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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

Lack of ambition on full display as eastern Member States graded on first climate and energy plans submitted to Commission

A grading of the NECPs from Bulgaria, Czechia, Estonia, Hungary, Latvia, Poland, Romania and Slovakia finds that paltry targets for renewable energy and energy efficiency remain just above the bare minimum required by the EU. The analysis grades Latvia at the top of the table, with Bulgaria and Hungary’s business as usual approach earning it the lowest marks [2].

As part of the design of the EU’s 2018 ‘Clean energy package’, the NECP was envisioned as a tool for Member States to plan their own targets for 2030 and explain how each would contribute to the bloc’s targets for energy efficiency, renewable energy and a phase out of fossil fuels, while quantifying the investments needed to reach such objectives.

But in many countries goals to increase renewables and energy efficiency as part of the energy mix are negligible, as in Romania and Slovakia, which plan an uptake of renewables from 25 to 27.9 per cent and 14 to 18 per cent, respectively.

In Europe’s most energy-intense economy, Bulgaria has limited potentials gains in energy efficiency, because the NECP is designed to subsidise energy prices, thus disincentivising efficiency investments.

A lack of measures designed to reduce energy consumption and boost efficiency gains has also led to an uptick in plans for nuclear energy or the burning of gas, waste or biomass, posing more problems than solutions. For instance, the extensive use of biomass as a fuel source threatens biodiversity and poses risks of deforestation in Poland, Slovakia and Estonia.

Also, with coal firmly envisioned in its future energy mix, Poland plans the development of nuclear energy as a key decarbonisation measure, but even in the most optimistic scenario the nuclear power plant will not go online before 2033, and its economic viability is questionable.  

Raphael Hanoteaux, EU policy officer for Bankwatch, said: “While the development of the NECP is a learning process, there is vast room for improvement. It is in everyone’s interest that the final plans are more ambitious and more inclusive before the end of the year. ”

For more information contact

Raphael Hanoteaux
EU policy officer
Email: raphaelh AT bankwatch.org
Telephone: +32 2 894 46 00

Notes

[1] The new briefing is available here
[2] The complete grading can be found in the table below, and the methodology explaining the grades is available here.

Romania’s dodgy math: will the country retire 2.2 GW of coal by the end of 2019?

Romania’s NECP, a document supposed to guide the country’s climate and energy policy for the next decade, claims Romania will have only 3.7 GW of installed coal capacity by 2020 – a shocking claim considering that currently there are 5.9 GW installed and the government made no plans to retire any unit this year.

The document also says that an another 540MW of coal capacity will disappear by 2030. Additionally, the NECP includes a very unambitious target for renewable energy in final energy consumption of only 27.9%.

‘Normally, anybody who wants to prevent a catastrophic increase of the global temperature would be happy to hear that 2 GW of coal will be retired in one year. But let’s not open the champagne bottles yet. The NECP lacks a commitment for a coal phaseout and it relies on plans to build a new coal unit. This means the 2020 installed capacity figure is likely a blatant inaccuracy – even more embarrassing as Romania is now in the spotlight for holding the EU Presidency,’ comments Alexandru Mustata, campaigner for Bankwatch Romania.

According to Bankwatch, calculations for the NECP are based on the National Energy Strategy, which prioritizes building a new 600MW unit on the site of the existing Rovinari power plant in Gorj county. An expert assessment of the economics of the new unit included in the Bankwatch publication shows that the new Rovinari unit would hardly (if ever) be economic if built. Fuel, CO2 and limestone costs will eat up 82% of the total revenue generated by the unit, leaving little room to cover the other costs – salaries, operation etc. – not to mention making a profit.

‘Romania once again fails to prepare a clear strategy to tackle this century’s biggest challenge: climate change,’ says Mustata. ‘Instead, it plans a new coal unit while most other European countries plan phaseouts and it squanders its enormous renewables potential. All this while being at the helm of the EU and supposedly offering guidance to the entire block.’

Notes to editors:

Read the Bankwatch analysis of Romania’s NECP, including an expert assessment of the economics of the new planned coal unit at Rovinari here.

