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Planned power plants in the Balkans need review as EU adopts tougher pollution standards

The European Union has today approved an updated set of binding standards for power plants, which include new, stricter pollution limits.

The standards, known as the LCP BREF [1], were adopted today by the IED Article 75 Committee [2]. These standards do not address CO2 and other greenhouse gas emissions, and therefore would not help countries meet their obligations under the Paris Agreement. Yet, once implemented, they will help prevent thousands of premature deaths caused by air pollution from coal power plants [3], by restricting emissions of sulphur dioxide, dust, nitrous oxides, hydrogen chloride, hydrogen fluoride and mercury.

Several Western Balkans countries already require the use of the EU’s BREF standards in their legislation as a basis for issuing permits. As a result, as soon as the new standards are published in the EU’s Official Journal later this year, they will also apply to new plants across most of the region [4]. Therefore, governments in Bosnia-Herzegovina, Kosovo, Macedonia, Montenegro and Serbia – where planned new coal power plants are most likely to be affected by the updated BREF [5] – need to revisit investment plans to ensure the project designs are indeed in line with the new standards and consider the possible financial implications.

Ioana Ciuta, Energy Co-ordinator at CEE Bankwatch Network, says:

Governments across the Western Balkans urgently need to review their plans for new thermal power plants. If they fail to comply with the new standards they will be landed with expensive investment costs within just a few years.

Pippa Gallop, Research Co-ordinator at CEE Bankwatch Network, says:

None of the new coal plant projects in the region appears to have taken these new standards into account in their planning. But it would be a lot cheaper for them to adjust the project designs now than to have to carry out retrofits in a few years’ time.

For more information contact:

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

Ioana Ciuta
Energy Co-ordinator, CEE Bankwatch Network
ioana.ciuta@bankwatch.org
+40 724 020 281
Twitter: @unaltuser

Notes:

[1] Large Combustion Plants Best Available Techniques reference document. This is one of a series of BREF documents for different industrial sectors.

[2] The Industrial Emissions Directive (IED) Article 75 Committee is a body established by Article 75(1) of the IED, assisting the Commission in elaboration of implementing acts. The Committee is composed of the Member States and is chaired by the Commission. The Committee adopts decisions on BAT conclusions.

[3] EEB, HEAL, CAN Europe, WWF European Policy Office, and Sandbag: Lifting Europe’s Dark Cloud, October 2016: http://www.eeb.org/index.cfm?LinkServID=E3882544-5056-B741-DBB3E8DE57F619F6

[4] All of the Western Balkans countries refer to Best Available Techniques in their legislation but only Albania, the Federation of Bosnia and Herzegovina, Macedonia and Montenegro explicitly refer to the EU reference document. Serbia and Republika Srpska need to adopt these standards as soon as possible to provide clear guidance and increase regulatory certainty for investors.

[5] These include:
Bosnia-Herzegovina: Tuzla 7, Banovići, Kakanj 8, Ugljevik III, Gacko II
Kosovo: Kosova e Re
Macedonia: Oslomej reconstruction
Montenegro: Pljevlja II
Serbia: Kostolac B3

Overlooked carbon costs could turn Western Balkans’ new coal power plants into white elephants – analysis

A new Bankwatch analysis examining ten coal-fired power plant projects across the Western Balkans finds that, once the cost of carbon emissions allowances are factored in, they could become a serious liability for both the companies involved and the public. Moreover, only a few feasibility assessments for coal power plants in the region are publicly available, and most of those have failed to properly take carbon costs into account, the briefing authors note.

The full briefing can be downloaded from here: https://bankwatch.org/sites/default/files/briefing-Balkans-CO2-29Mar2017.pdf

The EU’s Emissions Trading Scheme (ETS), one of Europe’s key instruments for reducing greenhouse gas emissions and tackling the climate crisis, obliges companies to purchase allowances for every tonne of carbon dioxide they emit. As countries of the Western Balkans are already working to join the EU, entering the ETS could effectively render a number of coal-fired power plants across the region stranded assets, the analysis shows.

