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European Development Bank Significantly Strengthens its Grievance Mechanism – Reformed Mechanism Now More Independent

Most development banks have a grievance mechanism—also known as an independent accountability mechanism—to receive complaints from people harmed by activities they finance. Once operational, the new Independent Project Accountability Mechanism (IPAM)—which will replace the EBRD’s current grievance mechanism, the Project Complaint Mechanism—will be removed from the operational structure of the bank and have senior-level leadership and a direct reporting line to the bank’s Board of Directors. The mechanism will also be restructured to ensure greater consistency and efficiency in processing complaints.

“We appreciate the leadership of the EBRD’s Board of Directors, which represents the bank’s member states, for their efforts to strengthen accountability at the bank. We hope that other development banks currently considering changes to their independent accountability mechanisms—such as the World Bank Group and the African Development Bank—will follow suit,” said Kindra Mohr of Accountability Counsel. “Communities affected by EBRD-financed activities should feel confident that their concerns will be taken more seriously and handled effectively at IPAM.”

The new policy also incorporates some innovative provisions that go beyond the existing best practice at its peers. The policy adopts a no tolerance position on retaliation against anyone who would file a complaint or otherwise engage with the mechanism. If complainants are concerned about their security, the mechanism will undertake a risk assessment and implement mitigation measures accordingly. The EBRD, like most development banks, frequently makes repeat investments in the same client. Now, if a client has been subject to a complaint at IPAM, that information will be considered by the Board before it makes any additional investments. Furthermore, most independent accountability mechanisms have the mandate to monitor commitments by the bank or its client. IPAM’s new policy, in addition to requiring regular monitoring reports, explicitly allows the mechanism to report any implementation issues or outstanding issues of non-compliance to the Board.

“We were pleased to see that many of the recommendations we submitted during the robust consultation process are reflected in the final policy,” said Kris Genovese, senior researcher at the Centre for Research on Multinational Corporations (SOMO). “My biggest disappointment is that the EBRD does not see fit to require its clients to disclose the availability of IPAM to project-affected people. What’s the value in having a great independent accountability mechanism if the people who need it most don’t know about it?”

“There is a lot of work ahead to ensure that the new policy is successfully implemented and delivers learning in the institution, improvements in projects and remedy for grievances raised by project affected people. Key to ensuring the mechanism’s effectiveness will be the recruitment of its new leadership. The Selection Committee, which is detailed in the new policy and will include two external stakeholders, must find someone who has the seniority and technical expertise necessary to ensure IPAM, and the EBRD, becomes a leader in accountability and sustainability,” said Fidanka Bacheva-McGrath of CEE Bankwatch Network.

Goldman winner to development banks: drop billion dollar Nenskra dam in Georgia

Join Ana on 2 May 2019 15:00 CEST to learn more about her award and her call to action ahead of the banks’ shareholder meetings.

The Executive Director of Bankwatch member group Eko-svest in North Macedonia, Ana is using her award to draw parallels between the Nenskra project’s potential impacts on nature and people and her award-winning seven-year campaign against dams in the Mavrovo national park.

In addition to more than 1 000 species of plants, Mavrovo is home to rare trout species, wolves, bears, golden eagles, and otters. Mavrovo also provides crucial habitat for one of the last remaining populations of the critically-endangered Balkan lynx, with only about 35 mature individuals remaining and the most active breeding population found exclusively in Mavrovo.

In 2010, the state-owned power utility ELEM proposed the construction of two large hydropower plants in Mavrovo: Boškov Most and Lukovo Pole. Funding for Boškov Most was secured via a USD 65 million loan from the EBRD, and Lukovo Pole’s USD 70 million investment was through the World Bank. However both banks backpedaled in 2017 and 2015, respectively.

If built the 280MW Nenksra project would irreparably destroy the unique biodiversity of the Caucasus mountains and the economic livelihoods of the indigenous Svan people that have lived for generations in the region. The area proposed for the Nenskra hydropower project covers important natural habitats for brown bears, greater horseshoe bats, and lynx. The area was originally intended to be part of a protected area under the Bern Convention, but the Georgian government decided to exclude the project site. The indigenous Svan communities that depend on their natural surroundings for their livelihood since generations, have been protesting the project over the past several years.

Both the EBRD and the EIB approved loans for the project last year, at USD 214 million and USD 150 million, respectively, but neither have disbursed the money.  The ADB is still considering supporting the project with USD 315 million, and the AIIB could also be awarding it USD 100 million.

