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EU climate fund bankrolling dirty energy expansion

Yesterday, 24 June, in its latest disbursement round, the Modernisation Fund approved nearly EUR 600 million for waste incineration projects in Poland that undermine climate action and Europe’s shift to a circular economy. 

Designed to support energy transition primarily in central and eastern Europe, the Modernisation Fund is intended to channel revenues from the EU’s carbon market, one of Europe’s top climate mitigation instruments, into investments in sustainable energy infrastructure.  

Yet, by repeatedly allocating this public money to waste incineration and fossil gas projects, governments effectively subvert the EU’s efforts to tackle the climate crisis, reduce waste and improve recycling. Expanding the combustion of garbage might generate energy, but it also requires the addition of fossil gas or diesel to improve combustion and produces toxic waste materials that require expensive, specialised disposal. 

Following yesterday’s disbursement decision, gas-fired power plants in the Czech Republic and two fossil gas pipelines in Romania will also receive a total of EUR 23.4 million via the Modernisation Fund. In addition, Slovakia has been allocated EUR 15 million that might be used to develop gas power plants. 

According to Bankwatch estimates, as of the end of 2023, the Modernisation Fund has already enabled fossil gas infrastructure and a raft of unsustainable energy projects totalling at least EUR 1.5 billion. In other words, during its first three years of operation, over 10 per cent of the Modernisation Fund’s investments went to fossil gas projects. 

In Romania alone, more than half a billion euro from the Modernisation Fund has been spent on fossil gas pipelines and gas-fired power plants, a report released by Bankwatch in April showed [1]. The Romanian gas grid operator Transgaz had previously been lobbying the European Investment Bank (EIB) and the European Commission for Modernisation Fund money for multiple gas projects. One of them, a pipeline intended to feed the Islanita and Turceni power plants, which had already been backed by the Fund, was awarded an additional EUR 8 million in yesterday’s disbursement. The very same project was rejected for financing in the previous disbursement round in December 2023. 

Although the EIB-managed Fund is expressly intended to help countries slash greenhouse gas emissions from their energy sectors, the methodology behind the assessments of candidate projects does not even mandate a minimum reduction in the level of emissions. 

Bankwatch and other groups have long been calling for the Modernisation Fund to end its support for fossil fuels, among other things, by revising the EU’s Emissions Trading System Directive, which guides the fund’s investments. Yesterday’s disbursement, the first since a new version of the Directive went into force, has seen financing for fossil gas dramatically shrink. But it is too early to call this a trend. Rather, the institutions governing the Modernisation Fund – its Investment Committee, the EIB and the European Commission – need to ensure that no more public money is spent on false solutions and that the Fund is fully dedicated to stepping up Europe’s energy transition. 

Morgan Henley, district heating campaigner with CEE Bankwatch Network, says:
‘This latest disbursement of the Modernisation Fund unfortunately again proves that it is not fit for purpose. While the bulk of investments is positive, tens of millions in EU public money are being wasted on fossil gas. Far from modernising national energy systems as intended, it is only entrenching the reliance on fossil fuels, particularly for district heating.’ 

Krzysztof Mrozek, head of the EU Funds for Climate Programme at Polish Green Network, says:
‘Much of the new investment schemes approved for Modernisation Fund financing in Poland are meant to support what’s needed to catalyse the energy transition, such as energy communities and powering district heating systems with renewables. But once again the Modernisation Fund is keeping Poland hostage to false solutions – one being waste incinerators. In this disbursement cycle, over half a billion euro will be wasted on waste. This is nine times the amount requested by the Polish authorities this year for energy communities.’ 

Raluca Petcu, fossil gas campaigner with Bankwatch Romania, says:
‘While most of the financing is important for the transformation of the Romanian power system, questionable projects are still being approved that will only deepen Romania’s long-term dependence on fossil gas. The financing of the gas pipeline for Turceni and Ișanlița, which is in reality two separate projects, comes after the Modernisation Fund already backed the two new gas power plants with EUR 420 million in 2022. Instead of supporting residential energy efficiency and the development of energy communities, which are non-existent in Romania, the national government is determined to pump billions in public money into fossil gas that will jeopardise our future.’ 

 

Notes to editors: 

[1] The Modernisation Fund: An open door for fossil gas in Romania https://bankwatch.org/publication/the-modernisation-fund-an-open-door-for-fossil-gas-in-romania 

 

For additional information, please contact: 

Morgan Henley
District heating campaigner, CEE Bankwatch Network
morgan.henley@bankwatch.org
+420 605 798 716 

Raluca Petcu
Fossil gas campaigner, Bankwatch Romania
raluca.petcu@bankwatch.org
+40 770 209 187 

Krzysztof Mrozek
Head of the EU Funds for Climate Programme, Polish Green Network
krzysztof.mrozek@bankwatch.org
+48 501 793 296

Environmental groups slate EU plans to weaken nature safeguards in the Western Balkans, Ukraine, Moldova and Georgia

Following changes to the EU Renewable Energy Directive last year that weakened environmental safeguards for renewables, the Commission is now recommending (2) that the Western Balkans, Ukraine, Moldova and Georgia follow suit, despite their already inadequate nature protection (3).

