Press release

Western Balkans: coal pollution increases due to government failures – new report

Six years since pollution control rules came into force under the Energy Community Treaty, sulphur dioxide emissions from coal plants included in the National Emissions Reduction Plans (NERPs)(2) of Bosnia and Herzegovina, Kosovo, North Macedonia and Serbia were still collectively 5.7 times as high as allowed in 2023. This is a step backwards from 2022, when they were 5.6 times as high.

The highest absolute emitter of SO2 in 2023 was Ugljevik in Bosnia and Herzegovina, with 97,189 tonnes. Its operator, an Elektroprivreda Republike Srpska subsidiary, has spent at least EUR 85 million, financed by a Japan International Cooperation Agency loan, on a desulphurisation unit, but following a series of technical problems, now admits it is not working, partly because it is an ‘economic burden’.

Fellow repeat offender Kostolac B in Serbia had finally started to decrease its SO2 emissions in 2021, but has increased them since then, emitting nearly 5.8 times as much as allowed in 2023. Either the desulphurisation unit, financed by the China Eximbank and installed by the China Machinery Engineering Corporation (CMEC), is not being used much, or it is underperforming.

Dust pollution from NERP coal plants across the region was nearly 1.75 times as high as allowed in 2023 – only a minor decrease from 1.8 times in 2022. Nitrogen oxides pollution also totalled 1.3 times as much as allowed. For the first time, Serbia joined Kosovo and Bosnia and Herzegovina in breaching its NOx limit.

In addition to the NERP breaches, at the end of 2023, the deadline for closing the smallest and oldest plants under the ‘opt-out’ limited lifetime derogation expired. All three countries in the Western Balkans with coal power plants subject to this rule – Bosnia and Herzegovina, Montenegro and Serbia – are now breaching it, as all the plants are still operating.

Montenegro’s Pljevlja plant has been running illegally since late 2020, and in 2022 was joined by Tuzla 4 and Kakanj 5 in Bosnia and Herzegovina and Morava in Serbia. Morava’s operator, Elektroprivreda Srbije (EPS), plans to run it until 2026, along with another opt-out plant, Kolubara A.

The Energy Community Secretariat has opened several infringement-type cases against the countries (3) but not a single government has imposed penalties on the coal plants in question. Nor do they have clear, updated and realistic plans for compliance and/or closure.

Davor Pehchevski, Balkan Energy Coordinator at Bankwatch – ‘Governments and utilities are intent on squeezing every last kilowatt out of their ageing coal power plants, regardless of the health costs. The countries’ national energy and climate plans (NECPs) must set out how and when coal will be phased out, but so far, most do not. In North Macedonia, closures are being delayed with no action being taken to address pollution in the meantime. Utilities can’t have it both ways – coal plants must either close immediately or comply until they close.’

Pippa Gallop, Southeast Europe Energy Policy Officer at Bankwatch – ‘At a time when EU leaders appear confident in Serbia’s ability to manage the environmental impacts of lithium mining, our report provides a sobering reality check about environmental law enforcement in the region. The European Commission’s inability to ensure compliance with EU pollution control legislation puts a major dent in the EU’s image in the region: The new Enlargement Commissioner must tackle this head on.’

Contacts:

Davor Pehchevski,
Balkan Energy Coordinator
davor.pehchevski@bankwatch.org
Tel: +389 71 264 087

Pippa Gallop
Southeast Europe Energy Policy Officer
pippa.gallop@bankwatch.org
Tel: +395 99 755 9787

Ioana Ciută, Strategic Area Leader – Beyond Fossil Fuels
ioana.ciuta@bankwatch.org
Tel: +40 724 020 281

Notes for editors:

