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European Parliament approves Juncker Investment Plan, lacks guidance and oversight

Today the European Parliament approved the regulation establishing the European Fund for Strategic Investments (EFSI) at the heart of President Juncker’s EUR 315 billion investment plan. But critics say that the regulation lacks clear provisions for oversight of the fund and guidance for investments in green, sustainable and resource-efficient projects that are part of the fund’s mandate.

At EUR 21 billion, the European Fund for Strategic Investments aims to leverage via the European Investment Bank (EIB) a total of EUR 315 billion in new projects by 2018. The fund should target projects with a higher risk profile than normal EIB investments and should as well increase lending for investments with so-called “European added-value” – projects with European relevance which go beyond what Member States can achieve individually.

Xavier Sol, Counter Balance director says:

“President Juncker promised targeted investments into sustainable sectors that could create jobs, but in the text approved today there is nothing that can guarantee this. The regulation we have now is a blank cheque for the European Investment Bank to carry on with business as usual.”

The fund’s regulation doesn’t include the necessary accountability mechanisms towards Europeans and the Parliament. Technocrats will decide which projects to support and these will have significant impacts on people and their environment.”

Markus Trilling, EU funds campaigner for Bankwatch and Friends of the Earth Europe says:

“The EFSI is an example of how the EU budget is being used to guarantee safe investments for the private sector while the public bears the risk. To increase the effectiveness of the investment fund and make sure it invests in projects that are future proof, the EIB needs a climate policy to guide its action on green energy. Investing in energy efficiency and renewable energy sources is where the smart money is at.”

For more information contact

Markus Trilling
EU funds policy officer
email: markus.trilling AT bankwatch.org
mobile: +32 484 056 636

Xavier Sol
Director, Counter Balance
email: Xavier.sol AT counter-balance.org
mobile: +32 473 22 38 93

Illegal coal subsidies could cost south-east European countries dearly, warns new study

Prague – New investments in coal mines and power plants could cost the Western Balkans and Ukraine dearly if they fail to take into account binding rules on subsidies (State aid), according to a new briefing released today by CEE Bankwatch Network.

The full paper, as well as accompanying case studies and press briefing, can be downloaded from http://bit.ly/state-aid-risk

Practices such as preferential loans and guarantees, equity measures, long term contracts, and privatisation have been subject to strict rules under the Energy Community Treaty [1] since it entered into force in 2006. And yet, the signatory countries [2] are still planning new coal power plants and mines [3] without adequate attention to State aid risks. As a result, investment projects and existing facilities could face serious problems, especially if the state is forced to recover the sum of the aid granted, according to the briefing’s authors, lawyers Peter Staviczky and Phedon Nicolaides [4].

Image of Pljevlia

See a slideshow of cases

Among the cases examined is the controversial plan for the Kosovo C power plant in Kosovo [5], which may be supported with a 20-year long-term power purchase agreement. While such contracts reduce the risk of the plant not being able to sell its electricity at a profit, they are usually considered as interfering with competition and are thus rarely allowed.

In January this year, the Serbian parliament ratified a USD 608 million loan for the Kostolac B3 power plant [6] and the Drmno mine. For the development of the mine the state directly took a loan from the China ExIm Bank on behalf of state-owned electricity company Elektroprivreda Srbije (EPS), thus leaving EPS with no payback risks at all, and putting the company at an unjustified advantage on the market.

“South-east European governments can no longer hand out money to energy companies as they please. They need to learn the rules as soon as possible – certainly before committing to finance any more major energy projects,” said Pippa Gallop, Bankwatch’s Research Co-ordinator. “In a sector where decisions have impacts lasting several decades, energy investments are highly cost-dependent and policymakers need to take all necessary steps to ensure legal certainty. State aid issues are no exception”.

“Governments not complying with State aid law requirements face serious legal risks both at national and European level, including for decisions taken long before EU accession. In some cases they may even have to recover the aid. The Energy Community countries would do well to learn from the case of Hungary, which signed long-term power purchase agreements with power plants in the mid 1990s, but was subject to a 6-year legal procedure after EU accession in 2004 followed by several lawsuits and international arbitration tribunals. Ultimately Hungary had to calculate the difference between the market price and the price it paid for the electricity under the agreements and recover the difference, plus interest,” warned Ioana Ciuta, Bankwatch’s Energy Co-ordinator.

