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NGOs hail Chinese banks’ exit from Bosnia’s controversial Ugljevik III coal plant project

The future of the planned 700 MW Ugljevik III coal power plant in Bosnia and Herzegovina is in doubt after one of the project companies, Sunningwell International Limited, confirmed (1) that Chinese bank loans will not be available for the project.

The news comes after China pledged to not build new coal-fired power plants abroad at both the UN General Assembly in September and the EU-China Climate Dialogue in October 2021 (2)(3). Sunningwell’s statement was issued in response to an article in The Diplomat by Just Finance International (4), questioning how China’s commitment would be put into practice in reality.

A concession to build and operate the plant was issued by the Republika Srpska authorities in 2013 to Comsar Energy, owned by Russian billionaire Rashid Sardarov. But the project has progressed slowly, with its environmental permits being cancelled twice, in 2017 and 2019, following legal complaints by the Center for Environment from Banja Luka being upheld.

Despite Comsar’s failure to build the plant, in 2020 the Republika Srpska authorities allowed the project to move ahead with a capacity increase of 100 MW, and in January 2021 they increased the concession period to 44 years (5). This was followed by an announcement (6) in June 2021 that an engineering, procurement and construction contract (EPC) for the project had been signed by Sunningwell and the project’s EPC contractor, China National Electric Engineering Company (CNEEC).

Majda Ibraković of Center for Environment in Republika Srpska, said, “Obtaining permits for Ugljevik 3 is still ongoing, and there have been numerous negative comments on the environmental impact assessment for this project. We appeal to the Government of Republika Srpska to realistically consider all the negative consequences of the project and refuse to issue any permits, because this investment is absolutely unclear, uncertain and finally very harmful for Republika Srpska entity and the country itself.“

Wawa Wang, director of Just Finance International, said, “The decision by Chinese banks to no longer provide financing for the Ugljevik III project demonstrates China’s rethinking of alternatives to coal for the region: since 2014 China has singlehandedly provided debt financing for new coal projects in the Balkans that OECD financiers consistently walked away from. It remains to be seen whether China’s 2021 pledge to end its overseas coal project is serious – especially as Chinese state-owned ​​​​enterprise (SOE) CNEEC, an EPC contractor for the project, and other SOEs continue to pursue problematic coal projects in Southeast Europe and globally. Chinese SOEs must exit these planned coal projects for its 2021 pledge to have true climate saving impacts.”

Pippa Gallop of CEE Bankwatch Network, said, “This project has been plagued with legal violations right from the outset and the Republika Srpska Concession Commission has confirmed that the concession-holder hasn’t fulfilled its obligations. It’s time to end this charade once and for all, admit the plant won’t be built, and turn towards sustainable forms of renewable energy.”

Contacts

Majda Ibraković, Center for Environment

majda.ibrakovic AT czzs.org  

+387 51 433 140

Wawa Wang, Just Finance International

wawa AT justfinanceinternational.org  

+45 81949469

Pippa Gallop, CEE Bankwatch Network

pippa.gallop AT bankwatch.org 

+385 99 755 9787

Notes for editors

(1) Sunningwell’s statement 

(2) China’s statement at the United Nations General Assembly in New York 

(3) EU-China Joint Communiqué following the Second EU-China High Level Environment and Climate Dialogue 

(4) Just Finance International’s article in The Diplomat   

(5) Capital.ba: Government extended Serdarov’s concession for Ugljevik III to 44 years

(6) CNEEC announcement of 24 June 2021 

Western Balkan countries need a dedicated fund to ensure a just energy transition – new report

Most Western Balkan countries have long relied on coal for their electricity. But as the international community mobilises to tackle the climate crisis, coal is becoming uneconomic and the region’s antiquated power plants will have to close in the coming years. Also, new EU climate policies designed to make coal power more expensive and ultimately obsolete – from the EU’s 2030 climate targets to the planned Carbon Border Adjustment Mechanism – will affect coal-based electricity imported from the Western Balkans, and lead to a gradual reduction in coal production in the region. 

Yet, a transition away from coal in the region – in itself a major development opportunity – needs to be done in a managed, inclusive and fair way, particularly involving those set to be most affected by it, namely coal workers and communities neighbouring mines. Such a process also requires a significant mobilisation of public resources.