Even at just EUR 5 per tonne of CO2, Montenegro’s Pljevlja II project, among the smallest in the region, would have to foot an additional EUR 8 million bill every year for its carbon emissions. With CO2 price set at EUR 35 per tonne – a price that may well be reached by 2030 – this extra annual cost would climb to no less than EUR 55.6 million.

For the 600 MW Ugljevik III in Bosnia-Herzegovina, the largest coal power station currently planned in the region, the yearly carbon bill would range between EUR 21 million and EUR 146 million, depending on the CO2 price.

Promoters of new coal projects, primarily state owned utilities, have so far overlooked these extra costs. For example, the feasibility study summary for Serbia’s Kostolac B3 plant explains that carbon costs had been left out on the assumption that they would be covered by the state. In practice, however, state aid rules that apply to Serbia as a signatory to the Energy Community Treaty forbid this kind of payment.

At the same time, the project’s sensitivity analysis, which does include carbon costs, leaves no doubts that “even a low CO2 price is enough to render the plant uneconomic,” according to Bankwatch’s assessment.

These findings illustrate the grave economic risk that investment in new coal power entails for companies and the public alike. Decision-makers, the briefing authors state, should revisit the feasibility of all coal power projects after applying shadow carbon pricing, and before allowing any further implementation of these plans.

In addition, governments that seek to secure future electricity supply have to “prioritise demand-side energy efficiency as the most sustainable long term way to avoid shocks from prices of either CO2 or imported fuels.”

Pippa Gallop, Research Co-ordinator at CEE Bankwatch Network and co-author of the briefing, says:
“New energy infrastructure built now will last for several decades and has to be future-proof. Legislation and demand patterns are going to change significantly, and investments have to be flexible enough to take account of this. But the Balkan coal plans are the opposite of flexible – they are not even likely to be feasible under today’s conditions of low electricity prices, let alone tomorrow’s conditions with CO2 pricing and higher environmental standards.”

Ioana Ciuta, Energy Co-ordinator at CEE Bankwatch Network and co-author of the briefing, says:
“Even with low CO2 prices, stranded assets are already reality in many parts of Europe. E.ON already plans to close 13 GW of its coal and gas capacity across Europe, and Enel intends to close 23 coal and gas power stations by 2019 in Italy alone. Behind these developments are the rise of renewable energy and the drop in electricity prices across most of Europe. So decision makers in the Western Balkans would be wise to put the money where the future is, rather than wait and adapt when they have no other choice.”

For more information contact:

Ioana Ciuta
Energy Co-ordinator, CEE Bankwatch Network
ioana.ciuta@bankwatch.org
+40 724 020 281
Twitter: @unaltuser

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

Azerbaijan suspended from the EITI – a Bankwatch and Counter Balance statement

A decision to suspend Azerbaijan’s membership in the Extractive Industries Transparency Initiative (EITI) adopted yesterday (Mar 9) is the latest reminder for international financial institutes to avoid supporting the Southern Gas Corridor (SGC) project.

In 2015, the EITI board downgraded Azerbaijan’s membership status due to its relentless crackdown on civil society, political opponents and journalists in the country, and in its October 2016 meeting board members decided to give Baku another chance to comply with international standards.

Yet, the Azerbaijani authoritarian regime that’s running a country completely dependent on the extraction and export of oil and gas, has so far proven that the concepts of democracy and human rights are simply foreign to it.

In the latest case, on Friday (March 3), Mehman Huseynov, a prominent blogger and chairperson of the Institute for Reporters’ Freedom and Safety, has been sentenced for two years in jail on defamation charges. Civil society figures believe this sentencing might be linked, among others, to the organisation’s work on the EITI.

Last month, an international group of 22 civil society organisations including Human Rights Watch, Reporters Without Borders and Bankwatch, has written to EITI board members, urging them to suspend Azerbaijan’s membership in the EITI.

Azerbaijan’s membership status in the international body is considered key to the Southern Gas Corridor project that is intended to bring 16 billion cubic meters of gas from Azerbaijan to Turkey and the EU every year.