Contacts:

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

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

Notes for editors:

[1] The Energy Community Treaty entered force in 2006, with the goal of creating a common energy market between the EU and some of its neighbours. It also aims to extend the EU internal energy policy to south east Europe and the Black Sea region. This includes the obligation for member countries to implement certain EU energy and environmental legislation and renewable energy targets.

[2] The Contracting Parties are currently Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Moldova, Montenegro, Serbia and Ukraine.

[3] For an overview of planned coal power plants in the Balkans, see https://bankwatch.org/campaign/coal .

New coal power plants are also planned in Ukraine, but due to the revision of the country’s energy strategy and the political situation, the plans are currently unclear.

[4] Péter Staviczky studied law at the Pázmány Péter Catholic University Faculty of Law and Comparative Law at the International Faculty of the University Robert Schuman Strasbourg. He did a banking-lawyer postgraduate training and took part in the common European specialist course of the Ministry of Foreign Affairs and the French École National d’Administration. He has been working at the State Aid Monitoring Office in Budapest since 2001. In 2007, he was appointed as head of the unit. He is a regular speaker at the seminars on State aid. Since January 2011 he is the attaché responsible for State aid at the Permanent Representation of Hungary to the EU in Brussels.

Professor Phedon Nicolaides holds the Jan Tinbergen Chair for European Economics at the College of Europe. He is also Professor at Maastricht University and holds a PhD in economics and a PhD in law. His research interests are European integration, competition policy and state aid, and policy implementation and he has published extensively on these subjects.

[5] https://bankwatch.org/our-work/projects/kosova-e-re-lignite-power-plant-kosovo

[6] https://bankwatch.org/our-work/projects/kostolac-lignite-power-plant-serbia

Eighty hectares of forest still standing in the lignite county of Gorj, court rules

Bucharest – Another environmental permit for the deforestation of 80 hectares of forest has been cancelled by a Bucharest court, following a Bankwatch Romania petition. The decision curtails plans to expand a lignite quarry in the Gorj county.

The request to cancel the environmental permit was based primarily on the grounds that the permit granting procedure was performed partially – only for a related activity, deforestation – while the main activity, expanding the lignite quarry by 80 hectares, was not assessed at all.

In other words, the main project consists of lignite surface mining, involving several works with environmental impact, whereas deforestation is just one of them. In addition, the environmental permit does not provide compensation measures for the clear cuts, although those measures are mandatory by Romanian law.

The environmental permit has been issued by the Environmental Protection Agency Gorj, at the request of the state-owned Oltenia Energy Complex.

The Pinoasa open pit mine is located near the town of Rovinari, home to one of Romania’s largest coal power plants. Surrounding this power plant are ten more lignite mining operations, whose cumulative effects have never been assessed.

The Bucharest court decision comes two months after an earlier ruling saved 130 hectares of forest from felling for expansion of the same quarry. [1]

“We believe that the Environmental Protection Agency (EPA) is one of the most important Romanian institutions whose main concern should be the compliance with all environmental procedures. And when it comes to projects that have a major environmental impacts, the agency must carefully consider all of their aspects,” said Ionut Brigle, campaign coordinator for Bankwatch Romania. “In particular, we urge the EPA to treat lignite mining expansion more seriously because of its negative implications.”

As defendants, Oltenia Energy Complex and Environmental Protection Agency Gorj can still appeal the court decision within 15 days of notification.

Throughout last year, Bankwatch Romania has been involved in legal actions resulting in the revocation of 28 deforestation permits, preventing the clearance of 23 hectares of forest for the expansion of the Rosia open pit mine. The court has also ordered the cancellation of two other environmental permits, near Tismana 1 (59 hectares) and Pinoasa (130 hectares) lignite quarries. Eight other similar cases are still pending a court decision.

Note to editors:

A photo of the mining operations can be downloaded here. Credits for the photo should be “Mihai Stoica for Bankwatch Romania”.

1. See https://bankwatch.org/news-media/for-journalists/press-releases/victories-piling-130-more-hectares-forest-saved-lignite-mi

For more details, please contact:

Ionuț Brigle
Campaign coordinator, Bankwatch România
ionut.brigle@bankwatch.org

Cătălina Rădulescu
Lawyer
catalina.radulescu@gmail.com

Civil society groups form ‘Better Regulation’ Watchdog to protect citizen, worker and consumer rights

Brussels, 18 May 2015 – More than 50 civil society organisations have joined forces to create the ‘Better Regulation Watchdog’ – a network to protect citizens’, workers’ and consumers’ rights. The network was launched today in Brussels, one day ahead of the expected announcement of the European Commission’s so-called ‘Better Regulation’ reforms.