For more information, contact:

Alexandru Mustata
Bankwatch Romania campaigner
alexandru.mustata@bankwatch.org

Bosnia-Herzegovina Federal parliament guarantees Chinese coal plant loan in contempt of EU law

The vote came after the Energy Community Secretariat earlier this week published an independent legal analysis, which confirmed that the Tuzla 7 guarantee contains elements of State aid, and called on the Parliament of the Federation of Bosnia and Herzegovina not to approve the guarantee. [1]

The guarantee had been cleared by the the State Aid Council of Bosnia and Herzegovina in July 2018, [2] but in September 2018, the Energy Community Secretariat requested the Federal Parliament not to approve the guarantee [3], after its initial examination of the case indicated that the guarantee would not be in line with EU law.

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

The proposed guarantee for Tuzla 7, however, covers 100 percent of the loan, plus interest and other associated costs. There are circumstances in which this is allowed, but, as a September 2018 complaint to the Energy Community by the Aarhus Resource Centre and Bankwatch argued, the relevant conditions are not fulfilled in this case.

Reacting to the vote, Denis Žiško from the Center for Ecology and Energy stated:

“By giving almost unanimous support to a document that is clearly not in line with the Energy Community State aid acquis, FBiH parliamentarians once again demonstrated utter irresponsibility with regard to the international obligations of our country. Actions like this are simply destroying the already questionable international credibility of BiH. It is certain that such short-sighted behaviour of our politicians further complicates our EU integration process. How can the EU trust a country whose politicians knowingly violate international treaties?”

Nina Kreševljaković from the Aarhus Resource Centre said:

“The FBiH parliament did not approve these documents five months ago, just before the elections, but has done so now when they are known to be illegal. It is clear that yesterday’s vote was not based on an assessment of the documents by the parliamentarians or the findings in the independent legal analysis of the Energy Community Secretariat. The approval is a consequence of post-election political trade-offs and completely ignores the undeniable long-term negative impacts of this decision on BiH citizens.”     

Pippa Gallop of CEE Bankwatch Network added:

“The Federal Parliament has acted with utter contempt for energy market rules. Bosnia and Herzegovina shouldn’t be allowed to export electricity to EU countries if its politicians flagrantly breach the law. The country can’t have it both ways. It has to decide: is it committed to participating in the EU energy market or not?”

Contacts

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 for editors

  1. The analysis and announcement are available here: https://www.energy-community.org/news/Energy-Community-News/2019/03/04.html
  2. Decision No. UP/I 03-26-1-42-4/18 of dated 23 July 2018
  3. The letter from the Energy Community Secretariat

For more information, see here.

Energy Community: Bosnia-Herzegovina guarantee for Chinese loan for Tuzla 7 is state aid, breaks EU law

‘Independent lawyers have now analysed the State Aid Council’s decision and the underlying public guarantee and have confirmed the Secretariat’s finding that the Tuzla 7 guarantee contains elements of State aid. The opinion was submitted to the State Aid Council,’ the Energy Community Secretariat wrote in a press release sent Monday evening.

‘The State Aid Council should therefore reopen its procedure and re-examine the guarantee in line with the Energy Community State aid acquis. The Secretariat also reiterates that the Parliament of the Federation of Bosnia and Herzegovina should not approve the guarantee, based on a non-compliant decision from its State aid authority.’

The guarantee had been cleared by the the State Aid Council of Bosnia and Herzegovina in July 2018, (1) but in September 2018, the Energy Community Secretariat requested the Federal Parliament not to approve the guarantee (2), after its initial examination of the case indicated that the guarantee would not be in line with EU law.

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

The proposed guarantee for Tuzla 7, however, covers 100 percent of the loan, plus interest and other associated costs. There are circumstances in which this is allowed, but, as a September 2018 complaint to the Energy Community by the Aarhus Resource Centre and Bankwatch argued, the relevant conditions are not fulfilled in this case. (3)

The legal analysis commissioned by the Energy Community confirms the reasoning presented by the NGOs to challenge the guarantee.

Last week, while the Parliament was preparing to approve the loan guarantee, the Energy Community Secretariat issued a warning that the Parliament must not approve the loan until its investigation was complete (4). Janez Kopač, the Energy Community Director, was in Sarajevo today to discuss the issue with BiH decision-makers.

“Using public money to support a new coal power plant is unacceptable in any case, but especially when it is illegal,” said Denis Žiško of the Centre for Ecology and Energy, Tuzla. “Tuzla 7, if built, would sentence Bosnia and Herzegovina to decades of more pollution and greenhouse gas emissions and is highly likely to generate economic losses. Parliamentarians must not support new coal plants in any way, but must instead act to reduce energy wastage and to use our renewable energy potential”.