Ana Colovic Lesoska, Executive Director for Ekosvest, said:

“The cases of Boškov Most and Lukovo Pole are cautionary tales. Governments in the Western Balkans are planning 2700 hydropower plants, and in Georgia there are plans for 150 such projects, including the massive Nenskra project. This hydropower tsunami will decimate our last pristine rivers and the livelihoods of people who depend on them. We cannot allow this.

The silver lining is that the banks can learn from their mistakes. Hydropower projects are fraught with risks – to nature, to people and to economies – and must be carefully scrutinised. A disaster was avoided in the case of Mavrovo, and the banks can do the right thing and not fund the Nenskra project.”

Manana Kochladze, Founder of the Georgian environmental NGO Green Alternative, a Bankwatch member group, and a 2004 Goldman Environmental Prize laureate, said:

“Just as in the Mavrovo national park in North Macedonia, Georgians are rising against hydropower projects that risk scarring the majestic valleys of Upper Svaneti and altering their traditional way of life. Just like the magnificent Mavrovo, this unique landscape is not the spring of money the Georgian government and its partners might see in it. These sub-alpine forests, snow-capped ridges, glacial valleys, and the brown bears, griffon vultures and lynxes that call them home, need to be protected.

Nenskra would wreak havoc on the landscape and take an unbearable toll on the local indigenous communities. People are determined not to let this happen. Development banks need to listen and avoid the bitter experience of the Mavrovo national park. The Nenskra project must not be realized.”

For more information contact

Ana Colovic Lesoska
Executive Director, Ekosvest
Email: ana@bankwatch.org

Ido Liven
Media officer, CEE Bankwatch Network
Email: ido.liven@bankwatch.org
+48-22-8920086
Skype/Wire: ido.bwn

EU-China summit an opportunity to tackle Chinese support for coal in southeast Europe

The coal units planned to be built with Chinese financing include a 600 MW new unit at the existing Rovinari power plant in Romania – the country currently holding the EU Presidency, 450 MW at Meliti in Greece, as well as several plants in Serbia and Bosnia-Herzegovina.

In the EU-China Strategic Outlook [2] published by the European Commission March 12, the Commission noted that “China is constructing coal-fired power stations in many countries; this undermines the global goals of the Paris Agreement.”

“It’s good to see the EU is finally saying something about Chinese support for coal worldwide. Now it’s time to make it clear to China that the EU will not tolerate this new spree of coal plants from appearing in southeast Europe with Chinese support. Otherwise, the EU will have a group of mini-Polands on its hands, which will eventually threaten Europe’s climate ambitions,” comments Pippa Gallop, Bankwatch research coordinator, and author of the analysis.

All the planned units are marred by controversy because of their doubtful legality and economic viability, shows the Bankwatch analysis.

Just two weeks ago, the Energy Community Secretariat in Vienna opened a dispute settlement case against Bosnia-Herzegovina for approving an illegal loan guarantee for the Tuzla 7 coal plant. The plant’s environmental permit is also being challenged in court.

“There’s a fundamental contradiction in Chinese money being poured into new European coal at a time when the EU has committed to carbon neutrality by 2050 and 17 EU states are either coal-free or committing to end coal,” says Ioana Ciuta, Bankwatch energy coordinator, one of the authors of the analysis.

“Western Balkan politicians constantly try to convince the public that the new coal plants would be clean, but there’s no such thing as clean coal. In any case, none of the China-backed plants planned in the Western Balkans will adhere to the latest EU pollution control standards, and the open-cast mines and ash dumps will continue to pollute,” added Ciuta.

Notes to editors:

[1] Read the Bankwatch briefing here: https://bankwatch.org/publication/chinese-coal-in-southeast-europe

[2] Read the EU-China Strategic Outlook document here: https://ec.europa.eu/commission/news/eu-china-strategic-outlook-2019-mar-12_en

For more information, contact:

Ioana Ciuta
Energy Coordinator, CEE Bankwatch Network
ioana.ciuta@bankwatch.org
+40724020281

Pippa Gallop
Research Coordinator, CEE Bankwatch Network
pippa.gallop@bankwatch.org
Skype: pippa.gallop

EU parliament reverses course, votes for strong action on climate with future funds for Europe’s needy regions

Climate Action Network (CAN) Europe and CEE Bankwatch Network have welcomed the outcome of the plenary sitting in Strasbourg, calling the result great news for the EU and its regions and an acknowledgement of the need for a rapid and comprehensive shift in Europe’s investment landscape.