The network of organisations from around Europe is concerned that the ‘Better Regulation’ agenda aims to weaken or undermine essential regulations and subordinate the public good to corporate interests.

The creation of the network is a response to the European Commission’s attempts to remove what it deems regulatory burdens under the ‘Better Regulation’ initiative. Commission First Vice President Frans Timmermans is expected to unveil a package of measures in support of this initiative tomorrow.

The network comprises a wide range of public interest groups including consumer, environmental, development, financial, social, and public health organisations and trade unions, and represents tens of millions of European citizens. The members are united by a desire to build an inclusive and competitive Europe founded on economic, social and environmental sustainability.

The network will examine actions taken under the Better Regulation initiative to identify possible risks to existing and future social, labour, environmental, consumer, financial regulation and public health standards. It will then inform civil society, media and decision makers of these risks by organising public debates, promoting research, and through joint campaigning and advocacy work.

Monique Goyens of BEUC – the European Consumer Organisation said: “We observe a lack of willingness from the new European Commission to take the measures necessary to protect consumers from unhealthy food, dangerous chemicals in consumer products or to provide for better labelling. Several initiatives have been delayed or are not being pursued anymore. The Better Regulation Watchdog network which unites civil society interest groups from various sectors is a clear signal to the European Commission not to jeopardise legislation protecting public interests.”

Christophe Nijdam, secretary general of Finance Watch said: “Growth and jobs need financial stability. The completion of a solid regulatory framework for the financial sector is one of the “big things” that Europe should focus on. As a member of this network we will watch the outputs of the Better Regulation initiative closely.”

Magda Stoczkiewicz, director of Friends of the Earth Europe said: “What the European Commission presents as a ‘better regulation’ agenda is in reality all about deregulation. In response to strong business lobbying, the Commission is planning to weaken, delay and scrap environmental standards.”

Oliver Roethig, Regional Secretary of UNI Europa said: “The idea to create the Better Regulation Watchdog was formed in a conversation between a small group of people. Now we are over 50 organisations! Together we will share intel, watch the Commission, and united react to safeguard the interests of workers, civil society and consumers.”

For more information please contact the following ‘Better Regulation Watchdog’ steering group member organisations:

  • BEUC: Ursula Pachl, +32 2 743 15 91, upa@beuc.eu or Johannes Kleis, +32 2 743 15 90, jkl@beuc.eu
  • Finance Watch: Joost Mulder, +32 484 54 27 11, joost.mulder@finance-watch.org
  • Friends of the Earth Europe: Paul de Clerck, +32 494 38 09 59, paul.declerck@foeeurope.org
  • ÖGB: David Hafner, +32 2 230 74 63, david.hafner@oegb-eu.at
  • UNI Europa: Christina J. Colclough, +32 471 93 67 51, christina.colclough@uniglobalunion.org

Notes

The founding statement of the Better Regulation Watchdog and the full list of members can be found at
https://bankwatch.org/documents/BRWN_Founding_Statement_and_Members.pdf

Thursday’s decision to suspend operation of a Soviet-era nuclear unit in Ukraine should lead to its retirement

Prague, Kiev – CEE Bankwatch Network and the National Ecological Centre of Ukraine (NECU) welcome the Ukrainian State Nuclear Regulatory Inspectorate Council’s decision at its meeting last Thursday (April 30) to suspend the operation of unit 2 in the South Ukraine nuclear power plant once it exceeds its design lifetime next week. According to the Council’s decision, a lifetime extension license for this 30 year old nuclear unit could be considered in the future, but only if all required conditions are met.

“The nuclear regulator has taken the most obvious decision since this nuclear unit, in its current state, is not fit for further operation,” says Iryna Holovko, CEE Bankwatch Network’s national campaigner for Ukraine. “Continuing its operation beyond the unit’s design lifetime would pose a serious threat to people in Ukraine and across its borders.”

As a result of the decision, the nuclear unit will cease operations no later than May 12, 2015. Should the state-owned nuclear energy operator Energoatom want to resume the unit’s operation beyond its design lifetime it will have to implement all necessary measures by May 2017.

Three of Ukraine’s nuclear energy units are already operating beyond their design lifetime, and nine others, including unit 2 in the South Ukraine power plant, are expected to be given similar permissions by the state nuclear regulator by 2020.

Upgrades, necessary to enable lifetime extensions for these units, are partially financed1 by loans from the European Bank for Reconstruction and Development (EBRD) and the European Atomic Energy Community (Euratom) totalling EUR 600 million.