The Green Tank and Bankwatch’s new report, titled A Just Transition Fund for the Western Balkan Countries, underlines the need for a Just Transition Fund for the Western Balkans and uses a specially developed model to explore how such a Fund could be allocated in the fairest possible manner.

The proposed allocation model employs five criteria which quantify each country’s dependence on coal and oil, the climate ambition of each country as reflected in known phase-out commitments, the pollution levels resulting from coal use, and the financial capacity of each country to cope with the challenges of the transition away from fossil fuels. Six coal phase out scenarios were analysed using the model, as well as a variety of different weightings for the allocation criteria.

The main outcome of the analysis is that committing to an early coal exit will significantly increase the share of the fund a country will receive. In particular:

  • Serbia benefits the most from an early coal phase-out date in five out of the six scenarios analysed, receiving as high as 45.4 per cent of the Fund. 

  • Bosnia and Herzegovina (BiH) may receive up to 34.6 per cent and surpass even Serbia’s share in the scenario in which BiH phases out coal by 2030, and Serbia and Kosovo continue with the coal-based electricity model until 2050 and 2040, respectively.

  • Kosovo may receive up to 23.8 per cent provided it commits to a coal phase out by 2030.

  • The fact that North Macedonia has committed to a 2027 coal phase-out date raises its share up to 13 per cent of the fund, almost double the share of 7.36 per cent it would have received had it decided to prolong its dependence on coal until 2050.   

  • Montenegro could potentially almost triple its share to almost 4 per cent of the fund if it decides to retire its only coal plant, currently operating way beyond its 20,000 legal operating hours, by 2022 instead of its pledged phase-out date of 2035.


Furthermore, the differences between each country’s smallest and largest potential shares for the six coal phase-out scenarios increase when the transition speed criterion has a larger weight, whereas accounting for the financial capacity of the Western Balkan countries in the design of the Just Transition Fund favours the weaker countries (Kosovo, BiH and Albania).

‘To avoid the huge challenges of an abrupt transition such as the one currently taking place in Greece’s lignite regions, Western Balkan countries should start to plan the transition of their coal regions immediately. The EU should provide both technical and financial support in developing a truly Just Transition Fund for the Western Balkans, whereas the transition speed should definitely be included among the allocation criteria to correctly assess the urgency of the transition in each country’, stated Nikos Mantzaris, Senior Policy Analyst of the Green Tank, an Athens-based environmental think tank.
 
‘The transition away from fossil fuels in the Western Balkans is coming much faster than governments expect, and a Just Transition Fund is much needed to support this process. This winter, much of the region has been struggling with power plant failures and coal supply difficulties. Antiquated coal power plants in North Macedonia, Serbia and Kosovo went offline, underlining the need to speed up investments in energy efficiency measures and sustainable forms of decentralised renewable energy generation,’ stated Ioana Ciuta of the CEE Bankwatch Network.

Notes to editors:

The full text of the report “A Just Transition Fund for the Western Balkan countries” is available here.

Contact info:

The Green Tank: Ioli Christopoulou, info@thegreentank.gr, +30-210-7233384, +30-6937-935031

CEE Bankwatch Network: Ioana Ciuta, ioana.ciuta@bankwatch.org; +40724020281

EU bank freezes funding for major Budapest Airport expansion over sweeping violations of environmental norms

Even before the airport development has commenced, nearly a million people living around the airport have long been suffering air pollution and unbearable noise, including some houses damaged by vibration and air turbulence. The Complaint Mechanism’s investigation revealed that no environmental impact assessment has been done for the project, and found that the local residents have been deprived of their right to be consulted on the plans to expand the airport and on measures to mitigate the impacts.

In December 2018, the EIB granted the airport operator a EUR 200 million loan intended for “the construction of the new Pier B, a possible new Terminal 3, the renewal of the airfield ground lighting, the construction of a new cargo city and a range of other landside and airside enhancements,” as well as an “upgrade of the baggage handling system,” according to the Bank’s project documentation [1]. These works are ultimately meant to allow for a 50% increase in passenger traffic within the next eight years. The loan was also backed by a guarantee from the EU budget under the European Fund for Strategic Investments.

