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MEPs gas a green EU budget by voting for fossil fuels in Just Transition Fund

Proposed in January 2020 by the Commission to support a sustainable phase-out from fossil fuels in Europe’s carbon-dependent regions, the fund was set to be fossil free after EU heads of state backed the Commission’s proposal. MEPs later walked back on this commitment in July by voting in favour of funding for fossil gas.

Raphael Hanoteaux, EU funds policy officer for CEE Bankwatch Network, said “This vote sends a troubling signal as the EU continues to hammer out the details for the rest of the EU Budget, with 900 billion euros at stake in the Cohesion Policy and the Recovery and Resilience Facility. The full exclusion of fossil fuels across all funds is crucial in order to concentrate on a sustainable and just transition and recovery.”

“By allowing fossil gas in the fund, MEPs have condemned Europe’s fragile regions to decades more polluting energy. This hampers the EU’s prospects to reach carbon neutrality by 2050, and shows that MEPs are still unable to walk the talk when it comes to closing the European Green Deal, especially now that the Commission has announced a new target of 55 per cent for greenhouse gas emissions reduction by 2030.”

For more information contact

Raphael Hanoteaux, EU funds policy officer
CEE Bankwatch Network
E-mail: raphaelh@bankwatch.org

EU-China leaders’ meeting: EU must do more to tackle legal breaches by Chinese companies in Europe, say civil society organisations

Chinese SOEs have been particularly active in southeast Europe in recent years. Contracts have been signed to build four new coal plants, rehabilitate two coal plants, investments in heavy industries and build other infrastructure such as motorways and railways At least three more memoranda for new coal plants have been signed (2). Chinese companies have also bought the Smederevo steel plant and the Bor copper mine, and are planning to build a tyre factory in Zrenjanin, all in Serbia.

Despite Chinese policy guidelines (3) requiring compliance with host country legislation, most of the projects breach national and EU environmental, procurement and State aid law.

For example:

  • None of the projects are in line with the latest EU pollution control standards, the so-called LCP BREF, from 2017.
  • Most have very weak environmental assessment studies, and the Drmno mine expansion in Serbia had none at all.
  • The Tuzla 7 project in Bosnia and Herzegovina has become notorious due to a Federal loan guarantee that is now subject to an infringement procedure by the Secretariat of the Energy Community Treaty due to State aid violations. 
  • Due to a blanket exemption in a 2013 agreement between Serbia and China, Chinese projects in Serbia do not undergo tender procedures (4), in clear violation of EU procurement rules which undermine the rule of law and Serbia’s ability to ensure value for money. 

“Quite often we hear that these are win – win projects. Unfortunately this is true only for the Chinese side that is producing and exporting all of the equipment and using Chinese workers to install it. For BiH side this is more of a lose – lose case, since we will end up with a huge debt and a stranded asset“, stated Denis Žiško from the Center for Ecology and Energy in Tuzla, Bosnia and Herzegovina, who has been closely monitoring the Tuzla 7 and Banovići coal power projects. 

Chinese SOEs and media have often asserted (5) that new coal-fired power plants contribute to environmental and social improvements in already-polluted locations. By approving its companies to undertake coal projects in Europe, China fails to deliver its pledge to combat climate change in an understanding reached with the EU at the 20th EU-China Summit (6).

Mirko Popović of the Renewables and Environmental Regulatory Institute (RERI) in Serbia finds this highly unlikely: “it seems that the recent installation of non-functional desulphurisation facilities in Kostolac thermal power plant, and significant increases of air pollution in Bor and Smederevo, are examples of Chinese investment business models and their relations with political actors in Serbia. The lack of environmental law enforcement and transparency in these cases is worrisome and will significantly undermine Serbia’s EU accession agenda“, he stated.

“The need to limit climate change clearly means that no more fossil fuel infrastructure can be built anywhere. Southeast European governments bear the primary responsibility for poor decision-making and enforcement on Chinese-built projects, but they will ultimately create problems for the whole EU as the accession countries struggle to comply with EU law,” warned Zvezdan Kalmar from CEKOR, Serbia. 