The Recommendation would, if agreed on, be adopted at the Energy Community Ministerial Council at the end of this year. Although non-binding, it is expected to be seized on by governments eager to circumvent EU laws they have not yet fully implemented.

The countries are home to global biodiversity hotspots and their mountain, river and lake, karst fields and coastline habitats harbour numerous endangered and endemic species. But they lack legal protection and are under constant threat. 

The region has long been plagued by rampant hydropower development (4), but even solar and wind projects, although much-needed, are also starting to cause a public backlash due to poor siting, lack of public consultations and environmental assessments (5).  

The new Directive aims to improve spatial planning through designation of renewables acceleration areas that prioritise built-up and brownfield locations and avoid protected ones. 

But the Energy Community countries have protected as little as 4 per cent of their land, compared to 26 per cent in the EU (6). With such a low share, say the groups, instead of focusing on locations with low environmental impacts, the new Directive would ‘encourage their deployment almost everywhere in the Energy Community countries, including in highly sensitive locations, with very few safeguards.’

Most renewables in acceleration areas would be exempt from environmental impact assessments – often the only chance for the public to have a say on specific projects. As well as fomenting local opposition, this is inconsistent with the Environmental Impact Assessment Directive which is binding under the Energy Community Treaty.

The proposal ‘sends a completely inappropriate signal to the Western Balkans, Ukraine, Moldova and Georgia that nature protection and public consultations are no longer a priority when planning renewable energy’, according to the groups. 

Pippa Gallop, Southeast Europe Energy Policy Officer at CEE Bankwatch Network – ‘These countries have already tried to speed up hydropower without adequate safeguards and public consultations, so we know how this story ends: with court cases, protests and blockades. But while hydropower is an ageing, climate-vulnerable technology, solar and wind expansion are crucial and we can’t afford to mess them up.’ 

‘Renewable energy development must succeed, but it must avoid damaging nature, and it must have public buy-in’, conclude the groups, asking the Commission to revise its proposal to avoid conflicts with environmental safeguards.

The joint letter can be found here.

Contact:

Pippa Gallop,
Southeast Europe Energy Policy Officer
CEE Bankwatch Network
pippa.gallop@bankwatch.org
+385 99 755 9787

 

Notes for editors:

  1. The Energy Community Treaty is an international organisation which brings together the European Union and its neighbours to create a pan-European energy market. It was founded by the Treaty establishing the Energy Community signed in October 2005 in Athens, Greece, in force since July 2006. Its key objective is to extend the EU internal energy market rules and principles to countries in Southeast Europe, the Black Sea region and beyond on the basis of a legally binding framework. The current Contracting Parties are Albania, Bosnia and Herzegovina, Georgia, Kosovo, Moldova, Montenegro, North Macedonia, Serbia and Ukraine.
  2. See draft Ministerial Council Recommendation on accelerating the deployment of renewable energy projects and implementing the energy efficiency first principle.
  3. The European Commission regularly exhorts the countries to improve nature protection and uphold EU standards in its annual Enlargement package country reports. 
  4. For more on hydropower, see for example https://bankwatch.org/project/rivers, https://www.balkanrivers.net/en.
  5. For examples, see here and here.
  6. Area of land protected by law: e.g. 4 per cent of land in Bosnia and Herzegovina, 8 per cent in Serbia and 11 per cent in Georgia, compared to 26 per cent in the EU.

Bosnia and Herzegovina: Motorway-affected residents submit complaint to the UN

The complaint alleges violations of their rights to property and public participation in environmental decision-making. Some of the group are resisting expropriation procedures, while others will receive no compensation at all, despite having houses within metres of the motorway that will become uninhabitable and unsellable. Many of the group have already had to rebuild their lives after the 1990s war, and cannot face another upheaval.

The complaint details how the decision to route the motorway through villages, agricultural and tourist areas in the Neretva valley was taken without public consultations, breaching local legislation and depriving affected people of the chance to have a say.

Given the existence of an alternative route on the surrounding hills, whose rejection has never been convincingly explained, the group believe it is unjustified for the motorway to harm their properties.

Their view has been vindicated by the accountability mechanism of the European Bank for Reconstruction and Development (EBRD), which is financing this motorway section (3).