The European Investment Bank (EIB), the EU’s house bank, is currently mulling a record EUR 2 billion loan to the western section of the SGC, the Trans Adriatic Pipeline (TAP), as well as a EUR 1 billion loan to the central section of the project, the Trans Anatolian Pipeline (TANAP).

The European Bank for Reconstruction and Development (EBRD) – which has already helped finance the Shah Deniz II project, the SGC’s source gas field – has also stated it is considering a loan of up to EUR 1.5 billion for TAP, and possibly another for the TANAP project.
Both institutions have committed to EITI compliance in their energy policies and are official partner organisations of the EITI.

“If there is no progress [on the implementation of EITI standards in Azerbaijan] it will be quite difficult to justify a large amount of financing,” the EBRD’s now former Managing Director for Energy and Natural Resources, Riccardo Puliti, told Anadolou Agency in a September 2016 interview. “It is important for both TAP and TANAP, but it is particularly important for TANAP, because [Azerbaijani state owned energy company] SOCAR is so prominent in TANAP,” he added.

In an open letter published in January, jailed Azerbaijani opposition politician Ilgar Mammadov warned European governments, as well as potential financiers of the SGC, about engagement with Azerbaijan’s rulers.

Specifically, Mammadov, who had worked closely with the EITI as a member of the Natural Resource Governance Institute until his arrest in March 2013, clearly warned that at this week’s board meeting, “those driven by pressing commodity and geopolitical interests … may ask the international financial institutions to disconnect the SGC loans from Azerbaijan’s compliance with the EITI.”

Anna Roggenbuck, EIB Policy Officer at CEE Bankwatch Network, says:

“The EITI board’s decision is but the latest confirmation that Azerbaijani fossil fuels export projects like the SGC only fuel the autocratic regime in Baku as it intensifies its repression of civil society and media in the country. The EIB and the EBRD should recall their commitments to human rights and take the EITI board’s decision as their cue to disengage from the project.”

Xavier Sol, Director of Counter Balance, says:

“EU leaders, who have long cited democracy and human rights as the cornerstones of modern day Europe, should recognize the EITI board’s decision for the stark warning sign it is. Knowing that any revenues from the Southern Gas Corridor project will only serve to entrench Azerbaijani President Ilham Aliyev’s regime, now is the time for Europe to think whether it is willing to put its highest energy bets on such partner.”

For more information please contact:

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

Xavier Sol
Director, Counter Balance
xavier.sol@counter-balance.org
+32 2 893 0861
@xavier_sol

EU watchdog investigating European Investment Bank for maladministration

The European Investment Bank (EIB) is being investigated for maladministration, after the European Ombudsman sent a formal letter opening the case this week (27 February 2017).

The investigation comes after ClientEarth, CEE Bankwatch Network and Counter Balance highlighted the lack of transparency at the bank, and its attempts to block scrutiny. This complaint, submitted in September 2016, was accepted by the Ombudsman, which announced it would investigate the case and ask the EIB to explain its transparency policy and reaction to the NGOs’ challenge.

ClientEarth, CEE Bankwatch Network and Counter Balance complained because the EIB – which invests around €80 billion in projects annually – blocked a challenge to its new transparency policy from the three NGOs.

The EIB has a huge impact on environmental decisions around the world, from whether a dam will be built on vulnerable ecosystems to whether funding will go to renewables or fossil fuels.

Its transparency policy keeps all information about investigations – including of corruption and fraud – confidential. It also creates illegal exceptions to people’s right to scrutinise the bank. Given the amount of money at stake, this raises serious concerns about the accountability of the bank.

ClientEarth lawyer Anaïs Berthier said: “If the EIB stops public scrutiny of its actions using its so-called transparency policy – and blocks challenges to that policy – it is failing doubly in its duties. The complaint mechanism is there to make sure the bank – and the projects it funds – are accountable for every Euro of public money spent, so it is essential that people can use it.”

Director of Counter Balance Xavier Sol said: “As an NGO coalition promoting a high level of transparency for the EU public banks, we welcome the Ombudsman’s decision to open an investigation. We hope this will shed light on the culture of secrecy still prevailing at the EIB and on the need for the bank to raise the bar on transparency. Indeed it is key for European taxpayers to know that European funds are spent in the public interest.”

