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The Paris Agreement is a wake up call for the EU’s house bank to realign its investment strategy

The European Investment Bank (EIB) must adopt new directives and operating principles to play a meaningful role in realising the EU’s goal of a decarbonised and resource efficient economy, say CEE Bankwatch Network and Counter Balance ahead of the bank’s annual meeting during the EU finance ministers’ Council this Wednesday, May 25.

A new Bankwatch analysis released today shows that, while the EIB has met its climate action objective – a minimum loan allocation for projects intended to reduce greenhouse gas emissions and facilitate adaptation to the impacts of climate change – the contribution of the EU’s house bank to addressing the unfolding climate crisis is far from sufficient.

The full briefing can be found here: https://bankwatch.org/publications/european-investment-bank-and-climate-action-2013-2015

The EIB has set itself a target of 25 percent of its annual lending volume to be earmarked for projects labelled “climate action”. According to the analysis, the bank has so far managed to meet this target, but since 2013 it has failed to finance such projects in a number of EU countries including Portugal, Croatia, Poland, and Belgium.

Specifically, the EIB’s climate action lending appears to prioritize richer EU member states. Between 2013-2015 the top four beneficiaries of such finance were the UK, Austria, Sweden and France. Climate action investments made over 35 percent of EIB financing in each of these countries. At the same time, in Croatia, Cyprus, Portugal and Malta, EIB lending under the climate action program amounted to less than 10 percent.

Not least, the bank’s revised climate strategy, adopted ahead of the landmark Paris climate summit, has failed to up its climate action target. Moreover, this new strategy also does not commit the EIB to facilitate the EU’s climate and energy goals, or to increase its lending for much needed energy efficiency and renewable energy projects.

“The EIB’s investment trajectory currently looks particularly worrying,” says Anna Roggenbuck, EIB Policy Officer at CEE Bankwatch Network. “With plans to spend EUR 3 billion on the massive fossil fuels project that is the Southern Gas Corridor, the world’s largest lender is turning its back on the global effort to tackle the climate crisis. Instead of enabling the transition to sustainable energy, the EIB could be helping a European carbon lock in for decades to come.”

A European Parliament resolution last month flagged up the broadening gap between the EU’s climate and energy policies and the EIB’s operations. The Parliament called on the bank to improve the sustainability of its operations by stepping up lending for energy efficiency and renewable energy projects. It also urged the bank to reconsider its ongoing tendency to finance carbon intensive infrastructure such as motorways and fossil fuel projects.

The contribution of EIB financing to cross-sector energy efficiency has widely varied across Europe, the Bankwatch analysis found, and in a number of countries it has been well below the EU average or even plain zero.

Additionally, EIB investment in renewable energy has plummeted from EUR 5.1 billion in 2013 to EUR 2.7 billion in 2015. In a number of EU countries, EIB funding is completely consumed by public authorities and state-owned companies, and in turn private promoters of renewable energy from have no access to this funding source.

“At the Paris summit, the EIB portrayed itself as a climate champion. Now the bank has to translate this rhetoric into action,” says Xavier Sol, Director of Counter Balance. “It is now up to EIB Governors to ensure the European Parliament’s call is not ignored. A major effort is required to improve the bank’s transparency, sustainability and accountability standards.”

For more information contact:

Anna Roggenbuck
EIB Policy Officer, CEE Bankwatch Network
annar@bankwatch.org
+48 91 831 5392
Twitter: @RoggenbuckA

Xavier Sol
Director, Counter Balance
xavier.sol@counter-balance.org
+32 2 893 08 61
Twitter: @xavier_sol

NGOs file a complaint against Vinci Russia for corruption of foreign public officials in Khimki Forest motorway case

A complaint filed last week is requesting an investigation into alleged corruption involving French company Vinci in the construction of a controversial motorway through Khimki Forest near Moscow. The complaint was filed to Nanterre’s chief investigating judge by civil society groups Sherpa and CEE Bankwatch Network, activists Evgenia Tchirikova and Mikhail Matveev, and with the support of Princip, defenders of the Khimki forest.