In early 2024, the accountability mechanism confirmed that the route selection process had breached the Bank’s policies and recommended analysing alternative alignments, together with a new environmental and social assessment (4). However, the EBRD has dragged its feet in remedying the breach of its standards and the project is currently in a deadlock.

Azra Duraković of Eko Dvogled says: ‘The EU and its banks have been proudly vocal about their financing of the Corridor Vc motorway, but much less so about the need to properly consult people about the routing. We are therefore turning to the UN to help uphold the affected people’s right to property, as a crucial source of income, security and stability, as well as the right to participate in decision-making.

The international community helped people to rebuild their lives in this area after the last war, and now they are complicit in building a motorway across their properties. This land can’t be ceded for an illegal and illegitimate motorway route, especially when reasonable alternatives exist.’

Contacts

 

Notes for editors

  • For background information on the project, see here.
  • For more about the United Nations Human Rights Council, see here.
  • For more on the EBRD financing, see here.
  • More information on the EBRD accountability mechanism’s findings is available here and here.

Civil society urges the EBRD to adopt responsible policies and reaffirm its commitment to promoting democracy

With the recent adoption of the ‘foreign representatives’ law in Kyrgyzstan and a similar ‘foreign influence’ bill set to be passed by the Georgian parliament, civic space continues to shrink in countries within the EBRD region. In this context, the need for enhanced human rights safeguards and a clear reaffirmation of the EBRD’s commitment to promoting multiparty democracy is more urgent than ever (3). 

Mark Martin, executive director of CEE Bankwatch Network, says: ‘International financial institutions must not turn a blind eye to the growing threats to civil society in Georgia and other countries in the region. If the situation in Georgia continues to escalate, we expect the EBRD, together with other international financial institutions such as the Asian Development Bank and the World Bank Group, to step up the pressure and halt funding to the government or entities linked to the ruling Georgian Dream party.’ 

As it revises its good governance policies this year, the EBRD has a golden opportunity to improve its human rights due diligence. Despite heavily increasing investments in green projects in recent years, the EBRD still lacks an effective system for safeguarding human rights, as highlighted in a joint statement on the EBRD’s draft safeguards signed by 60 civil society organisations. 

Nina Lesikhina, policy officer at CEE Bankwatch Network, says: ‘The EBRD’s efforts to engage with communities as part of its due diligence remains weak. At its Annual Meeting in Yerevan, the EBRD is once again seeking civil society’s views on its investments. But this practice should be routinely implemented at the project level as well. Communities should always have an opportunity to discuss project risks and impacts directly with the Bank. Their involvement helps to inform investment decisions and prevent harm during project implementation. But for this to happen, the EBRD needs to improve transparency and implement effective anti-retaliation measures to protect those who speak out.’ 

The EBRD is also currently reviewing its Agricultural Sector Strategy, an opportunity to learn from past mistakes and promote decentralised, fair and environmentally friendly agricultural production. This is particularly important for Ukraine as it rebuilds its economy. 

Anna Danyliak, national coordinator for Ukraine at Ecoaction and CEE Bankwatch Network, says: ‘While EBRD investments have helped increase agricultural production in its countries of operation, there’s still an urgent need to address regional and global challenges. In Ukraine, significant EBRD investments in the agribusiness sector have contributed to the rise of large-scale agriculture companies that now monopolise the market. However, these massive investment projects haven’t been subject to proper baseline assessments or environmental impact monitoring, with some approved before they were even disclosed. If the EBRD is truly committed to developing sustainable agri-food systems, this approach must be abandoned for good.’ 

Finally, Bankwatch urges the EBRD to address a range of issues with its new Sustainable Infrastructure Strategy, which guides its investments in solid waste, urban transport and highway infrastructure. To avoid harm, delays, as well as legal and financial risks, important decisions on the siting of facilities, the routing of transport corridors, and the assessment and management of potential risks and impacts on nature, cultural heritage, communities and livelihoods must be made transparently and in consultation with affected communities and stakeholders. 

Fidanka Bacheva-McGrath, Cities for People strategic area leader at CEE Bankwatch Network, says: ‘Sustainable infrastructure investments aimed at decarbonising cities and transport systems can only succeed if they ensure public participation, inclusion and accessibility, especially for vulnerable groups. All too often we see green projects facing problems during implementation or failing to achieve their transformative objectives. Despite the considerable challenges involved, there’s still huge potential for climate investments in the water, solid waste and transport sectors as long as the EBRD changes its approach to transparency, governance and affordability for the better.’ 

For more information, please contact: 

Michaela Kožmínová, Communications Officer at CEE Bankwatch Network | michaela.kozminova@bankwatch.org  

Notes for editors: 

(1) All Bankwatch materials for the EBRD Annual Meeting are available here: https://bankwatch.org/ebrd-annual-meeting-2024  

(2) The EBRD’s failure to protect human rights has been put into sharp focus on the Amulsar gold mine project in Armenia, the Indorama Agro cotton project in Uzbekistan, the Corridor Vc motorway project in Bosnia and Herzegovina, and many other projects that Bankwatch and its partners have been monitoring in recent years.