Anna Roggenbuck, Policy officer at CEE Bankwatch Network said: “The European Ombudsman opened its investigation after our initial complaint was rejected by the Complaints Mechanism of the EIB on inadmissibility grounds. The Ombudsman decision is a clear signal the claims were admissible. We are glad she will investigate the way the complaint office took its decision a few months after it first confirmed admissibility for the complaint, and whether it was caused by management intervention.”

Now, the Ombudsman will ask the European Investment Bank to respond to the complaints. If she finds the bank guilty of maladministration, she will make recommendations to improve its transparency. This would shed light on the bank’s practices and exert significant pressure to improve.

Read ClientEarth’s Complaint to the European Investment Bank about its Complaint Mechanism alleging noncompliance of the European Investment Bank’s Transparency Policy with EU and international law on access to information

Read ClientEarth’s complaint to the European Ombudsman on the European Investment Bank’s Transparency Policy

Read the letter from European Obmudsman responding to ClientEarth’s complaint about the European Investment Bank

Bulgaria risks unnecessary breach of nature laws, threatening EUR 800 million of EU funding

The building of an EU-funded motorway linking Bulgaria and Greece, through Kresna Gorge – a stunning wildlife haven protected by EU nature laws – would be a disaster for nature and local people, and could result in up to €781 million being returned to the European Commission, claim Bulgarian and international NGO experts.

If the project is given the go-ahead in April, it would also provide the first test of EU Environment Commissioner Karmenu Vella’s recent pledge to better implement EU nature laws.

Good alternatives exist to complete the Sofia-Thessaloniki highway outside the protected gorge. At least one route – the “full eastern” option – complies with EU legislation, according to NGO experts. Any route inside the gorge would break EU nature laws, as damage to the gorge would only be permitted if no alternatives exist.

The European Commission determined in 2008 that routing motorway traffic through the gorge would be illegal. [1] The “full eastern” option would also prevent losses of endangered species of European importance, and foster local economic development of agriculture, wines and tourism. [2]

The gorge is home to more than 3,500 species of flora and fauna, including many snakes, turtles and bats found nowhere else in Europe. There are more species of butterfly in one square kilometre of Kresna Gorge than in all of the UK.

Construction of the motorway must be completed by 2023 and in full compliance with EU nature laws. If either of these conditions are breached, the Bulgarian government risks having to repay up to €781 million of grants to the European Commission.

Robbie Blake, nature campaigner for Friends of the Earth Europe said: “I visited Kresna Gorge and saw with my own eyes how this stunning natural jewel is a vital hotspot for Bulgarian and European nature. No motorway could be built here without completely destroying nature in the gorge and the local community.

If this project is railroaded through, all eyes will be on EU Environment chief Karmenu Vella – will he stick by his recent decision to better enforce and implement vital nature protection laws?“

Fidanka Bacheva-McGrath, international campaign coordinator of CEE Bankwatch Network said: “If the Bulgarian Government tries to route the motorway through the gorge, this would break our obligations under EU law, would result in legal challenges, and cause delays that risk Bulgarian taxpayers having to pay back the entire grant of nearly €800 million. Building through the Gorge would be a disaster for Bulgaria, it would lead to a whole new fiasco.”

Danniel Popov, Bulgaria national coordinator at CEE Bankwatch Network said: “There’s absolutely no need to carve the motorway through the Gorge, as a good bypass route to the east exists, which would save the wildlife haven, be much less environmentally damaging, would avoid so many road deaths in Kresna, and would be better for local people and sustainable local development. The authorities should move forward with this plan, and fast, as it’s the only option to get the job done in time and legally.”

What’s next?

The Bulgarian Government is currently carrying out an Environmental Impact Assessment to decide on the most appropriate route, with the results expected by the end of April. The local community and the wider Bulgarian public then will be able to express their views on this, and it will have to be approved by the EU Commission. The NGOs have met with the Kresna municipatily, the Bulgarian Government and Road Agency to offer assistance in creating a high quality assessment fit with EU law, so that the Struma motorway bypassing Kresna Gorge can be developed before 2023.