The groups are asking the EU to: 

  • Clearly tell China to stop building new coal plants in EU and accession countries
  • Set this and compliance with EU law as binding conditions in the comprehensive investment on trade (CAI) currently being negotiated with China. 
  • Improve law enforcement in accession countries, including by strengthening the Energy Community Treaty to enable penalties to be issued. 
  • Introduce a carbon border tax for electricity to help reinforce the message that coal is no longer economic.

Contacts:

Wawa Wang, Senior Advisor, VedvarendeEnergi. Phone: +45 81949469 E-mail:ww@ve.dk  

Denis Žiško, Energy and climate change program coordinator, Center for Ecology and Energy, Tuzla, E-mail: denis.zisko@ekologija.ba, Tel: +387 61 140 655

Mirko Popović, Programme Director, RERI – Renewables and Environmental Regulatory Institute, mirko.popovic@reri.org.rs, Tel: + 381 11 451 45 28

Zvezdan Kalmar, Coordinator for energy, climate change, and monitoring international financial institutions, CEKOR, kalmar.zvezdan@protonmail.com, +381655523191

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

Notes for editors:

(1) This press release is issued by the following groups:

  • Center for Ecology and Energy Tuzla, Bosnia and Herzegovina
  • CEE Bankwatch Network, Czech Republic
  • Climate Action Network Europe
  • Renewables and Environmental Regulatory Institute – RERI, Serbia
  • Sustainable Energy (VedvarendeEnergi), Denmark
  • CEKOR, Center for ecology and sustainable development, Serbia 
  • Center for Environment, Bosnia and Herzegovina
  • Eco-team,Montenegro

(2) These projects include:

Contracts signed:

Memoranda of understanding signed:

For more on Chinese involvement in energy sector projects see a joint briefing by Bankwatch and VedvarendeEnergi, here: https://bankwatch.org/publication/chinese-built-coal-projects-in-europe and ve.dk/chinese-built-coal-projects-in-europe/  

(3) The Green Credit Guidelines (2012) and the Green Investment Principles for the Belt and Road Initiative (2019) signed by 30 international and Chinese financial institutions, including China Development Bank and the Export-Import Bank of China.The signatories pledged to embed sustainability into corporate governance, set up robust systems, designate competent personnel, and maintain acute awareness of the potential impacts of investments and operations on climate, the environment and society in the BRI region.

(4) On 20 August 2009 the Serbian government signed a Memorandum of Understanding with the Chinese government on economic and technical co-operation in the field of infrastructure. Annex 2 to the 2009 agreement was signed on 26 August 2013. This annex includes a clause in Article 5 that (our translation): “Agreements, contracts, programmes and projects carried out in accordance with Article 4 of the Agreement on the territory of the Republic of Serbia do not carry an obligation to publish a public tender for carrying out investment works and delivery of goods and services, except if it is otherwise specified in the commercial contract from paragraph 4 of this Article.”

(5) For example at: http://www.xinhuanet.com/power/2019-08/22/c_1210251184.htm

(6) See Joint Statement of the 20th EU-China Summit at: https://eeas.europa.eu/delegations/china_en/48424/Joint%20statement%20of%20the%2020th%20EU-China%20Summit

Georgia’s billion dollar dam violates international standards

After more than two years of investigation, the Nenskra hydropower plant (HPP) project in Georgia was found non-compliant with the standards of two international financial institutions.1

The project does not meet the banks’ requirements in the following areas of human rights and environmental protection: indigenous people’s rights, the protection of cultural heritage, gender issues, assessment and management of environmental and social impacts, information disclosure and engagement of local communities and other stakeholders.

The investigation of the long-debated Nenskra HPP, planned to be constructed in the Svaneti mountains of Georgia, was launched after complaints2 were submitted to the EBRD and EIB in 2018 by CEE Bankwatch Network, Georgian non-governmental organisation Green Alternative, and community representatives from the potentially affected areas. 