“The Energy Community is clearly saying that, by providing the guarantee, Bosnia and Herzegovina is in non-compliance with EU law. If the Parliament nevertheless votes on March 7 to approve the guarantee, then it is knowingly legalising an illegality. Even more, it willingly pushes the country into a situation where it will be penalised in a few years” stated Ioana Ciuta of CEE Bankwatch Network.

Contacts

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

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

Notes for editors

  1. Decision No. UP/I 03-26-1-42-4/18 of dated 23 July 2018
  2. The letter from the Energy Community Secretariat
  3. For more information, see here: https://bankwatch.org/press_release/use-of-public-money-to-support-tuzla-7-coal-power-plant-must-be-investigated-shows-new-complaint  |  https://www.energy-community.org/news/Energy-Community-News/2019/02/23.html

Milestone bank summit in Belgrade a step towards protecting Balkan rivers, but greater transparency still needed

The bank summit was initiated by the London-based European Bank for Reconstruction and Development (EBRD) and the Save the Blue Heart campaign in order to discuss the sensitive issue of hydropower development in the Balkans. Representatives from some of Europe’s largest commercial lenders, including UniCredit, Erste Groupe and Societe Generale, attended the summit.

The discussion explored how these financial institutions could start providing timely information to the public about the likely environmental and social impacts of their loans for hydropower projects in order to avoid the destruction of the pristine rivers of the Balkans, some of Europe’s last wild waterways.

A lack of transparency has plagued a number of investments [2] across the region where rivers have been impounded, dried out  important species and habitats have been lost, and local communities have confronted project developers over their loss of livelihoods.

The Save the Blue Heart of Europe campaign is calling on banks to immediately stop funding for projects that are located in protected areas and other valuable river stretches, apply more stringent green conditions to loans in the sector and increase funding for energy efficiency and other renewable energy sources, whose potential in the region remains largely untapped [3].

The Belgrade summit follows public pressure in 2018 when more than 120 000 people sent the EBRD the largest ever public petition on energy issues to drop funding for hydropower projects planned in protected areas of the Balkans. One of the largest financiers of hydropower projects in the Balkans, the EBRD has financed 61 hydropower projects in the region, where up to 2 800 potential projects have been identified [4].

Igor Vejnovic, hydropower coordinator for CEE Bankwatch Network, said: “Transparency is a cornerstone of democracy and environmentally and socially-responsible investment. Without it, banks expose themselves to legal and reputational risk. So today’s meeting is a sign that financial institutions are willing to listen, but the question remains if they will act to protect the rivers and communities of the Balkans.”

Gabriel Schwaderer, CEO of EuroNatur, said: “The destruction of the beautiful Balkan rivers by hydropower would not only be ecologically devastating, but also nonsense in regards to energy politics. A transformation of the entire energy policy is urgently required: reduction of energy consumption, increase of energy efficiency, reduction of major energy losses and investment in solar and wind instead of hydropower.”

Ulrich Eichelmann, CEO of Riverwatch: “Within the last two years, we have assessed the ecological value of the Balkan rivers in detail. The outcome is a spatial plan that defines no-go areas for new hydropower plants, the so-called “Eco-Masterplan for the Balkan Rivers”. The result is proof that this river network is without par in Europe: 76 per cent of the rivers are of such high value that they qualify as no-go zones. The banks must stop the funding of hydropower in these areas.”

Contacts

Igor Vejnovic, Hydropower Coordinator
CEE Bankwatch Network
igor.vejnovic@bankwatch.org
+420 777 995 515

Anja Arning, Head of Public Relations
EuroNatur
anja.arning@euronatur.org
+49 (0)7732 – 927213

Ulrich Eichelmann
CEO, Riverwatch
ulrich.eichelmann@riverwatch.eu
+43 676 6621512

Notes

[1] The ‘Save the Blue Heart of Europe’ campaign is an initiative of nongovernmental organisations EuroNatur and Riverwatch, together with green groups from southeast Europe, Bankwatch and activist company Patagonia in order to save the pristine rivers of the Balkan from destruction brought by dams and diversions. https://www.balkanrivers.net/

[2] http://bankwatch.org/hydrobanks

[3] https://balkanrivers.net/en/news/eco-masterplan-shows-value-balkan-rivers

[4] https://bankwatch.org/publication/financing-for-hydropower-in-protected-areas-of-southeast-europe-update