And yet, no consultations with neighbouring countries on the potential health and environmental impacts have been carried out, despite Ukraine’s obligation to do so under the Espoo convention on cross-border environmental impact assessment as well as the conditions to the EBRD loan.

On Thursday a Bankwatch-NECU team concluded a fact finding mission on nuclear energy in the country, and the team members were present at the Council meeting.

“Our team spent the last few days meeting with representatives from the authorities in Kiev and at the Zaporizhia nuclear power plant, but so far we have got no assurances on how and when Ukraine will involve our countries in the environmental impact assessment process,” said Ákos Éger, campaigner with National Society of Conservationists – Friends of the Earth Hungary. “We hope the next time we meet them is when they come to consult us on these plans.”

Nuclear power plants generate almost half of the electricity supply in Ukraine. The country is almost completely dependent on Russia for its nuclear fuel as well as treatment and storage of two thirds of its spent nuclear fuel.

“The Council’s decision today demonstrates that insufficient safety levels lead to the closure of nuclear units, but the objective should not be resuming their operation,” concluded Holovko. “Rather, the shutdown of the 1000MW Soviet-era nuclear unit, even if only temporary, means it is high time for decision makers in Ukraine to start looking into alternatives and planning life beyond nuclear energy.”

Note to editors:

For more on the present and future of nuclear energy in Ukraine, see the recent commentary by Iryna Holovko on Project Syndicate:
http://www.project-syndicate.org/commentary/ukraine-nuclear-reactor-by-iryna-holovko-2015-04

1. The first four tenders within the nuclear safety upgrade program, started by the Energoatom under the EBRD tendering procedures, include measures at South Ukraine unit 3 and at four units at the Zaporizhia nuclear power plants. Most of these units will reach the end of their design lifetime by 2020 and are planned for prolonged operations.

For more information contact:

Iryna Holovko
National campaigner for Ukraine, CEE Bankwatch Network
iryna@bankwatch.org
Tel.+380 50 647 6700

Parliament warns of risky financing, demands more accountability at Europe’s bank

In its annual resolution on the European Investment Bank, Members of the European Parliament have criticised the bank’s Project Bond Initiative, warning that the risk-sharing instrument bears similarities to those proposed under the Juncker Investment Plan.

The MEPs condemned the EIB for financing “infrastructure projects that turned out to be unviable and unsustainable”, specifically mentioning the Castor gas storage project in Spain and the Passante di Mestre highway in Italy. The Castor project had to be stopped for causing earthquakes, saddling Spanish taxpayers with debts of EUR 1.4 billion.

The Passante di Mestre project received EIB support, even after several project promoters had been arrested on allegations of corruption and money laundering. Now the project might be refinanced using the Project Bond Initiative, a risk-sharing instrument that the Parliament believes finances the wrong kind of projects and transfers too much risk on the shoulders of the public sector.

MEPs have asked for a proper evaluation of the mechanism and warned about the regular use of such risk-sharing instruments, because they “bear the risk of the socialisation of losses and the privatisation of returns”.

MEPs called on the bank to develop in 2015 a responsible taxation policy that includes country by country reporting and the identification of the beneficial ownership of its clients, as proposed in the Counter Balance report ‘Towards a responsible taxation policy’ earlier this month.

The Parliament is also seeking to increase the accountability of the bank by:

  • Enhancing its oversight of the bank through more regular monitoring of its activities;
  • Calling for an improved and fully independent Complaints Mechanism at the bank; and by
  • Giving the European Court of Auditors full scrutiny over all of the bank’s facilities that deal with public funds.

Xavier Sol, Counter Balance Director:

“This resolution really takes the EIB to task. MEPs want the bank and the Commission to get serious about the risks that come with these financial tools and the failed infrastructure projects like Castor that they are used to finance. Such mechanisms will be at the core of the Juncker Plan, and MEPs share our concerns that these shift the risks to the public sector and reduce the quality of the projects financed. The Parliament resolution comes at a historic moment for the bank, and we hope that the EIB will reflect on the outcomes of this vote through changes in policy and practice.”

Anna Roggenbuck, CEE Bankwatch Network:

“I am pleased to see the European Parliament urging to reform and reinforce the EIB Complaints Mechanism just before the review of this policy. I hope it will bring necessary improvements to its independence and effectiveness which is highly needed in light of the future role of the bank in the Juncker Investment Plan.”