionally played a major role in southeast Europe, but climate change is challenging this role. Albania has added around 600 MW in large plants and several more hundred megawatts of smaller plants since 2010, yet average hydropower generation barely increased between 2010 and 2020. In Bosnia and Herzegovina, Croatia and Montenegro, which added only small hydropower plants, average generation even decreased slightly.

Undeterred, the region’s governments and utilities are keen to build even more large hydropower. Bosnia and Herzegovina is particularly ambitious, planning at least 12 large dams despite its failure to complete a single large greenfield plant in the last decade.

Financing is becoming more scarce as the European Investment Bank, European Bank for Reconstruction and Development and Germany’s KfW have become more cautious of late, leaving Chinese and Turkish banks, as well as the US International Development Finance Corporation (DFC), among the few willing to bet on such a risky sector.

Yet despite Chinese companies being involved in several projects in Bosnia and Herzegovina – including the Ulog plant on the upper Neretva, a series of three plants on the Bistrica, and potentially also another three plants on the upper Drina – the only confirmed Chinese financing is for the controversial 160 MW Dabar plant, for which a EUR 180 million Eximbank loan was signed in January this year.

Pippa Gallop, CEE Bankwatch Network – ‘Hydropower generation in the region is going up and down like a yo-yo due to climate change, making it futile to add more dams. This is most obvious in countries like Albania, Bosnia and Herzegovina, Croatia and Montenegro that are already quite hydropower-dependent. It’s utterly incomprehensible that as of the end of 2021, Montenegro only had 2.5 MW of solar photovoltaics installed. Diversification of renewables and a serious ramping up of energy efficiency is urgently needed.’ 

Amelie Huber, EuroNatur Foundation – ‘Hydropower investors continue to be lured by the prospects of a free energy source that’s always available, but hydropower has long ceased to be that: time and cost overruns are the order of the day, especially when it comes to large hydro, and river flow is no longer reliable. And the very negative impact of hydropower on the biodiversity of river systems has to be taken into account on top of that. Countries whose energy systems depend on hydro will pay a high price as climate change impacts intensify and droughts and floods become more frequent.’

Ulrich Eichelmann from Riverwatch – ‘Besides the energy-related aspects that speak against damming the Balkan rivers, there is also the fact that rivers like the Neretva, Drina and others are of incredible ecological value. Would you dare to destroy the last remaining old growth forests to produce pellets? We´d do the same with these remaining pristine rivers if we allow them to be dammed. Fortunately, people are more and more understanding the true value of the Balkan rivers and are increasingly fighting the dam projects and winning.’

 

Contacts

Pippa Gallop, Southeast Europe Energy Advisor, CEE Bankwatch Network

pippa.gallop@bankwatch.org

+385 99 755 9787

Skype pippa.gallop

 

Christian Stielow
EuroNatur
christian.stielow@euronatur.org

+49 07732 927215

 

Cornelia Wieser

Riverwatch

cornelia.wieser@riverwatch.eu

+43 650 4544784

 

Petra Boic Petrac

WWF Adria

ppetrac@wwfadria.org

+385 91 2905976

 

Notes for editors

(1) The Southeast European countries covered by the report are Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Montenegro, North Macedonia, Serbia, Slovenia.

(2) The project case studies are:

  • Skavica, Albania
  • Bistrica B-1, B-2, B-3, Bosnia and Herzegovina
  • Buk Bijela / Upper Drina, Bosnia and Herzegovina
  • Dabar / Upper Horizons, Bosnia and Herzegovina
  • Ulog and Upper Neretva, Bosnia and Herzegovina
  • Janjići, Bosnia and Herzegovina
  • Yadenitsa, Bulgaria
  • Kosinj/Senj II, Croatia
  • Komarnica, Montenegro

The Shared Green Deal project begins work on people-centered climate neutrality by 2050

Much of the recent focus on tackling climate change has centred on green technology development. Shared Green Deal, however, will involve 24 separate ‘social experiments’ – taking place in neighbourhoods across Europe – looking at how organisations and individuals can work together to make our daily lives more sustainable.  

The project will work directly with families in fuel poverty, as well as with schools, housing associations and businesses. Skill-sharing workshops, toolkits for other local networks, and accessible training videos will be developed which focus on sharing energy-saving know-how between generations. 

A total of 22 partner institutions, including Bankwatch, from across Europe will together examine the role Social Sciences and Humanities can play in helping countries, cities and neighbourhoods dramatically reduce their carbon emissions as part of the European Green Deal programme.  

In CEE Bankwatch Network we will be focusing on clean energy, which is one of the key priorities of the European Green Deal, since its production and use accounts for more than 75% of the EU’s greenhouse gas emission. To make this transition successful and just, we need to involve stakeholders and local communities from the ground by co-creating visions of desirable energy futures, said Christophe Jost, Bankwatch’s EU Policy Officer.  

The pledge that no person or place is left behind during the transition to a low-carbon society is a key part of the European Green Deal, and diversity and inclusivity will be at the heart of Shared Green Deal project to ensure disadvantaged and vulnerable social groups are supported with the changes taking place. 