Released in late 2021, the Complaint Mechanism’s investigation report [2] was the result of a complaint submitted by two Hungarian civil society groups, the National Society of Conservationists – Friends of the Earth Hungary (MTVSZ) and the Association for Civilized Air Transport, with support from CEE Bankwatch Network. Following the Complaint Mechanism’s recommendation, the disbursement of the loan has been discontinued at least until the EIB receives the decision of the Hungarian authorities on whether a full environmental impact assessment is required for the expansion of the airport. A proper assessment should account for the cumulative impacts of the different project components. The investigation report also recommended measures to ensure fair stakeholder involvement and proper information disclosure, including mapping again all those who stand to be affected by the airport expansion and establishing a grievance mechanism for the project.

In addition, the investigation report confirmed allegations raised by the civil society groups regarding failures within the EIB in screening the project’s compliance with the Bank’s own policies, and in informing the public about the project and its implications. According to the report, the EIB’s due diligence for the project lacked basic necessary documentation and therefore had no grounds to conclude it complies with the Bank’s standards. Following the findings of the EIB’s Complaint Mechanism investigation, civil society groups now urge the Hungarian authorities to ensure noise levels from the airport are in line with EU and WHO standards, and to support the residents most affected, including through offering to buy out homes in the loudest areas and subsidising full insulation in houses further afield.

Teodóra Dönsz-Kovács, campaigner with the National Society of Conservationists – Friends of the Earth Hungary (MTVSZ), said: “The Hungarian government and the airport operator should take joint responsibility for addressing the impacts of the current operation of the airport, regardless of whether the government buys the airport, as it intends, or not. The local residents are already suffering.  Beyond the case of the Budapest Airport, if we take the climate goals and ecological limits seriously, such developments should be properly vetted by investors, authorities and the EIB.”

Zoltán Frik, President of the Association For Civilized Air Transport, commented: “The Complaint Mechanism’s investigation report gives new hope and impetus to the local residents to continue their struggle. Therefore, it is of utmost importance that the issues identified in this report are urgently addressed – the environmental impacts and the climate footprint of a larger airport must be properly assessed, and neighbouring communities need to have a say on both the investment and remedy measures.”

Anna Roggenbuck, Policy Officer with CEE Bankwatch Network, said: “The EIB is currently revising its environmental and social policies, and a new policy could be adopted within weeks. The case of the Budapest Airport shows that the EIB cannot take for granted that projects in the EU always meet the Bank’s environmental and social standards. The Complaints Mechanism rightly suggested that for such complex projects the Bank should seek assistance of environmental and social experts including those who know the local language in order to appropriately assess the project and conducts monitoring.”

For additional information please contact:

Teodóra Dönsz-Kovács
National Society of Conservationists – Friends of the Earth Hungary (MTVSZ)
donsz.kovacs.teodora@mtvsz.hu +36304580730 

Anna Roggenbuck Policy Officer,
CEE Bankwatch Network
+48 509970424 annar@bankwatch.org 

Zoltán Frik  (Hungarian speaking) Acting President,
Association for Civilized Air Transport
+36202681386 egyesulet@kulturaltlegikozlekedesert.hu 

Notes

[1] https://www.eib.org/en/projects/pipelines/all/20160605 

[2] https://www.eib.org/attachments/complaints/sg-e-2020-03-budapest-airport-conclusions-report-ws-26-11-2021.pdf 

[3] Bankwatch and MTVSZ published an analysis in October 2021 https://bankwatch.org/publication/trouble-in-the-air-eib-ignores-environmental-and-social-burdens-caused-by-budapest-airport-expansion 

Secret negotiations and fossil fuels plague planning of EU’s just transition away from coal

A new briefing by CEE Bankwatch Network [1] finds that access to the latest, updated versions of the plans and proposed amendments has been limited, especially in Lublin, Poland, Hunedoara, Romania and Slovakia, where virtually no access has been granted to the drafts.  

The Bankwatch briefing outlines the state of play in the Commission-led process in seven countries – Estonia, Poland, Czechia, Slovakia, Hungary, Romania and Bulgaria – and the degree to which the different plans adhere to the EU’s ‘partnership principle’ and the recent Commission Staff Working Document on the Territorial Just Transition Plans.  