In 2007 the Russian Federal Roads Agency, ROSAVTODOR, launched a call for tenders for the construction of a section of the M11 motorway. Three companies submitted tenders, including the North West Concession Company (NWCC), owned by the Vinci Group and Russian partners including Vladimir Putin’s close associate Arkady Rotenberg. After studying the submissions, the Russian state decided to declare the call for tenders unsuccessful and rejected all three tenders. In 2009, Russian authorities awarded the section’s construction directly to NWCC for 1.63 billion Euros.

Yet several studies have shown that the route that was chosen, compared with twelve others, is the most expensive one, and the one that would have the worst environmental impact. The project’s usefulness is therefore being questioned, as it does not meet the social and environmental challenges of the Russian transportation sector.

This is the first wide-ranging case which could lead to holding a major French company liable for corruption in Russia.

Sherpa has already filed an initial complaint against VINCI CONCESSIONS RUSSIE SA on 24 June 2013 for alleged corruption of foreign public officials in the case of the tender for the construction of the section of motorway M11 through the Khimki Forest..

The appointment of an investigating judge will make it possible to carry out all actions necessary to establish the truth and identify who should be held responsible.

At a time when France has enhanced its legal framework for the fight against corruption, and French companies are making more commitments, the French judicial system must be able to establish who is liable for actions allegedly committed by a French company in a country which is known to be plagued with corruption.

For more information contact:

William Bourdon
President of Sherpa
01 42 60 32 60 / +33 (0)6 08 45 55 46

Pippa Gallop
Research Co-ordinator, CEE Bankwatch Network
pippa.gallop@bankwatch.org

Parliament gets tough on control of EU Bank’s funds

In its annual resolution on the European Investment Bank adopted today in Brussels, Members of the European Parliament have criticised the bank’s support to projects under corruption investigations. They also called on the EIB to go further on fighting climate change, tax evasion and tax dodging.

Counter Balance and CEE Bankwatch Network welcome the positions taken today by the Parliament in this resolution.

The MEPs asked the EIB to “stop further loan disbursements to projects under ongoing national or European corruption investigations”, like it did in Slovenia for the Sostanj coal power plant [1]. The Parliament calls on the EU Bank to learn lessons from past experiences instead of repeating the same mistakes over and again.

In particular, the Parliament condemned the bank’s support to the Passante di Mestre highway in Italy [2]. The Passante di Mestre project received EIB support in 2013, even after several project promoters had been arrested on allegations of corruption and money laundering. In 2016 the project is being refinanced using the Project Bond Initiative, a risk-sharing instrument jointly set up by the European Commission and the EIB. Echoing previous NGO demands [3], MEPs “call on the EIB, once again, to suspend all forms of funding for the project”.

A similar warning is sent in relation to tax evasion and tax dodging: the EIB needs to get serious on those issues by closing the loopholes in its current tax havens policy and requesting more transparency from its clients on their tax practices, as proposed in a Counter Balance report in 2015 [4]. MEPs call on the EIB to develop in 2016 a taxation policy that includes inter alia public country by country reporting requirements for all its clients.

The Parliament is also seeking to increase the sustainability of the bank’s operations by:

– Enhancing its lending to energy efficiency and renewable energy projects in new Member States so that they reach 30% of total investments in these fields by 2020;
– Calling for a review of EIB’s climate action objective, since the 25% target set by the bank has already been reached in 2015; and by
– Expressing its concerns about the “tendency to finance infrastructure such as motorways, which encourage fossil fuel consumption and therefore run counter to the Union’s long-term objectives of moving towards a carbon-free economy”.

Anna Roggenbuck, CEE Bankwatch Network, said:

“It is encouraging that the European Parliament notices EIB investments in renewable energy and energy efficiency are in a number of Member States far below the EU average. Those investments are crucial to modernize economies and mitigate climate change in order to deliver on the Paris agreement. The EIB and Member States should discuss how to address this failure, especially via the European Fund for Strategic Investments.”

Xavier Sol, Counter Balance Director, said:

“This resolution really sends a strong signal to the EIB: business as usual is not feasible anymore. This is an important step forward to make the EU Bank a more accountable and transparent institution. It is now time for the EIB to deliver on this call for action”.