See more information at the official project website.

       

Bosnia’s planned Tuzla 7 lignite plant on the rocks after state aid U-turn

The State Aid Council’s 2018 decision to greenlight the loan guarantee was found in breach of State aid legislation by the Energy Community Secretariat in an infringement case against Bosnia and Herzegovina at the Ministerial Council in November 2021.

The case was opened based on a complaint by the Aarhus Centre Sarajevo and Bankwatch. In its decision, the Ministerial Council found that Bosnia and Herzegovina failed to comply with its obligations under Article 18 of the Treaty, on the prohibition of market-distorting State aid.

The guarantee for Tuzla 7 covered 100 percent of the loan, plus interest and other associated costs, but as a contracting party to the Energy Community treaty, Bosnia and Herzegovina must follow EU rules on subsidies in the energy sector. One of them is that in most cases state guarantees may only cover up to 80 percent of the total loan amount.

Tuzla 7’s woes were compounded last year when it was revealed that the contractor itself, China’s Gezhouba, can no longer fulfil its contract due the withdrawal of GE as an equipment supplier. However, the Federation of Bosnia and Herzegovina government and parliament appear reluctant to take a final decision on the fate of the project.

Pippa Gallop of CEE Bankwatch Network – ‘We very much welcome this decision by the State Aid Council and hope it signals the end of the unfortunate Tuzla 7 saga. Cutting the project’s lifelines is the sensible thing to do so that Bosnia and Herzegovina can move on to more environmentally and economically sound energy planning.’

Denis Žiško, Aarhus Centre in Bosnia and Herzegovina – ‘Bosnia and Herzegovina’s energy sector must now do an about-turn. Our decision makers need to speed up sustainable renewables and energy efficiency like they mean it – we can no longer waste time on polluting and expensive projects.’

Boris Mrkela of Just Finance International – ‘The State Aid Council’s decision sheds light on the Chinese leadership’s unwillingness to go through with Xi Jinping’s pledge to stop financing new coal power plants abroad. Bosnian taxpayers deserve a better insight into how their money is spent and the risk with large loans for heavily polluting investments and untransparent business deals such as Tuzla 7.’

Contacts

Pippa Gallop, CEE Bankwatch Network,
pippa.gallop@bankwatch.org
+385 99 755 9787
Skype: pippa.gallop

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

Boris Mrkela, Just Finance International
boris@justfinanceinternational.org
+387 61 90 28 60

Notes for editors:

More information on the Energy Community case can be found at: Case ECS-10/18, https://www.energy-community.org/legal/cases/2018/case1018BH.html

It’s time to put an end to EU funding of fossil gas

Background 

The European Parliament agreed on 21 June 2022 to adopt the European Commission’s proposal to exclude fossil fuels financing via the Modernisation Fund. Following the European Parliament’s decision, the Environmental Council will meet on 28 June 2022 to discuss the Emissions Trading System (ETS) revision file, including the future use of the Modernisation Fund.  

This document lays out the current state of play regarding the funding of fossil fuels under the Modernisation Fund in four recipient countries in central and eastern Europe: Poland, Romania, Czechia and Slovakia. The document shows that large percentages of the funding allocated for the transition to climate neutrality is being used to fund fossil gas projects. This risks locking in the use of fossil fuels in Member States for decades to come. 

Poland 

So far, Poland has received funding in three disbursement cycles for eleven investment schemes worth approximately EUR 2.9 billion. Poland has already requested EUR 590.6 million of this amount.  

Although most of the investment schemes listed above are indeed in line with Modernisation Fund priorities, a key problem is the limited catalogue of potential beneficiaries. Large, mostly state-owned, energy companies are receiving a disproportionate amount of funding.  

There are three particularly controversial schemes supported under the Modernisation Fund in Poland: 

  • Cogeneration for energy and industry 
  • Cogeneration for district heating 
  • The use of alternative fuels for energy purposes 

The two cogeneration investment schemes, worth EUR 440 million (already requested for disbursement: EUR 44.4 million) and EUR 666.7 million (already requested for disbursement: EUR 66.6 million) respectively, allow for the use of fossil gas. This means that nearly 19 per cent of funds disbursed to Poland under the Modernisation Fund are earmarked for investment schemes allowing for the use of fossil gas. Another controversial investment scheme, with budget amounting to EUR 666.7 million (of which EUR 266.4 million has been already requested) is aimed at increasing the use of alternative fuels and opens the door to developing and expanding waste incineration installations. The three schemes mentioned were confirmed by the European Investment Bank (EIB) as priority investments, contributing to the Fund’s goals, even though they allow for the use of fossil fuels and waste incineration (the latter of which is not in line with the ‘do no significant harm’ principle).  