While the partnership principle mandates access to information and a high level of transparency throughout all phases of the process, a huge gap persists in the access provided to stakeholders across the EU’s coal regions. 

In addition to a lack of information, overall ambition to address the challenges posed by climate change have been underwhelming: fossil fuels projects have not been excluded entirely, a lack of clarity persists about the date by which coal will be phased out, and many of the plans only comply with outdated targets set in national energy and climate plans.   

Jens H. Schreuder, EU Just Transition Policy Officer with CEE Bankwatch Network, said, ‘The Just Transition Mechanism is a historical opportunity to transform the European coal regions that need it the most. That is why it is so important that the planning process is transparent and reflects real ambition. If we fail to achieve that now, it will already be too late.’ 

Miłosława Stępień, Just Transition Coordinator with CEE Bankwatch Network, said, ‘Only a few years ago it seemed impossible that any of these regions would be discussing a fossil fuel phase out, so these plans are already a huge step forward. But there is still much work to be done. We must increase ambitions on climate action and help these regions transition without leaving anyone behind. This can only happen if the process is transparent and inclusive.’ 

 

For more information contact 

Jens H. Schreuder, EU Just Transition Policy Officer, CEE Bankwatch Network  

Email: jens.h.schreuder@bankwatch.org 

Miłosława Stępień, Just Transition Coordinator, CEE Bankwatch Network 

Email: miloslawa.stepien@bankwatch.org 

Notes 

[1] The briefing is the fifth in a series of updates tracking the Territorial Just Transition Plans that were initiated by the European Commission with the establishment of the Just Transition Mechanism in January 2020. 

Bern Convention to investigate hydropower damage to the upper Neretva River in Bosnia and Herzegovina

The EFT Group’s 35 MW Ulog plant, with a 53-metre high dam, is already being built by China’s Sinohydro. Construction works were already halted once in 2013 after two fatal accidents caused by landslides (2), but resumed in 2020. A series of seven smaller plants is also planned further upstream by local company Marvel d.o.o. and will turn most of the upper course of the river – a section of about 38 kilometres – into a series of dams, pipes and reservoirs. 

The complaint, submitted by the Center for the Environment, Aarhus Center Sarajevo, Riverwatch, Euronatur, ClientEarth and CEE Bankwatch Network, alleges that the Bosnia and Herzegovina authorities failed to protect the upper Neretva – part of the Convention’s Emerald Network – by permitting hydropower development along its entire length. 

The Emerald Network is an ecological network consisting of natural areas of special interest for protection, located in the member states of the Bern Convention. Due to its uniqueness, the upper course of the Neretva River had already been put forward for protection within this network in 2005.

Although the environmental impact assessments for these projects identified several significant species such as otters and crayfish being present, the government of the Republika Srpska Entity concluded, without any evidence, that these projects would not have a negative impact on the environment and could be implemented. 

“Research confirms that the area around the source and upper course of the Neretva is an extremely well-preserved ecosystem. Muddy water due to the construction and operation of the Ulog hydropower plant would destroy the most important Balkan populations of marble trout, soft-mouthed trout, and the endemic Neretva loach downstream, while the seven plants upstream would threaten the survival of the only brown trout Adriatic haplotype. The upper Neretva would completely change from a river into a series of reservoirs and pipelines”, said Jelena Ivanic, coordinator of the Save the Blue Heart of Europe campaign in Bosnia and Herzegovina from the Center for the Environment. 

“Bosnia and Herzegovina, as a signatory to the Bern Convention, is committed to preserving wild flora and fauna and their natural habitats, yet Republika Srpska is blundering ahead by allowing the destruction of the entire upper Neretva,” she added.

 

The Save the Blue Heart of Europe campaign aims to protect the most valuable rivers in the Balkans from building hydropower plants. The campaign is coordinated by the NGOs Riverwatch and EuroNatur, and is being run jointly with partner organizations from the Balkans. 