Notes for editors

[1] Read more about the case of Sostanj: Sostanj lignite plant: A mistake not to be repeated
[2] Find out more about the Passante di Mestre project in the new NGO report “Highway to hell”
[3] Read the article EIB set to finance motorway under corruption investigation in Italy
[4] Read the report “Towards a taxation policy for the EIB”

Contacts

Xavier Sol
Director, Counter Balance
xavier.sol AT counter-balance.org
Mobile: +32 473 223 893 Office: +32 289 308 61
Twitter: @Counter_Balance

Anna Roggenbuck
EIB policy officer, CEE Bankwatch Network
annar AT bankwatch.org
Mobile: +48 509970424 Office: +48 91 831 5392
Twitter: @RoggenbuckA

EU’s flagship climate instrument used to subsidise coal in Central and Eastern Europe

The EU’s carbon market rules allow Central and Eastern European Member States to invest up to €12 billion in coal powered energy production. As representatives of the EU Member States are due to discuss the EU ETS this Wednesday, the new publication “Fossil fuel subsidies from Europe’s carbon market” adds momentum to the need to overhaul this policy.

Under a provision referred to as “Article 10c” in the EU Emissions Trading System (EU ETS), low-income Member States can grant free pollution rights to their electricity producers until 2019. This is permitted on the condition that they invest at least the equivalent monetary value of those allowances in diversifying and modernising their electricity generation.

“The experience to date demonstrates that this provision has so far not resulted in the diversification of the energy mix in lower-income Member States. Quite the contrary, it will lock them in carbon intensive energy production and investment uncertainty. Europe’s carbon market is hence being used to subsidise coal power, including investments in the second largest fossil-fuel power station in the world,” says Urska Trunk, Policy Officer at Carbon Market Watch.

In 2013, only about 10% of the investments through Article 10c were related to clean technologies or the diversification of the energy mix. An overwhelming 90% of investments benefitted the upgrading and retrofitting of existing (fossil fuel) infrastructure.[1] The majority of Article 10c investments did not lead to a more diversified energy mix in countries such as Poland and the Czech Republic that are highly dependent on coal.

“Continuing to allocate free pollution permits is contradictory to the EU’s transition away from fossil fuels,” says Joanna Flisowska, Coal Policy Coordinator of Climate Action Network Europe. “To turn carbon trading into a tool that helps end our addiction to fossil fuel, especially coal, polluter handouts must end, and the price of carbon must increase. This will boost investments in renewables and energy efficiency.”

In addition to supporting carbon-intensive energy systems, Member State analysis has exposed other shortcomings, such as little or no time for the public to provide comments on the government’s investment plans.

Markus Trilling, EU Policy Officer at CEE Bankwatch Network explains: “Detailed information on the investments is often lacking and oversight by third parties is very difficult if not impossible. This makes it very hard to assess the effectiveness of the investments and their compliance with the EU’s clean energy objective”.

Despite concerns from civil society that Article 10c has not had desired effects, the EU ETS proposal for the next trading round from 2021-2030 continues to allow lower-income states to give free allowances to their power sector.

“Decision makers must ensure that Article 10c moves away from subsidizing coal to becoming a tool to diversify the energy mix and take bold steps needed to reduce energy poverty and import dependency of emerging European countries,” Urska Trunk concludes.

Media contacts

Urska Trunk, Policy Officer, Carbon Market Watch
Tel: +32 487 12 96 17
urska.trunk AT carbonmarketwatch.org

Kaisa Amaral, Press Officer, Carbon Market Watch
Tel: +32 485 07 68 90
kaisa.amaral AT carbonmarketwatch.org

Markus Trilling, EU Policy Officer, CEE Bankwatch Network
Tel: +32 2 893 10 31
markus AT bankwatch.org

Notes to editor

Recommendations by Carbon Market Watch and CEE Bankwatch Network to reform Article 10c after 2020:

– Ensure that all investments are selected based on a transparent process through a competitive bidding process with full accessibility of relevant documents.
– Introduce selection criteria for the ranking of projects so that no investments in coal production are eligible and investments in energy efficiency and sustainable renewable energy sources are prioritized.
– Base the investment selection process on open consultation that provides for public input and takes the comments raised by stakeholders fully into account.
– Allow all interested parties to participate in the competitive bidding process, including non-ETS operators, such as renewable energy companies to ensure it is non-discriminative.
– Guarantee that investments are additional so that Article 10c does not support projects that would have been undertaken regardless of the option of derogation.