The Modernisation Fund is managed behind closed doors in Poland, and civil society is not included in the planning and preparation of investment schemes. Public consultations are organised only after the schemes are accepted by the EIB. The indicative list of investments for 2022 and 2023 has not been published. In addition, the Ministry of Climate and Environment considers the Fund an ad hoc instrument to quickly direct money to areas in need, confirming suspicions that there is no unified strategy for spending Modernisation Fund resources by 2030. Thus, it is not possible to determine whether new investment schemes allowing funding for fossil gas will be submitted. Much will depend on the outcome of the ETS Directive Revision and whether gas investments will be excluded from the Modernisation Fund. 

Romania 

EUR 1.4 billion has so far been allocated to Romania from the Modernisation Fund. The funds will aim at financing nine priority sectors. 

The European Commission approved the Oltenia Energy Complex’s decarbonisation plan and restructuring plan this year in order to replace existing lignite capacities with fossil gas and reduce greenhouse gas emissions. The Ministry of Energy subsequently announced the submission of two projects to be financed under the Modernisation Fund: the construction of two fossil gas power plants with a total capacity of 1325 megawatts (MW), worth an approximate total of EUR 841 million, with a disbursement from the Modernisation Fund amounting to over EUR 420 million.  

No calls for projects were held, and the bureaucratic structure around the Modernisation Fund in Romania has so far been opaque and unclear. This has made it challenging for private companies to apply for funding. Consequently, the only beneficiaries so far are fully or partially state-owned companies. Seventeen priority projects have been approved in 2022 by the EIB and two non-priority projects by the Investment Committee. 

Slovakia 

Slovakia had a total of EUR 169.5 million disbursed in the second and third disbursement cycles (October 2021 and March 2022) to support:

  • Modernisation of energy systems, including energy storage and energy efficiency improvements – rehabilitation and extension of district heating and cooling networks 
  • High-efficiency cogeneration 
  • Solar and wind power deployment 

All investments thus far have been in the priority sector. 

The process has not been sufficient for achieving a sustainable energy transformation. The lack of transparent governance makes it almost impossible to distinguish which projects align with the REPowerEU objectives. Moreover, district heating and cooling networks and high-efficiency cogeneration plants might include fossil gas support. Their overall allocation is EUR 149.5 million – approximately 88 per cent of the first three disbursement cycles. 

In addition, Slovakia lacks a vision for ambitious modernisation in the district heating and cooling sector without fossil gas and extensive use of biomass. The Slovak National Energy and Climate Plan is based on outdated policy and provides no pathway to carbon neutrality.  

Czechia 

Czechia has received EUR 320 million so far for the first two disbursement cycles:  EUR 202 million for the first disbursement cycle and EUR 118 million for the second disbursement cycle. For the third disbursement cycle, Czechia is expected to receive an additional EUR 520 million. The following schemes have been supported: 

  • Support for photovoltaic power plants with installed capacity up to 1 MW from the Renewable Energy Sources+ Programme 
  • Support for photovoltaic power plants with installed capacity above 1 MW from the Renewable Energy Sources+ Programme 
  • Modernisation of energy sources priority investments from the programme HEAT 
  • Modernisation of energy production priority investments from the programme ENERG ETS 

We have seen gas projects being funded under the current setup in the Czech Modernisation Plan. One example is the HEAT programme, which supports the use of renewable energy sources and low-carbon sources of energy for heating through changing the fuel base from coal to other sources (mainly gas and biomass) and through modernising heat sources and distribution systems. Nine projects received funding from this programme in 2021: two in the priority sector, and seven in the non-priority sector. According to information provided on the State Environmental Funds webpage, out of these seven projects, five are expected to use gas technology in transitioning from coal. All of the non-priority investments are related to combined heat and power (CHP) technology using gas as a fuel. 

In 2022, it is envisaged that another EUR 150 million will finance gas infrastructure. ‘Natural gas’ is directly mentioned in the programmes HEAT and ENERG ETS. Projects that focus on the conversion to ‘natural gas’ with CHP will be from now on considered priority investments. This change in categorisation was approved by the Investment Committee of the EIB. The list of schemes including fossil gas from the third disbursement cycle is as follows: 

  • Modernisation of energy sources to natural gas without CHP; non-priority investments of the programme HEAT (Modernisation of thermal energy supply system) 
  • Modernisation of energy sources to natural gas without CHP; non-priority investments of the programme ENERG ETS (Improvement of energy efficiency and reductions of emissions of greenhouse gases in EU ETS industry) 
  • Modernisation of natural gas energy sources without CHP; ENERG ETS programme 
  • Modernisation of energy sources to natural gas with CHP; priority investment of the programme HEAT (Modernisation of thermal energy supply systems) 
  • Modernisation of energy sources to natural gas with CHP; priority investments of the programme ENERG ETS (Improvement of energy efficiency and reductions of emissions of greenhouse gases in EU ETS industry) 
  • Modernisation of energy sources to natural gas with CHP; priority investments of the programme ENERG ETS (Improvement of energy efficiency and reductions of emissions of greenhouse gases in EU ETS industry) (P‐5 Modernisation of natural gas energy sources with CHP)