The vote reverts back to the initial proposal from the European Commission on the ERDF from May 2018 that prohibited funding for projects with heavy environmental impacts like fossil fuels.

The outcome solidifies the final negotiating position of the Parliament that it will use in discussions with the European Council and Commission when the parties begin the so-called trialogues in October, and indicates a readiness for Europe to continue a progressive approach to climate finance.

Raphael Hanoteaux, EU policy officer with CEE Bankwatch Network, said: “The Parliament understands that business as usual is no longer an option, and fossil fuels have no place in the future of Europe’s financing. This vote sets a clear direction for a clean and sustainable Cohesion policy that will bring certainty to managing authorities, investors, and local stakeholders as they plan projects for Europe’s energy transformation.”

Markus Trilling, Finance and Subsidies Policy Coordinator at Climate Action Network (CAN) Europe, said: “Today’s vote is a good result for citizens and the economy. Investing in renewable energy and energy savings instead of financing fossil fuels will trigger the transition needed to modernise Europe’s regions and will help meet the EU’s climate objectives.”

Energy Community opens infringement procedure against Bosnia-Herzegovina over illegal Tuzla 7 state aid

The announcement follows a complaint [2] submitted by the Aarhus Resource Center, Sarajevo, and CEE Bankwatch Network in September 2018 that the guarantee would not be in line with EU State aid rules, which are binding under the Energy Community Treaty. [3]

The Energy Community Secretariat commissioned an independent legal analysis which confirmed the validity of the NGOs’ claims. [4] It has so far issued four warnings to the Federation of Bosnia-Herzegovina not to approve the guarantee as it constitutes illegal state aid according to EU rules. Commissioner for Enlargement Johannes Hahn similarly warned Bosnia-Herzegovina authorities not to approve the guarantee as it would contradict EU rules. [5]

The Federal House of Representatives nevertheless approved the guarantee on 7 March [6] but the House of Peoples has still to vote on the final stage of approval – set for 1 April.

“Both Commissioner Hahn and the Energy Community have been vocal in opposing this illegal guarantee. Continuing to defy these warnings would show a lack of commitment to the EU accession process and further delay Bosnia-Herzegovina’s energy transition,” commented Denis Žiško of the Center for Ecology and Energy, Tuzla.

“This project is an embarrassment and one that will cause problems for the country for decades to come. The feasibility assessment doesn’t include realistic coal prices or CO2 prices, the environmental permit is being challenged in court, and the lack of transboundary consultation is being examined under the Espoo Convention”, he added.

“Just yesterday the Energy Community published a new study criticizing the Western Balkans for sinking no less than EUR 1.2 billion in direct and indirect subsidies into the coal sector in 2017, and now Bosnia-Herzegovina is gearing up to waste more public money on new coal. The economic and environmental reality is that this cannot continue. Phasing out subsidies clearly requires political courage, but the best place to start would be not to add new ones”, added Pippa Gallop of CEE Bankwatch Network.

If Bosnia-Herzegovina does not take steps to rectify the non-compliance, the case will be brought to the highest decision-making body of the Energy Community, the Ministerial Council. Breaching Treaty provisions can result in exclusion from decision-making in the Energy Community, delays to EU accession, and temporary moratoria by European public banks on investments in the country’s energy sector.

For more information, contact:

Denis Žiško
Centar za ekologiju i energiju
denis.zisko@ekologija.ba
Skype: denis.zisko
Mob: +387 61 140 655

Pippa Gallop
CEE Bankwatch Network
pippa.gallop@bankwatch.org
Mob: +385 99 755 97 87

Notes to editors

  1. Energy Community announcement:
  2. https://bankwatch.org/press_release/use-of-public-money-to-support-tuzla-7-coal-power-plant-must-be-investigated-shows-new-complaint
  3. https://www.energy-community.org/
  4. https://bankwatch.org/press_release/energy-community-bosnia-herzegovina-guarantee-for-chinese-loan-for-tuzla-7-is-state-aid-breaks-eu-law
  5. https://www.reuters.com/article/us-bosnia-eu-energy/eu-official-criticizes-bosnias-backing-of-chinese-power-loan-idUSKBN1QU1JD
  6. https://bankwatch.org/press_release/bosnia-herzegovina-federal-parliament-guarantees-chinese-coal-plant-loan-in-contempt-of-eu-law
  7. Read the Energy Community study about state aid for coal in Western Balkans: https://www.energy-community.org/news/Energy-Community-News/2019/03/25.html