Both the EBRD and EIB have approved loans for the Nenskra HPP project, in the amount of USD 214 million and USD 150 million respectively. However, neither has signed the final loan contracts yet. The Asian Development Bank and the Asian Infrastructure Investment Bank are also involved in the project and are currently considering loans totalling USD 414 million.  

The news that the project fails to comply with international standards comes as yet another controversy for the 280 MW hydropower plant project, which has already been the subject of years of opposition from local communities, warnings about its financial liability by IFIs, and abandonment by a major construction contractor, to name just a few. 

The Nenskra HPP is intended to be one of the largest dams in Georgia’s plans for massive hydropower installations in the Upper Svaneti region. JSC Nenskra, a joint venture of Korea Water Resources Corporation and the Georgian State’s Partnership Fund is the Nenskra HPP project promoter. The HPP project was also financed by Korean Development Bank.  

Anna Roggenbuck, EIB Policy Officer at CEE Bankwatch Network said: ‘ EIB Complaints Mechanism confirmed our allegations that this project simply violates the rights of the impacted community of Svans who risk their livelihood and culture being swept by the Nenskra project. The Mechanism confirmed that the project has been improperly implemented from the very beginning starting with the problematic consideration of the project’s alternative option. It is hard to imagine how the Bank could now effectively prompt the necessary corrections. Withdrawing public financing for this project is the only right way in this case.’

David Chipashvili, International Financial Institutions Monitoring Program Coordinator at Green Alternative: ‘I highly appreciate that IPAM [the EBRD Independent Project Accountability Mechanism] has found a number of areas of non-compliance, especially regarding lack of assessments of the project alternatives. Unfortunately, the EBRD and EIB have promoted the project without proper technical and financial justification, which can have not only irreversible environmental and social impacts, but also drastic financial impacts too, as other IFIs indicated earlier. In 2017 and 2018, the International Monetary Fund and the World Bank revealed assessments that pointed at specific threats to the fiscal stability of Georgia’s budget by incurring over USD 1.8 billion in fiscal costs between 2022 and 2041. Therefore providing public funding for the project is not reasonable and needs to be cancelled’. 

For more information contact:

David Chipashvili, Green Alternative, Bankwatch Campaigner for Georgia
Email: dchipashvili@greenalt.org

Anna Roggenbuck, Bankwatch, EIB Policy Officer
Email: annar@bankwatch.org

Rusudan Panozishvili, Green Alternative, Bankwatch Media and Community Coordinator
Email: panozishvili@greenalt.org

1 Nenskra HPP Compliance Review Report EBRD Project Complaint Mechanism Case 2018/08 July 2020; CONCLUSIONS REPORT 7 February 2020,Nenskra HPP Complaint SG/E/2018/32 Georgia

2 Request to the EBRD’s PCM on the Nenskra HPP project, May 30, 2018; The complaint to Complaints Mechanism of the European Investment Bank , June 1, 2018

 

Illegal lignite mine expansion in Bosnia and Herzegovina prompts NGO formal complaint

An Environmental Impact Assessment (EIA) is a legal prerequisite under the Energy Community Treaty for energy-related projects. Such analysis is intended to identify the extent of any potential environmental damages associated with the project, and instruct how they can be avoided or mitigated. But, as the complaint argues, RiTE Gacko, a subsidiary of entity-owned utility Elektroprivreda Republike Srpske (ERS), has been progressively expanding the Gacko lignite mine over the past three years without any such assessment.

Only earlier this year did the mine operator commence an EIA process for the mine’s Central Field. The EIA study was released in March and public consultations started in May but the mining works have been going on undisturbed.

In the complaint, the Center for Environment demands the mining be stopped immediately and that a detailed expert analysis be undertaken to determine the environmental damage that has already been done. As the EIA study itself admits, several kilometres of the River Mušnica have already been rerouted, and considerable parts of the mine area have already been exploited, something which is visible in satellite images.

