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No excuses for the EIB to finance Sostanj

Ljubljana — The Slovenian parliament has ratified today – in an extraordinary session, right before the start of the Christmas holidays – the state guarantee contract between the European Investment Bank and the Slovenian government for a 440 million euros loan for the construction of a new coal unit at Sostanj.

After the Slovenian government too approved the state guarantee on 6 December, the parliament vote is the last step needed for the EIB to disburse the money. The management of the bank is now expected to make a final decision on the disbursement. However, the EIB also has to take into account that there is an ongoing OLAF (European Anti-Fraud Office) investigation into allegations of corruption against the management of the new block.

The new block at Sostanj is estimated to cost 1.3 billion euros, and could not be constructed without the 550 million euros promised by the EIB (110 million have been paid already) and an additional 200 million euros expected to come via the European Bank for Reconstruction and Development (EBRD).

“Under no circumstances should the EIB disburse the remaining 440 million euros to Sostanj – this is one of the worst investments to support from European public sources,” comments Lidija Zivcic from Slovenian NGO Focus.

“The emissions from the 600 MW lignite block would prevent Slovenia from meeting its 2050 climate targets, and the corruption investigation concerning the management of the project has still not been completed by OLAF,” adds Zivcic. “Disbursing money before the conclusion of this ongoing investigation is not only highly risky for the bank but it could also make the EIB breach its own internal policies and thus be seen as an improper use of EIB funds.”

“Additionally, the economic viability of the project is highly questionable. The Slovenian government has failed to make sure its own recommendations for energy investments are met; moreover, it is clear that the project as it is right now will never bring profit if the EU 2050 decarbonisation roadmap is respected,” adds Nina Stros from Greenpeace in Slovenia. “If we also consider the extreme social costs that burning lignite causes, it is hard to see any reason for the bank to support this project.”

The European Investment Bank, the EU house bank, has this autumn launched a process of reviewing its energy lending policy in order to align it better with EU climate goals.

“Climate science says it loud and clear that we cannot be investing any more in fossil fuel infrastructure as of today,” comments Pippa Gallop from CEE Bankwatch Network. “Putting this money into Sostanj right now, as the EIB is revising its loans in the energy sector, is a slap in the face for people who believe that the EIB is engaging in an honest process to clean up its lending. Financing such a damaging project is inadmissible behaviour coming from a public bank.”

Notes for the editors:

1. Read an independent assessment of the economic viability of the new plant, showing Sostanj is not a solid investment:
https://bankwatch.org/sites/default/files/Sostanj-TES6-economics.pdf

And an analysis of the conditions posed by the Slovenian authorities on the constructors (unlikely to be met):
https://bankwatch.org/news-media/blog/financial-alchemy-slovenias-energy-sector-still-results-lignite-not-gold

2. Slovenian state commission for the prevention of corruption says conditions for corruption were present in the awarding of the equipment contract for the new plant to Alstom and says works should not go ahead until allegations are cleared:
https://bankwatch.org/sites/default/files/StateCommissionReport-corruption-TES6-23Feb2012.pdf

3. OLAF opens investigation into the allegations of corruption:
https://bankwatch.org/sites/default/files/Slovenia%20Investigation.pdf

4. Operating TEŠ6 will result in emissions of 3.4 mt CO2 per year, which is equivalent to almost all of Slovenia’s emissions in 2050 (if it cuts emissions by 80 percent – a minimum according to the European targets of 80-95 percent).

5. The European Investment Bank, the EU house bank, has a mandate to further EU objectives, including when it comes to climate change policies.
http://www.eib.org

For more information, contact:

Lidija Zivcic
Focus Slovenia
lidija at focus.si
+386 5 907 13 26

Nina Stros
Greenpeace Slovenia
nina.stros at greenpeace.si
+386 40 871 530

Pippa Gallop
CEE Bankwatch Network
pippa.gallop at bankwatch.org
+385997559787

New report shows World Bank tough talk on climate is just a mirage in Mongolia’s Gobi desert


Ulaanbaatar, Mongolia – Just one week after its grim warning during the UN climate talks in Doha that the world is on a path towards a four degree-rise in global temperatures, the World Bank is set to approve financing for yet another coal plant. The plant will power a giant mining complex in Mongolia’s South Gobi desert, fuelling climate change and violating the Bank’s own policies, argues a new analysis from advocacy groups (1).

The groups reviewed the environmental and social impact assessment (2) prepared by mining conglomerate Rio Tinto for its US$13.2 billion Oyu Tolgoi copper and gold mine and associated facilities, including a 750 megawatt thermal coal power station. Rio Tinto’s assessment was submitted to the World Bank Group and the European Bank for Reconstruction and Development (EBRD) in order to be considered for project finance (3).