(1) The report is available at ComplyOrClose.org

(2) As part of their obligations to comply with the Large Combustion Plants Directive under the Energy Community Treaty, four Western Balkan countries – Bosnia and Herzegovina, Kosovo, North Macedonia and Serbia – have drawn up National Emission Reduction Plans (NERPs) covering the period from 2018 to 2027. Instead of requiring each large combustion plant to comply with the emission limit values from the Large Combustion Plants Directive from 1 January 2018, these plans allow the countries to calculate national emissions ceilings for sulphur dioxide, nitrogen oxides and dust, and to gradually decrease their total emissions from selected pre-1992 large combustion plants until 2027. In 2027, all the plants included in the NERPs will individually need to be in compliance not only with the emission limit values from the Large Combustion Plants Directive, but also with Part 1 of Annex V to Directive 2010/75/EU on Industrial Emissions.

(3) Due to the breaches of the NERP pollution limits, in March 2021 the Energy Community Secretariat opened dispute settlement cases against BiH, Kosovo, North Macedonia and Serbia.

In July 2023, the Energy Community Secretariat took further steps against Bosnia and Herzegovina, Kosovo, and North Macedonia, making a reasoned request to the Energy Community Ministerial Council to make decisions on the cases, which it did in December 2023. The case against Serbia remains open but has not escalated due to ongoing desulphurisation investments.

Due to the breaches of the opt-out provisions, the Energy Community Secretariat also opened dispute settlement cases against Montenegro in April 2021, Bosnia and Herzegovina in October 2022, and Serbia in October 2023.

Reaction to the European Court of Auditors’ report on the green transition in the EU’s recovery fund

The European Court of Auditors’ report on implementation of EU’s recovery fund, published yesterday, casts a new shadow over the contribution of the fund to the green transition. The court identified a series of weaknesses in the design and implementation of the investments for climate and environment. This means that less money is actually spent on the green transition than what is communicated by the Commission and Member States.

These shortcomings include issues with the methodology to track climate investments as well as discrepancies between planning and implementation of the measures. Due to the recovery fund’s legal framework, as well as the Commission’s interpretation of the rules and the practices of Member States in spending the money, it is likely that the fund’s actual investments for the green transition are largely overestimated.

The report shows it is necessary to develop a different approach which more accurately calculates the contribution of the Recovery and Resilience Facility to the green transition, as well as to establish higher standards for implementing climate and environment investments. In particular, this means a stricter approach to applying the ‘do no significant harm’ principle, as well as improved reporting on climate spending.

The Commission will propose the EU’s long term budget post 2027 by mid-2025, and is regularly portraying the recovery fund as a blueprint for future funding streams. The inconsistencies and shortcomings related to climate and environment measures must be properly considered, with the necessary revisions being properly integrated when planning future EU funds.

Christophe Jost, Senior EU Policy Officer says, ‘Climate and environment investments needs are only increasing. So, it is crucial that public funds for the green transition are spent with the highest standards, both in the design and implementation. The European Court of Auditors’ report shows this is not happening with the EU’s recovery fund so the Commission and Member States must revise their practices to ensure that what is communicated corresponds to what is happening on the ground’.

For more information contact:

Christophe Jost, Senior EU Policy Officer
christophe.jost@bankwatch.org

Environmental NGOs demand halt to KfW controversial biomass investments in Serbia

KfW is the main financier of a controversial EUR 32 million Programme for Renewable Energy in South East Europe – Development of a Biomass Market in Serbia, which started in 2017. The programme has already led to the construction of four combined heat and power (CHP) plants in four Serbian municipalities [2], each featuring a wood boiler and a larger fossil fuel boiler. On 14t of May 2024, KfW approved two new contracts for a further EUR 9.9 million in loans for six more wood biomass plants in six further municipalities. [3] The full details of the agreements for the second phase remain undisclosed.

KfW’s financing of wood bioenergy in Serbia is sourced from Federal Ministry for Economic Cooperation and Development (BMZ) funds aimed at reducing greenhouse gas emissions and supporting a just transition. However, the planned investment threatens Serbia’s forests, affecting the diverse wildlife and ecosystems they support, and exacerbates the existing high levels of air pollution. As the letter points out, illegal logging is widespread in Serbia and there is no adequate legal and administrative framework for protecting forests and all the mammals, birds, fungi and other life forms that depend on them.