[1] See 2015 Commission’s Impact Assessment (p.133)

Lost in transition: Far-reaching changes needed as European bank marks 25 years

On April 15, the European Bank for Reconstruction and Development (EBRD) will be marking its 25th anniversary. Reflecting on two decades of monitoring the EBRD’s policies and projects, a new report from CEE Bankwatch Network raises concerns about a growing gap between the bank’s operations and its mandate.

Download the full report at https://bankwatch.org/lost-in-transition

Established in 1991 to facilitate the transition to market economies through sustainable development, the bank’s region of operation has grown well beyond its original geographical scope of eastern Europe and the former Soviet Union without actually achieving its goals, says the new report. In fact, only one country, the Czech Republic, has formally ‘graduated’ as recipient country of the EBRD, and in 2013 the bank itself acknowledged that many of the other recipient countries were ‘stuck in transition’.

The report explores two of the cases where the EBRD’s financial support has effectively helped deepen countries’ economic dependence on natural resource extraction, leaving them to the mercy of fluctuating commodity markets. At least 13 coal and metals mining operations in Mongolia have received sizeable financial support from the bank since 2006. Among them, last December the EBRD signed its largest ever syndicated loan of USD 1.2 billion for the expansion of Rio Tinto’s Oyu Tolgoi copper and gold mine, despite unresolved complaints of local herders.

Support for the Shah Deniz II gas field development has made up the largest share of EBRD funding for Azerbaijan over the past five years, thus contributing to the economic crisis the country is now facing as a result of the fall in oil and gas prices. But not only is petro-finance for Azerbaijan at odds with the EBRD’s commitment to help tackle the climate crisis, it is also in stark violation of the bank’s mandate to work only in countries practicing multi-party democracy.

Fidanka Bacheva-McGrath, Bankwatch’s EBRD campaign co-ordinator, says:

“25 years ago, at the start of transition, everyone asked ‘When will we catch up with the West?’ Now the EBRD says it will be decades before convergence of living standards is achieved. More importantly, economic reforms have promoted unsustainable development and have allowed for corrupt and undemocratic elites to get a tight grip on societies. The bank was a leading force in the region, both in terms of finance and in ideological guidance, as to how transition progress should be measured, but now it blames the lack of progress on the countries themselves. If the success of the bank is measured by the success of its recipient countries, the bank’s shareholders should pause to seriously reconsider the institution’s approach to development.”

The bank’s involvement in a large number of projects with adverse environmental and social impacts has also overshadowed its stated mission to promote sustainable development. Among the cases described in the report are hydropower development in Georgia and ageing nuclear power in Ukraine. In both cases, and others, the EBRD turned a blind eye to the lack of strategic assessment of sustainable alternatives and relied on outdated plans for development of the energy sector in these countries. These projects are indicative of a questionable trend of the bank using public money to support business as usual while overlooking both the public interest and its own environmental and social standards.

The report calls on the EBRD and its shareholders – that include the U.S., Japan, China, and the EU and its member states – to critically reflect on the way the bank has worked to accomplish its mission, and on the impacts its investments have had on people and the environment. In a number of cases, the report authors stress, it is still not too late to change course.

Pippa Gallop, Bankwatch’s research co-ordinator and one of the authors of the report, says:

“The EBRD is taking one step forward and two steps back when it comes to sustainable development, while the concept of economic transition has become so blurry as to be virtually meaningless. A thorough re-think of the bank’s purpose is needed in order to re-orientate its investments from quantity to quality. But this is only going to happen if the EBRD’s shareholders push for it.”