 

Energy Community: Western Balkan coal subsidies worth over 1.2 billion euros in 2017

The study, entitled Analysis of Direct and Selected Indirect Subsidies to Coal Electricity Production in the Energy Community Contracting Parties, which covers the Western Balkans and Ukraine (2), shows that significant amounts of taxpayers’ money is used by governments in the region to perpetuate the countries’ over-reliance on coal – usually low-grade, sulphur-laden lignite, the most polluting of fossil fuels.

Public subsidies for coal mining and electricity generation in the Western Balkans – especially Serbia, Bosnia and Herzegovina and Kosovo – give coal an unfair advantage over other energy sources and continue to hamper much needed decarbonisation efforts, concludes the Energy Community.

Western Balkan countries provided total direct subsidies of over EUR 500 million in the years 2015-2017 while indirect subsidies to their coal industries were worth EUR 1.06 billion in 2017 alone, by failing to apply a carbon price and by foregoing returns from state-owned companies by allowing them to operate unprofitably (3). In 2017, Western Balkan countries paid direct subsidies worth EUR 157 million which, together with the indirect subsidies, make up a total of EUR 1.2 billion for that year.

The Energy Community Contracting Parties have legal obligations prohibiting energy sector subsidies that may give certain companies an unfair advantage. The Western Balkans countries also all have stabilisation and association agreements with the EU, stipulating deadlines by which they need to set up independent national level bodies to approve proposed subsidy schemes.

“These findings show that the Western Balkan countries are progressing much too slowly with applying EU subsidies rules in the energy sector, giving coal an unfair advantage and burdening the public with unjustified costs,” said Pippa Gallop from CEE Bankwatch Network. “The European Commission needs to take clear action on the report’s findings and ensure the countries deliver on their stabilisation and association agreements, but it also needs to provide more support for the Energy Community’s efforts in this field,” she added.

Handouts to the coal sector may even have intensified since 2015-2017, as exemplified by Bosnia and Herzegovina’s recent disregard for the Energy Community’s warnings (4) regarding a proposed state guarantee for a EUR 614 million China Exim Bank loan for the planned Tuzla 7 coal power plant.

A power purchase agreement for the planned Kosova e Re coal plant in Kosovo is also subject to scrutiny by the Energy Community Secretariat, whose preliminary findings indicate that it breaches the Energy Community Treaty (5) and may even bankrupt the country (6). Under the agreement, the Kosovar government would not only buy off all the electricity from the planned plant but would even provide payments when not operating, as well as numerous other guarantees for the investor, UK-registered ContourGlobal.

Igor Kalaba of Climate Action Network Europe warned that: “The Western Balkan governments are setting themselves up for a shock once they enter the EU Emissions Trading Scheme. Carbon prices have not been properly taken into consideration when planning new coal projects, increasing the chances those plants will end up as stranded assets. The European Commission needs to make sure the countries apply a carbon price signal as soon as practically possible. This would also provide the countries with income to implement a well-planned and socially just coal phase-out and to speed up energy efficiency and renewables development.”

The Energy Community Secretariat has invited public comments on the results of the study until 25 April 2019. All comments should be submitted to public_consultation@energy-community.org.

For more information please contact

Stevan Vujasinovic
Southeast Europe Communications Coordinator
Climate Action Network (CAN) Europe
stevan@caneurope.org
Tel: + 381 63 390 218

Pippa Gallop
Research Co-ordinator
CEE Bankwatch Network
pippa.gallop@bankwatch.org
Tel: +385 99 755 9787

Notes to editors

  1. The study is available here
  2. The study covers countries signing the Energy Community Treaty which use significant amounts of coal – Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia and Ukraine.
  3. EUR 865 million for CO2 costs and EUR 221.6 million in foregone returns
  4. For more information, see: https://bankwatch.org/press_release/bosnia-herzegovina-federal-parliament-guarantees-chinese-coal-plant-loan-in-contempt-of-eu-law
  5. See: https://energy-community.org/news/Energy-Community-News/2018/06/14.html
  6. See speech by Energy Community Director Janez Kopac at an event in the European Parliament on 22 November 2018