The groups found that Rio Tinto’s assessment contravenes World Bank guidelines for approving coal power projects because it does not include an assessment of the power plant or the cumulative impacts of the project over its full life cycle. The assessment also fails to provide any meaningful consideration for low-carbon alternatives or support for renewable energy projects, and fails to adequately account for CO2 emissions, all issues that the institution requires an expert panel to consider for each and every coal plant they consider financing (4).

Justin Guay of the Sierra Club explains, “The World Bank’s climate credibility is on the line. Fast tracking this project, without following existing coal screening policies, just doesn’t jive with Dr. Kim’s statement that climate change is ‘tilted against many of the world’s poorest regions and likely to undermine development efforts and goals’.”

The groups also contend that Rio Tinto’s analysis does not adequately assess the impacts of the project on the arid region’s already scarce water supply and its threat to the traditional way of life for the nomadic herders who have lived in the region for centuries. The project necessitates the use of fossil and deep water aquifers, yet the Rio Tinto’s assessment offers no effective proof that this will not impact the herders or their livestock.

According to Sukhgerel Dugersuren, Executive Director of the Mongolian NGO Oyu Tolgoi Watch, “Rio Tinto’s blatant disregard for the people who call the Gobi Desert home and the water resources they depend on for their survival should be a clear signal to international financial institutions that the project cannot receive funding in its current design.”

Based on the review’s findings, the groups are requesting that the World Bank and EBRD delay consideration of the Oyu Tolgoi project until Rio Tinto demonstrates that there are enough water resources in the Gobi for the lifetime of the project and takes concrete measures to mitigate its environmental and social impacts, and the World Bank convenes an expert panel to consider low-carbon alternatives.

“Before considering this project any further, the World Bank and EBRD need to go back to the drawing board and commission an independent, robust and transparent review of the environmental and social impact assessment that genuinely evaluates the impact on scare water resources and the coal projects’ compliance with bank policies. They must also create concrete plans for alleviating the mine’s impacts on local people and their livelihoods,” added Sukhgerel.

A decision on the project by the World Bank is expected at the end of January, and the EBRD will consider the project in February. The U.S. Export-Import Bank, Export Development Canada and the Australian Export Finance and Insurance Corporation are also considering financing the project.

Notes for editors

1. The ESIA review was conducted by the Accountability Council (US), Bank Information Center (US), CEE Bankwatch Network (regional), London Mining Network (UK),OT watch (Mongolia), Sierra Club (US) and urgewald (Germany), with assistance from other independent experts.

2. The full review of the Environmental and Social Impact Assessment and its implications for the WB loan is available at http://www.bicusa.org/proxy/Document.103001.aspx and the review’s implications for the EBRD at: https://bankwatch.org/sites/default/files/a-useless-sham-OT-ESIA-review-14Dec2012.pdf. An Environmental and Social Impact Assessment conducted by Oyu Tolgoi LLC, the Rio Tinto subsidiary that manages the mine, was released in August 2012, as required by the World Bank Group and the EBRD for projects with significant adverse social and environmental impacts, after eight months of delay.

3. The World Bank’s International Finance Corporation and Multilateral Investment Guarantee Agency are slated to provide US$900 million in loans and up to US$1 billion in political risk insurance respectively, while the amount that the EBRD is considering is still unknown.

4. The full analysis of the World Bank policy violations associated with the coal plant is available at http://action.sierraclub.org/site/DocServer/Tolgoi_assessment_Final.pdf?docID=11801.

For more information, please contact:

Sukhgerel Dugersuren
Executive Director, OT Watch
Tel.: +976 99 185 828
otwatch at gmail.com

Jelson Garcia
Bank Information Center
Tel.: +1 202 624 0622
jgarcia at bicusa.org

Richard Harkinson
London Mining Network
Tel.: +44 7563 238179
research at londonminingnetwork.org

Nicole Ghio
Sierra Club
Tel.: +1 202 675 6270
nicole.ghio at sierraclub.org

Dirty coal gets closer to receiving almost half a billion euros from EU taxpayers

The European Investment Bank (EIB) is gearing up to pay 440 million euros to a new 600 MW lignite plant in Slovenia at a time when calls for an end to subsidies for fossil fuels are intensifying all over the world.

On Friday, November 30, the Slovenian ministries of finance and infrastructure signed contracts with the management of TES (the constructors of a new block at the Sostanj lignite plant) in view of offering a state guarantee for a loan of 440 million euros from the EIB needed if the 1.3 billion euro project is to go ahead. The guarantee still has to be discussed by the Slovenian government and ratified in the parliament.

“Despite huge controversy over this project in Slovenia, the ministries pulled it off to sign these contracts on the very last day of the most recent deadline set by the EIB,” explains Barbara Kvac from Slovenian NGO Focus. “Yet these signatures actually put the EIB in front of a serious test of its credibility. On the one hand, the bank must be under significant pressure to hand over the money, but on the other, state guarantee or no state guarantee, there are still several investigations ongoing into suspected corruption in the project that the EIB should see the results of before paying any money.”