500 scientists warned in an open letter in 2021 that additional woodharvest for bioenergy “will increase warming for decades to centuries. That is true even when the wood replaces coal, oil or natural gas.” Furthermore, part of that ‘climate finance’ has been used to build new fossil fuel boilers next to wood-fired ones.

Natasa Kovacevic, Campaigner for district heating sector decarbonisation, CEE Bankwatch Network ‘Not enough wood can be harvested to cover Serbia’s plans for biomass district heating without causing serious harm to the countries’ forests. Pouring further money into burning trees for heat means feeding illegal logging activities, exacerbating poor air quality and fuelling the climate crisis. It also crowds out funding urgently needed for more sustainable energy solutions.‘

Zoe Lujic from Earth Thrive, who lives in Serbia, states: “Industrial forest biomass goes against the inherent and inalienable rights of Nature and thus violates the rights of forests and living forest communities, to live and exist, flourish and evolve naturally. We strongly oppose the spreading of industrial forest biomass in Serbia, Balkans and beyond.”

Almuth Ernsting from Biofuelwatch adds: “KfW must discontinue further support for biomass energy in Serbia, re-evaluate funding priorities, and support real heating alternatives such as solar, geothermal, large-scale heat pump deployment, and energy efficiency measures to ensure genuine climate and nature benefits. Mr Sven Giegold, State Secretary in the FederalMinistry for Economic Affairs and Climate Action and Chair of the Board of Directors of KfW needs to intervene to ensure that KfW carries out a review to that effect.”

Jana Ballenthien, forest campaigner with ROBIN WOOD and member of the German network ausgebrannt says: “Germany has a huge responsibility for forest destruction worldwide. It is not the first time that BMZ is financing projects which promote burning forest biomass. We cannot accept that the German development bank KfW becomes an instrument for promoting harm to the climate internationally. A fundamental rethink is needed.”

Contacts:

Natasa Kovacevic
Campaigner for Decarbonisation of the District Heating Sector for the Western Balkans, CEE Bankwatch Network, email. natasa.kovacevic@bankwatch.org , Mob. +382 67 030 033

Almuth Ernsting Biofuelwatch, biofuelwatch@gmail.com, Tel.: +44-79340-227525

Zoe Lujic, EarthThrive, zoelujic@earth-thrive.org Tel.: ++381 64-309-8177

Notes for editors:

[1] Open Letter to KfW – Offener Brief an die KfW

[2] The recently built plants are located in Priboj, Mali Zvornik, Novi Pazar and Majdanpek.

[3] More information about KfW’s Programme for Renewable Energy in South East Europe – Development of a Biomass Market in Serbia can be found at:

https://www.kfw-entwicklungsbank.de/ipfz/Projektdatenbank/Förderung-erneuerbarer-Energien-in-Südosteuropa—Entwicklung-des-Biomassemarktes-in-Serbien-29131.htm and

https://www.german-energy-solutions.de/GES/Redaktion/DE/Publikationen/Kurzinformationen/Technologiefactsheets/2022/fs-serbien.pdf?__blob=publicationFile&v=1

Western Balkans can leapfrog gas for solar and wind to power clean energy transition

Data in the Global Wind and Solar Power Trackers show that Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia collectively hold a combined 23 GW of prospective utility-scale solar and wind capacity, which is 70 per cent more than a year ago and comparable to the prospective capacity in Germany.

While Serbia currently boasts the largest share of operating (444 megawatts, or 29 per cent) and prospective (10.9 GW, or 47 per cent) utility-scale solar and wind capacity in the region, it risks falling behind as Albania, Bosnia and Herzegovina, and North Macedonia have outpaced it in adding new capacity over the past few years.