(3) See the statement by Bankwatch’s Executive Director on the shrinking civic space for civil society in Georgia, Kyrgyzstan and other EBRD’s countries of operation: https://bankwatch.org/blog/statement-by-bankwatch-s-executive-director-on-the-shrinking-space-for-civil-society-in-georgia-kyrgyzstan-and-other-ebrd-s-countries-of-operation 

More than money: New report reveals shortcomings in human rights policies of leading public development banks

A new report by FIDH and Bankwatch, released a week ahead of the EBRD Annual Meeting, reveals that the measures being implemented by four leading public development banks are not sufficient to prevent their projects from endangering human rights. 

Each year, public development banks make vital decisions on the financing of hundreds of development cooperation projects and business activities worldwide. Their lending policies commit to respecting human rights. Unfortunately, all too often, undertakings funded by these banks violate human rights despite having environmental and social safeguards in place

This has been proven in the cases of the Corridor Vc motorway in Bosnia and Herzegovina, the Indorama Agro project in Uzbekistan, the expansion of Budapest Airport in Hungary, the Mombassa Port Access Road in Kenya, and many other projects that Bankwatch and FIDH have been monitoring for years. 

Our report, entitled ‘More than money: Public development banks must strengthen human rights safeguards’, contends that the current environmental and social sustainability frameworks employed by the European Investment Bank (EIB), the EBRD, the French Development Agency (AFD), and the International Finance Corporation (IFC) – a member of the World Bank Group – provide a solid basis for exercising human rights due diligence. However, it reveals significant shortcomings in transparency and public participation in the identification, prevention, management and remediation of human rights risks and impacts. 

Anna Roggenbuck, Policy Officer at CEE Bankwatch Network, says: ‘Throughout all stages of the project life cycle – from assessment to implementation – the integration of human rights considerations can be improved. Quality procedures would allow bank staff to become more aware of the risks to human rights, an area in which no compromises should be acceptable.’

Gaelle Dusepulchre, Deputy Director of the Business, Human Rights & Environment Desk at FIDH, says: ‘Due diligence is key to ensuring sustainability and direct benefits for communities who are affected by these projects. By comparing the policies of these large banks, our analysis can contribute to a better understanding of the achievements that have been made and the challenges that remain to ensure that their work protects human rights and the environment.’

As the EBRD currently revises its good governance policies, it has a unique opportunity to take responsibility for the negative impacts of its investments and pioneer enhanced human rights due diligence among development banks.

For more information, please contact:

Anna Roggenbuck, Policy Officer at CEE Bankwatch Network  |  annar@bankwatch.org 

Lucia Posteraro, Communications Officer at FIDH  |  lposteraro@fidh.org | +33 7 81 21 26 05

EBRD approves EUR 98.6 loan for disputed fossil gas mega pipeline in North Macedonia

The Greece – North Macedonia gas interconnector project is also subject to formal complaints to the EBRD’s accountability mechanism and the Energy Community Secretariat in Vienna, as the legal requirement to hold national-level public consultations before giving environmental consent was breached. (2)

Moreover, neither the North Macedonia authorities nor the EBRD have assessed the pipeline’s most significant impact – the greenhouse gas emissions from burning the transported gas – nor have they disclosed why so much gas is needed or what it will be used for.

Ana Colovic Lesoska, Eko-svest – ‘The EBRD claims this pipeline will help North Macedonia move away from coal, but it’s too late to replace one fossil fuel with another. New gas is not needed for the power sector, as the country’s energy strategy shows. Well-sited solar and wind, geothermal and heat pumps must be prioritised now, not in 20 years.’

Pippa Gallop, CEE Bankwatch Network – ‘With climate chaos spiralling out of control, it’s obscene that the EBRD is still propping up fossil fuels with public money. This pipeline will either lead to a major increase in gas consumption or become a costly stranded asset. Today’s decision is infuriating, but it’s not the end of the story. We’ll keep working to stop the project and cut to a clean energy future.’

Contacts

Pippa Gallop, 

Southeast Europe Energy Policy Officer, CEE Bankwatch Network

pippa.gallop@bankwatch.org

+385 99 755 9787

Ana Colovic Lesoska, 

Executive Director Center for environmental research and information Eko-svest

ana@ekosvest.com.mk

+38972726104

Notes for editors

  1. EBRD project summary document: https://ebrd.com/work-with-us/projects/psd/51747.html
    More information on the project is available     here.
  2. For more information on the complaints, see here and here.