 

Contacts

Jelena Ivanic, Center for Environment, jelena.ivanic@czzs.org +387 51 433 140

Andrey Ralev, CEE Bankwatch Network, andrey.ralev@bankwatch.org +359 884268552

Anja Arning, EuroNatur Foundation, anja.arning@euronatur.org, +49 7732927213

Bianca Vergnaud, ClientEarth, bvergnaud@clientearth.org, +32 471 88 70 95

 

Notes for editors

  1. Bern Convention on the Protection of European Wildlife and Natural Habitats 
  2. For more details see: https://bankwatch.org/press_release/complaint-on-bosnia-herzegovina-dams-on-neretva-river-submitted-to-the-bern-convention

This publication was produced in collaboration with EuroNatur and RiverWatch in the frame of the Save the Blue Heart of Europe campaign, with financial support from MAVA Foundation.

Loan guarantee for Bosnia’s Tuzla 7 coal plant confirmed as illegal

A guarantee for a EUR 614 million loan from China Eximbank to build the 450 MW Tuzla 7 coal plant was cleared by the State Aid Council of Bosnia and Herzegovina in July 2018. 

Following a complaint submitted by the Aarhus Center Sarajevo and Bankwatch in September 2018, the Energy Community Secretariat twice advised the Federation of Bosnia and Herzegovina (FBIH) Parliament not to approve the guarantee, after its examination of the case indicated that it would be in breach of EU law.

However, the FBIH parliament’s House of Representatives and House of Peoples defied the warnings and approved the guarantee on 7 March and 1 April 2019. 

Under the Energy Community Treaty, Bosnia and Herzegovina must follow EU rules on subsidies in the energy sector. Among other things, in most cases state guarantees may only cover up to 80 percent of the total loan amount.

The guarantee for Tuzla 7, however, covers 100 percent of the loan, plus interest and other associated costs. There are circumstances in which covering the whole loan amount is allowed, but the relevant conditions were not fulfilled in this case.

Since the guarantee was approved, the project has been hit by further setbacks, in particular the withdrawal of GE as an equipment supplier. The lead contractor, China’s Gezhouba Group, has offered alternative Chinese technology which the Federation of Bosnia and Herzegovina authorities are now considering.  

‘The loan guarantee for Tuzla 7 has been confirmed as illegal and Gezhouba cannot fulfil its contract. What more do Bosnia and Herzegovina’s decision-makers need to make them drop this fantasy project?’ said Denis Žiško of the Aarhus Centre Tuzla.

‘Fears about Bosnia and Herzegovina’s electricity supply are overblown. If we start reducing our massive energy wastage and invest more in solar and wind, Tuzla 7 can easily be substituted’, he added.

Bosnia and Herzegovina’s independent transmission system operator has confirmed (1) that even if Tuzla 7 is not built, the electricity supply will not be endangered until at least 2030, and even then only if electricity consumption is at the higher end of what is expected.

‘Tuzla 7 is a relic from a bygone age. Just like Slovenia’s notorious Šoštanj unit 6 (2), it would end up as a liability for Bosnia and Herzegovina due to the unrealistically low coal prices used in the feasibility study and the inevitable introduction of carbon pricing’ (3) said Pippa Gallop of CEE Bankwatch Network. 

 

For additional information please contact:

Denis Žiško

Aarhus Centre, Tuzla

denis.zisko@ekologija.ba

Skype: denis.zisko

Mob: +387 61 140 655

Pippa Gallop

CEE Bankwatch Network

pippa.gallop@bankwatch.org

Skype: pippa.gallop

Mob: +385 99 755 9787 

 

Notes for editors

1. BIH Independent System Operator, Indicative Generation Development Plan 2022-2031, p.43 https://www.nosbih.ba/files/2021/04/20210402-lat-Indikativni-plan-razvoja-proizvodnje-2022-2031.pdf

2. Around a decade ago, despite warnings from NGOs and others, Slovenia made the mistake of starting to build the Šoštanj 6 lignite unit, which ended up twice as expensive as planned, with 12 people being charged with offences including money laundering.  The unit started commercial operations in 2016, and every year since then, the Šoštanj plant has made huge losses. In April it was reported that this year’s losses may top EUR 150 million. https://balkangreenenergynews.com/eles-ceo-slovenia-must-set-coal-phaseout-date-as-soon-as-possible/

3. For more on the feasibility study issues, see for example https://unearthed.greenpeace.org/2020/01/14/china-belt-and-road-coal-plants-in-bosnia-serbia-balkans/