Notes:

[1] In 2008, the Environmental Impact Assessment for the Struma Motorway project, endorsed by the European Commission, deemed that any motorway construction in the gorge and the option to maintain the current road for international traffic (the so-called zero option) is not in compliance with the EU Habitats Directive because of the detrimental and unavoidable impacts on the protected biodiversity. The legally agreed conclusion was to route the motorway through the tunnel.

[2] Table comparing the differences between the “Semi Eastern” route half through Kresna Gorge and the “Full Eastern” motorway’s route fully bypassing the Gorge to the east.

 

Destructive hydropower project in Macedonia loses its only source of funding


Skopje, Prague – After a five years long campaign, Eko-svest, Front 21/42 and CEE Bankwatch Network welcome the cancellation [1] of a EUR 65 million loan from the European Bank for Reconstruction and Development (EBRD) intended for the Boškov Most hydropower project in Macedonia. As a result this controversial project is now highly unlikely to be realised.

In a statement posted last week on the EBRD’s website, the bank said that the loan agreement had been valid for five years but “conditions for disbursement were not met.”

Ever since plans for the Boškov Most hydropower project emerged, Macedonian and international environmental groups have repeatedly warned [2][3] of the detrimental ramifications this 68 MW hydropower dam inside the Mavrovo National Park could have for the fragile ecosystem and unique wildlife.

In particular, the project could severely threaten the already critically endangered Balkan lynx as well as several aquatic ecosystems and their species. In December 2015, the Standing Committee of the Bern Convention, the European wildlife treaty, called on the Macedonian government to suspend its plans [4] for establishing the Boškov Most and Lukovo Pole hydropower projects until the potential cumulative environmental impacts of these projects, as well as 19 other smaller hydropower projects across the Mavrovo National Park are fully assessed. Shortly after this resolution was issued, the World Bank decided to withdraw its support to the Lukovo Pole project.

Ana Colović Lesoska, Director of the Macedonian center for environmental research and information Eko-svest, said: “We expected the EBRD to have withdrawn from the project much earlier, even in 2013, when the independent expert report [5] came out as a result of our complaint to the bank’s Project Complaint Mechanism [6], stating that the EBRD had breached its own procedures when approving the project in 2011.”

Aleksandra Bujaroska from the Macedonian environmental lawyer association Front 21/42 said: “We regret that the Macedonian government haven’t properly implemented Strategic Environmental Assessment for the planned hydropower projects and wasted so many years and so much public money trying to push through a project which was never environmentally sound. Boškov Most raised environmental controversies from the beginning, having in mind that 80% of the project area is located in Mavrovo National park. In 2015 the Macedonia Administrative Court decision stated that the Macedonian Ministry of Environment had granted the license back in 2012 on the basis of an inadequate and incomplete environmental impact assessment and has therefore violated existing national environmental law.”

Fidanka McGrath, Bankwatch EBRD co-ordinator, said: “It was about time. This is now the second large hydropower project in the Balkans from which the EBRD had to withdraw, after the Ombla project in Croatia in 2013. We hope that this cancellation sends a strong signal to the bank to back off from protected areas and to reconsider the sustainability of large dam projects that cause irreversible biodiversity loss and the destruction of unique habitats.”

For more information please contact:

Ana Colovic Lesoska
Director, Eko-svest
ana@bankwatch.org
+389 72 726104

Aleksandra Bujaroska
Environmental lawyer
Front 21/42
aleksandra.bujaroska@front.org.mk
+389 78433713

Notes

[1] http://www.ebrd.com/work-with-us/projects/psd/boskov-most-hydro-power-project.html

[2] https://bankwatch.org/bwmail/62/pressure-mounts-ebrd-quit-macedonian-dam-folly

[3] https://bankwatch.org/publications/boskov-most-hydropower-plant-macedonia

[4] https://bankwatch.org/news-media/for-journalists/press-releases/macedonia-urged-suspend-controversial-hydropower-project

[5] http://www.ebrd.com/downloads/integrity/Boskov_CRR.pdf

[6] http://www.ebrd.com/downloads/integrity/Boskov_complaint_7.11.2011.pdf