For more information contact:

Fidanka Bacheva-McGrath
EBRD Campaign Co-ordinator
fidankab@bankwatch.org
Twitter: @fidankabmg

Pippa Gallop
Research Co-ordinator
CEE Bankwatch Network
pippa.gallop@bankwatch.org

Balkan protests show need for more EU action on air pollution – new analyses

Thousands of people took to the streets of Skopje, Pljevlja, Tuzla and other cities across the Western Balkans in December to demand action on chronic air pollution plaguing their communities. A new briefing shows that to a large degree these recurring smog incidents are the result of national authorities’ protracted inaction. Yet, air quality could be dramatically improved if two EU directives are transposed into the Energy Community Treaty, according to two legal analyses also released today.

Every winter, towns across the Balkans face the same problem of heavily polluted air, and residents are increasingly concerned about the health implications.

The briefing paper, released today by CEE Bankwatch Network CEE Bankwatch Network and a group of environmental organisations in the region [1] explores the context of air pollution in Pljevlja, Tuzla, Sarajevo, Skopje and Tetovo following massive public protest across the region. According to the document, the main culprits vary by location but include thermal power plants, polluting industrial facilities, traffic, and poor enforcement of national air quality standards.

Read the briefing

In Pljevlja, Montenegro, airborne dust pollution in has exceeded the allowed annual limit by more than five times every year since 2010. And yet, the Montenegrin government keeps blaming individual household stoves while failing to limit pollution from the lignite-fired power plant.

This winter has seen particularly bad air pollution in Sarajevo, Bosnia and Herzegovina. On 19-20 December levels of inhalable coarse particles known as PM10 reached 350 micrograms/m3 – that is, seven times the maximum allowed level of 50 micrograms/m3. Over the same days, PM10 concentration in Beijing, notorious for heavy smog, did not exceed 279 micrograms/m3. [2] And that was not all. On January 24, 2016, at 10pm, PM10 concentration spiked to the literally breathtaking level of 750 micrograms/m3.

“Such levels of air pollution are unacceptable, and they are the most blatant symptoms of a systemic energy and transport problem,” says Ioana Ciuta, Energy Co-ordinator at CEE Bankwatch Network. “Without stronger action from the EU to ensure that environmental legislation is transposed and enforced this situation looks set to continue.”

The briefing recommends adopting two directives into the Energy Community Treaty in order to improve their implementation in the region.

According to the two legal analyses, the EU’s Air Quality Directive and the Industrial Emissions Directive Chapter II can be vital pieces of environmental legislation for countries of the Western Balkans. Moreover, adapting them to fit the scope of the Energy Community Treaty is feasible and comes with great public health benefits.

The adoption of the Air Quality Directive would introduce, among others, the obligation to establish air quality plans in zones or agglomerations where levels of pollutants in ambient air have exceeded any limit value, so when the plan explores causes of declining air quality, it can aim its measures specifically at the core of the cause – for example the electricity generation sector.

Another legal instrument that could help abate air pollution is the implementation of Best Available Techniques (BAT) requirement under the Industrial Emissions Directive, both for existing facilities and for new ones.

“This provision would ensure the level playing field in energy generation in the EU and the Energy Community that we aspire to and prevent the danger of emissions leakage,” concluded Pippa Gallop, Research Co-ordinator at CEE Bankwatch Network.

The briefing can be found here:
http://stories.bankwatch.org/up-in-smoke

The legal analysis of the Industrial Emissions Directive Chapter II can be found here:
https://bankwatch.org/sites/default/files/Legal-analysis-application-ChapterII-IED-Energy-Community.pdf

The legal analysis of the Air Quality Directive can be found here:
https://bankwatch.org/sites/default/files/Prospects-for-implementing-air-quality-directives-Energy-Community.pdf

For more information contact:

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

Pippa Gallop
Research Co-ordinator, CEE Bankwatch Network
pippa.gallop@bankwatch.org

Notes to editors:

1. Zelena akcija/Friends of the Earth Croatia; Ekotim, Center for Ecology and Energy, and Center for Environment (Bosnia and Herzegovina), Green Home (Montenegro), Eko-Svest (Macedonia), and CEKOR (Serbia).

2. Converted from 163 US AQI figures, see https://www.airnow.gov/index.cfm?action=resources.aqi_conc_calc