In January 2018 the Ministry of Spatial Planning, Construction and Ecology issued a screening decision, instructing RiTE Gacko to carry out an EIA process for the opening of the Central Field of the Gacko mine. But satellite images document the expansion already five months before the screening decision was issued. The mine operator’s website also shows that the works are at an advanced stage and states that they should be finished by the end of 20201. But this only became clear after the EIA process had started in March and the EIA study made public.

Alerted by the Center for Environment in April, the environmental inspectorate made a field inspection, took note of the situation and issued two misdemeanour fines to the mine operator, for carrying out works without a valid environmental permit. The fines amount to EUR 1500, the minimum prescribed by the Law on Environmental Protection. The Inspectorate did not order stopping the illegal works.

The complainants, supported by Bankwatch, also seek that the Law on Environmental Protection, currently under revision in Bosnia and Herzegovina’s Serb entity, be changed in order to  include effective, proportionate and dissuasive penalties. 

“The fact that RITE Gacko has been illegally mining coal for so long and received such low fines, is an example of how the impact on the environment is being mistreated by Bosnian authorities. This is a severe and persistent breach of environmental legislation and we expect the energy utility and the mine operator (at least) to pay for this wrongdoing proportionally to the environmental damage they caused and to stop knowingly destroying the natural values of Gacko’s environment”, commented Majda Ibrakovic, climate and energy campaigner at Center for Environment.

“What is going on now in Gacko defeats the purpose of evaluating environmental impacts. There is now no way to understand the baseline situation before the expansion, nor is any public consultation meaningful when significant damage has already been done. With today’s complaint we hope that the Energy Community will prompt the authorities in Republika Srpska to suspend the works and take all measures to protect the environment and the people of Gacko”, said Ioana Ciuta, energy coordinator at CEE Bankwatch Network.

For additional information please contact:
Majda Ibrakovic, Center for Environment
majda.ibrakovic@czzs.org
Skype: live:ibrakovic.majda

Ioana Ciuta, CEE Bankwatch Network
ioana.ciuta@bankwatch.org
Skype: ioana.ciuta
@unaltuser

1 Original: “Uslov za otvaranje novog kopa („Povlatne zone”), tj. budućeg površinskog kopa „Gacko” koji obuhvata i Polje „C“ je bio – izmještanje postojećeg vodotoka rijeke Mušnice izvan kontura ležišta uglja. Radovi na izmještanju korita rijeke su završeni u dijelu gdje je locirana “Povlatna zona” i jednom dijelu Centralne zone, dok će potpuna regulacija biti izvršena do kraja 2020. godine (II faza) u skladu sa planiranom dinamikom.” From: RiTE Gacko: Stanje radova nakon šest godine od pojave klizišta i prodora vode u Polje „B“ površinskog kopa „Gračanica“, 11 November 2019.

https://www.ritegacko.com/2019/11/11/stanje-radova-nakon-sest-godina-od-pojave-klizista-i-prodora-vode-u-polje-b-povrsinskog-kopa-gracanica/

A checklist to ensure getting Territorial Plans for coal regions right

“Countries in central and eastern Europe are currently embarking in the process of writing up Territorial Plans for their coal regions, which would enable them to access the billion of euros made available by the EU via the Just Transition Fund,” explains Alexandru Mustață, the Bankwatch Just Transition coordinator. “But not every Territorial Plan is a good one. So, looking back at our experience working with coal communities in countries in the region, we came up with a checklist of what would make a good Territorial Plan.”

The European Council decided on Monday to reduce the Just Transition Fund for the period 2021-2027 from EUR 40 billion to 17.5 billion. This might discourage some regional governments, which began seeing the transition as an opportunity, not only a challenge. It is now even more important that the Fund only supports projects leading to climate neutrality. Investments must create quality jobs as quickly as possible, but they shouldn’t rely on the Just Transition Fund alone – the Cohesion Policy has many instruments to support the transition of coal regions. 

The checklist comprises, among others: concrete indicators that the Territorial Plans should include, for example when it comes to emissions and jobs; criteria on how to make sure the Plans do not support polluting or dated industries in the regions; specific advice on how to make participation work. 