Yet the region’s operating utility-scale solar and wind capacity accounts for just 7 per cent of the regional electricity mix (1.5 GW). At the same time, only 6% (1.3 GW) of prospective capacity is under construction and very likely to become operational.

In order to unlock this potential, governments need to address barriers associated with planning and permitting, and develop supportive legal frameworks and complementary infrastructure to build up a clean and flexible grid. Renewables zoning should be done with rigorous environmental safeguards, to reduce trade-offs with nature and biodiversity. Local communities should also be actively involved in, and benefit from the projects.

For their part, the EU and U.S. need to embrace solar and wind instead of gas as an energy security measure to help the Western Balkans reach its full clean energy potential.

Zhanaiym Kozybay, co-author of the report and researcher for Global Energy Monitor, said: ‘The Western Balkans are in a unique position because the region isn’t already shackled to gas infrastructure. Wind and solar are low hanging fruit, and choosing renewables is a greener move that makes economic sense. But more political will is needed domestically, and the EU and U.S. should champion the region’s clean energy potential rather than backing expensive, polluting gas.’

Chris Vrettos, project manager at the European Federation of Energy Communities, REScoop.eu, said: ‘This accelerated shift to renewables is a very welcome step, but we must ensure that it is done democratically. Governments should create enabling frameworks to facilitate the growth of energy communities. Project developers should also open part of their projects to shares by local citizens and communities. This would offer a new source of revenue to many households, providing much needed economic prospects especially to communities in ex-coal areas.’

Pippa Gallop, Southeast Europe energy policy officer at Bankwatch, said: ‘After years of over-reliance on climate-vulnerable hydropower, it’s gratifying to see solar and wind finally accelerating in the Western Balkans. The challenge now is to speed up improvements in spatial planning, environmental assessments and public participation, to prevent biodiversity damage and build public support.’

Contacts

Zhanaiym Kozybay

Researcher, Global Energy Monitor

zhanaiym.kozybay@globalenergymonitor.org

Chris Vrettos

Project manager, European Federation of Energy Communities, REScoop.eu

chris.vrettos@rescoop.eu

Pippa Gallop

Southeast Europe energy policy officer, Bankwatch

pippa.gallop@bankwatch.org

About Global Energy Monitor

Global Energy Monitor (GEM) develops and shares information in support of the worldwide movement for clean energy. By studying the evolving international energy landscape and creating databases, reports, and interactive tools that enhance understanding, GEM seeks to build an open guide to the world’s energy system. Follow us at www.globalenergymonitor.org and on Twitter @GlobalEnergyMon.

GEM data serves as a vital international reference point that is being used by agencies including: Intergovernmental Panel on Climate Change (IPCC), International Energy Agency (IEA), United Nations Environment Programme (UNEP), U.S. Treasury Department, and the World Bank. Furthermore, industry data providers such as Bloomberg Terminals and the Economist, and academic institutions like University of Oxford and Harvard University draw on this data.

About Bankwatch

CEE Bankwatch Network is the largest network of grassroots environmental groups in central and eastern Europe and a leading force in preventing dubious public investments that harm the planet and people’s well-being. The banks and funds we watch are often obscure but always important entities that function outside the realm of public scrutiny. Together with local communities and other NGOs we work to expose their influence and provide a counterbalance to their unchecked power. Follow us at www.bankwatch.org and on Twitter @ceebankwatch.

About REScoop.eu

REScoop.eu, the European Federation of Citizen Energy Communities, is a network organization representing over 2,250 European energy cooperatives and their 1,500,000 citizens. The organization’s vision centers around a clean energy transition, where energy is a democratic good, accessible to all. REScoop.eu’s main areas of work include: policy, capacity building, and networking.

About Electra Energy

Electra Energy is a social cooperative founded in 2016 aiming to facilitate the transition to a democratic energy system in Greece and South-East Europe. Through networking, advocacy, and capacity building it’s assisting citizens, SMEs and Municipalities in the creation of community energy projects.

About the Global Solar and Wind Power Trackers

The Global Solar Power Tracker is a worldwide dataset of utility-scale solar photovoltaic and solar thermal facilities. It includes solar farm phases with capacities of 20 megawatts (MW) or more (10 MW or more in Arabic-speaking countries) and medium utility-scale projects down to 1 MW globally. The Global Wind Power Tracker is a worldwide dataset of utility-scale, on and offshore wind facilities. It includes wind farm phases with capacities of 10 megawatts (MW) or more.

Urgent call for central and eastern European countries to raise their NECP climate ambitions

The update of the NECPs comes at a key moment, with the EU recently agreeing to an ambitious package of new rules and targets for the energy, building, and transport sectors. The final submission is a crucial milestone for incorporating these standards nationally and setting the course for the implementation of the European Green Deal.

However, CEE countries are showing varying levels of progress in updating their NECPs. Despite positive strides in some sectors, the region is failing to set itself on a clear path towards decarbonisation. This is reflected in unclear scenarios (due to missing information or data that’s hard to compare with previous plans), attempts to delay coal phase-out dates, over-reliance on fossil gas, and targets falling far below what new EU legislation requires. This will prevent national authorities and stakeholders from planning the needed transformation of the energy system.

Most Member States are expected to submit their plans late, as they rush to finalise their plans and hold last-minute consultations with stakeholders. This gives them some leeway to better align their plans with the EU’s climate targets. It’s imperative that all Member States raise their ambitions by setting clear phase-out dates for coal and gas and investing in sustainable energy solutions.

Johanna Kuld, International Public Finance Campaigner at CEE Bankwatch Network, says: ‘Our latest report (1) provides further evidence that central and eastern European Member States plan to invest heavily in fossil gas infrastructure, despite the urgent need for climate action. These investments – often involving public money – threaten to derail the energy transition in the region and jeopardise the EU’s 2030 greenhouse gas emission targets.’

Christophe Jost, Senior EU Policy Officer at CEE Bankwatch Network, says: ‘Today, greater energy security and competitiveness in the region means higher energy efficiency and renewable energy targets. It’s time to stop wasting money on fossil fuels, which will end up as stranded assets, and instead create a clear plan to unlock public investments for a fair and just transition. This includes making better use of EU funds of which the region is a major beneficiary.’

Contact:

Johanna Kuld

International Public Finance Campaigner

CEE Bankwatch Network

johanna.kuld@bankwatch.org

Christophe Jost

Senior EU Policy Officer

CEE Bankwatch Network

christophe.jost@bankwatch.org

Note to editors

CEE Bankwatch Network, Hooked on gas: Report on the status of national energy and climate plans in central and eastern Europe, June 2024. The report highlights the need for gas phase-out pathways and identifies shortcomings in the current draft NECPs of eight central and eastern European Member States – Czech Republic, Estonia, Hungary, Latvia, Romania, Slovakia, Bulgaria, and Poland.

EU climate fund bankrolling dirty energy expansion

Yesterday, 24 June, in its latest disbursement round, the Modernisation Fund approved nearly EUR 600 million for waste incineration projects in Poland that undermine climate action and Europe’s shift to a circular economy.

Designed to support energy transition primarily in central and eastern Europe, the Modernisation Fund is intended to channel revenues from the EU’s carbon market, one of Europe’s top climate mitigation instruments, into investments in sustainable energy infrastructure.

Yet, by repeatedly allocating this public money to waste incineration and fossil gas projects, governments effectively subvert the EU’s efforts to tackle the climate crisis, reduce waste and improve recycling. Expanding the combustion of garbage might generate energy, but it also requires the addition of fossil gas or diesel to improve combustion and produces toxic waste materials that require expensive, specialised disposal.