“The Upper Nitra region in Slovakia is a bit of an outlier in central and eastern Europe, in that our Territorial Plan was prepared by engaged local community members gathering in working groups,” says Lenka Ilcikova, a Bankwatch Just Transition campaigner in Slovakia and one of the authors of the checklist. “So, based on our experience with turning citizens’ inputs into local strategies, based on what worked for us and what didn’t, we can now offer some guidelines to those only starting out in neighbouring countries.”

The territorial just transition plan checklist is available at https://bankwatch.org/tjtp, and a full explanation for the checklist can be found in our briefing: https://bankwatch.org/tjtp-checklist“

For additional information please contact:

Alexandru Mustață
Just Transition coordinator, CEE Bankwatch Network
E-mail: alexandru.mustata@bankwatch.org
Tel.: +40726770808
Twitter: @AlexandruBW

New report calls on Member States to steer EU regional and recovery funding towards climate neutrality

A new report published by Climate Action Network (CAN) Europe and CEE Bankwatch Network identifies concrete investment proposals as listed in National Energy and Climate Plans (NECP) of 14 Member States to be funded in order to ensure a green recovery. The report titled “EU Funds for a Green Recovery”, comes right after the president of the European Council, Charles Michel’s proposal to increase the climate spending target of EU funds from 25% to 30% and makes it clear that if the EU funds are used wisely, they could both ensure a green recovery and boost climate ambition.  

Investments in sustainable renewable energy (including energy communities and prosumerism) and energy efficiency have the biggest potential to improve the quality of life for millions of Europeans, while increasing climate ambition. In addition, these sectors present a huge potential for creating jobs. Therefore, the report proposes them to be prioritised to get funding from the next EU budget and recovery funds. In addition, low emission transport systems, sustainable mobility measures and nature-based solutions are underlined as sectors having important potential to increase the climate ambition, while stimulating the economy for a green recovery. These measures offer important opportunities to Member States to increase their climate spending while ensuring the implementation of a much higher 2030 climate target for the EU.  

However, the report points out that many harmful measures still remaining in the NECPs might undermine climate action in the next decade. As proposed by the Commission, the NECPs will inform the spending of the next generation of EU funds, including the recovery plans. Therefore, the report recommends Member States to direct their upcoming spending plans towards climate neutrality and not to put money on the harmful measures such as development of new fossil gas infrastructure, exploitation of national fossil fuel resources, use of biomass in low-efficiency heating systems and investments in non-renewable energy sources.

Markus Trilling, finance and subsidies policy coordinator at Climate Action Network (CAN) Europe said: “”In this week’s European Council, Heads of State must rapidly build on the President’s proposal and agree on increasing climate action spending to at least 40%. It is much needed to pave the way for a drastically increased 2030 climate target. 

Timing of this decision is also very crucial as in the next months, Member States will present their spending plans for the next long term EU budget and set priorities for Recovery and Resilience Plans to receive support from the EU’s Recovery Fund. What Member States put in their spending plans will define the EU’s response to both the climate and economic crises in the next 10 years. Now, EU leaders have an opportunity to agree on using the full potential of EU funds to boost climate action and exclude support to fossil fuels.”

Raphael Hanoteaux, EU funds policy officer at CEE Bankwatch Network, said: “EU leaders have the choice to build back better with the recovery package. All member states win if spending plans are designed to transform public infrastructure and move towards a net zero-emissions, carbon free economy by 2050. This begins in eastern Europe by supporting smart investments with huge potential like energy efficiency, and banning any further spending on fossil fuels.”

The Commission’s proposal on the entire package, which comprises the revamped MFF 2021-2027 and additional funds specifically tailored to support the economic recovery until 2024 called ‘Next Generation EU’, has in place an overall climate mainstreaming target of at least 25%. The Council Presidency proposes to increase it to 30% and couple this financial boost with a commitment to reach the highest possible climate target for 2030. Cash from the Just Transition Fund would only be awarded to countries committing to climate neutrality on national level by 2050.