Following yesterday’s disbursement decision, gas-fired power plants in the Czech Republic and two fossil gas pipelines in Romania will also receive a total of EUR 23.4 million via the Modernisation Fund. In addition, Slovakia has been allocated EUR 15 million that might be used to develop gas power plants.

According to Bankwatch estimates, as of the end of 2023, the Modernisation Fund has already enabled fossil gas infrastructure and a raft of unsustainable energy projects totalling at least EUR 1.5 billion. In other words, during its first three years of operation, over 10 per cent of the Modernisation Fund’s investments went to fossil gas projects.

In Romania alone, more than half a billion euro from the Modernisation Fund has been spent on fossil gas pipelines and gas-fired power plants, a report released by Bankwatch in April showed [1]. The Romanian gas grid operator Transgaz had previously been lobbying the European Investment Bank (EIB) and the European Commission for Modernisation Fund money for multiple gas projects. One of them, a pipeline intended to feed the Islanita and Turceni power plants, which had already been backed by the Fund, was awarded an additional EUR 8 million in yesterday’s disbursement. The very same project was rejected for financing in the previous disbursement round in December 2023.

Although the EIB-managed Fund is expressly intended to help countries slash greenhouse gas emissions from their energy sectors, the methodology behind the assessments of candidate projects does not even mandate a minimum reduction in the level of emissions.

Bankwatch and other groups have long been calling for the Modernisation Fund to end its support for fossil fuels, among other things, by revising the EU’s Emissions Trading System Directive, which guides the fund’s investments. Yesterday’s disbursement, the first since a new version of the Directive went into force, has seen financing for fossil gas dramatically shrink. But it is too early to call this a trend. Rather, the institutions governing the Modernisation Fund – its Investment Committee, the EIB and the European Commission – need to ensure that no more public money is spent on false solutions and that the Fund is fully dedicated to stepping up Europe’s energy transition.

Morgan Henley, district heating campaigner with CEE Bankwatch Network, says:
‘This latest disbursement of the Modernisation Fund unfortunately again proves that it is not fit for purpose. While the bulk of investments is positive, tens of millions in EU public money are being wasted on fossil gas. Far from modernising national energy systems as intended, it is only entrenching the reliance on fossil fuels, particularly for district heating.’

Krzysztof Mrozek, head of the EU Funds for Climate Programme at Polish Green Network, says:
‘Much of the new investment schemes approved for Modernisation Fund financing in Poland are meant to support what’s needed to catalyse the energy transition, such as energy communities and powering district heating systems with renewables. But once again the Modernisation Fund is keeping Poland hostage to false solutions – one being waste incinerators. In this disbursement cycle, over half a billion euro will be wasted on waste. This is nine times the amount requested by the Polish authorities this year for energy communities.’

Raluca Petcu, fossil gas campaigner with Bankwatch Romania, says:
‘While most of the financing is important for the transformation of the Romanian power system, questionable projects are still being approved that will only deepen Romania’s long-term dependence on fossil gas. The financing of the gas pipeline for Turceni and Ișanlița, which is in reality two separate projects, comes after the Modernisation Fund already backed the two new gas power plants with EUR 420 million in 2022. Instead of supporting residential energy efficiency and the development of energy communities, which are non-existent in Romania, the national government is determined to pump billions in public money into fossil gas that will jeopardise our future.’

Notes to editors:

[1] The Modernisation Fund: An open door for fossil gas in Romania https://bankwatch.org/publication/the-modernisation-fund-an-open-door-for-fossil-gas-in-romania

For additional information, please contact:

Morgan Henley
District heating campaigner, CEE Bankwatch Network
morgan.henley@bankwatch.org
+420 605 798 716

Raluca Petcu
Fossil gas campaigner, Bankwatch Romania
raluca.petcu@bankwatch.org
+40 770 209 187

Krzysztof Mrozek
Head of the EU Funds for Climate Programme, Polish Green Network
krzysztof.mrozek@bankwatch.org
+48 501 793 296

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