Both OLAF (the European Anti-Fraud Agency) and the EIB are currently conducting investigations into corruption allegations in the management of Sostanj.

“In addition to corruption, the EIB has to also worry about the risks to its credibility represented by such a large investment in a lignite plant at a time when bodies like the International Energy Agency, the World Bank and others are calling for an end to subsidies for fossil fuels,” says Pippa Gallop, Bankwatch research coordinator. “In October this year, the EIB started a process of reviewing its energy policy, partly to make it more in line with climate science. What kind of an energy policy can we expect from the bank next year if the debate around it coincides with payments made to a new coal plant?”

There are also serious concerns about the viability of the project as a whole, which should serve as serious warning for a European public bank. In July, Slovenia’s parliament gave a half-hearted go-ahead to the project, but only under certain conditions, laid out by the government in February, such as keeping project costs below EUR 1.3 billion, completing construction by 15 February 2016, keeping carbon emissions under a certain level and the maximum price of lignite at EUR 2.25/GJ and ensuring that the project has an internal rate of return of at least 9 percent.

The problem is, some of the conditions set out by the government are virtually impossible to meet. Even in the revised investment program (IP5), projections on the project’s profitability do not come anywhere near 9 percent, and are diminishing as time goes on. Keeping the lignite price at EUR 2.25/GJ is also unrealistic given that it already cost EUR 2.7/GJ in 2011 and as the Velenje mine (the source of the lignite) becomes exhausted – projected to happen at around the same time as Sostanj Unit comes to the end of its life – it is hardly likely to get cheaper.

For more information, contact:

Barbara Kvac
Focus Slovenia
Barbara at focus.si
Tel.: +386 5 907 13 25

Pippa Gallop
CEE Bankwatch Network
pippa.gallop at bankwatch.org
Tel.: +385997559787

Collapse of EU budget talks short-changes people and planet

With today’s collapse of negotiations at the EU budget summit in Brussels, environment groups CEE Bankwatch Network and Friends of the Earth Europe called on countries to focus their efforts on agreeing a deal in the new year that has quality EU spending [1] at the top of the agenda.

Markus Trilling, EU Funds coordinator for CEE Bankwatch Network and Friends of the Earth Europe, said: “”Europe’s people and our environment have been let down by our leaders once again, and for what? While opposing member states have been fixating over sums as tiny as 0.005 percent of total EU GDP, the pressing issues of climate change, environmental degradation and resource use have been totally short-changed.

““If a further Budget summit goes ahead in the new year, it must put the quality of EU spending at the top of the agenda, and recognise the huge potential of this money for improving the quality of life in Europe, our shared environment and our economic prospects.

““A 25 percent ‘green’ EU budget for 2014-2020 would unlock substantial investment money for projects like energy savings and renewables that will cut our greenhouse gas emissions, create millions of new green jobs and reduce fuel poverty.

““Linking direct payments for farmers to strict environmental conditions and dedicating funds to protect nature will be crucial for delivering overall ‘green’ objectives.

“Europe’s leaders simply cannot afford to let a positive, quality-driven deal go begging again.”

For more information please contact:

Markus Trilling
EU Funds campaigner at CEE Bankwatch/Friends of the Earth Europe
Tel:+32 (0) 484 056 636
markus.trilling AT foeeurope.org

Notes

[1] Visit www.wellspent.eu to see how European projects funded by Cohesion Policy are working for the environment, society and the economy.

EU budget negotiations must tackle mistakes of past with focus on quality spending

Brussels, November 22, 2012 – As European leaders gather in Brussels today for the EU budget summit, quality spending must be the focus of discussions if the future European budget is to tackle Europe’s environmental and economic crises, according to environment groups CEE Bankwatch Network, Friends of the Earth Europe and Transport & Environment.

European spending has often been misguided and damaging, through investments promoting fossil fuel use, carbon-intensive projects or the destruction of nature [1], according to the three organisations. In times of economic and environmental crisis, quality spending on public transport, sustainable food production, renewable energy and energy efficiency projects can trigger environmental protection and sustainable development [2].

Markus Trilling, EU Funds coordinator for CEE Bankwatch Network and Friends of the Earth Europe, said: “Discussions on how much to spend have predictably dominated the run-up to the Budget summit, but negotiators need to focus on the quality of spending. People living in Europe could be forgiven for not knowing the huge potential this future budget has to work for them, their quality of life, their shared environment and their economic prospects.”

The environment groups maintain that the European Commission’s proposal to allocate 20 percent of the total budget for measures to address climate change does not go far enough, and are instead calling for a 25 percent ‘climate mainstreaming’ figure to be agreed in order to tackle both Europe’s environmental and economic crises [3].

Markus Trilling continued: “The EU’s budget for 2014-2020 represents a historic opportunity to address the environmental crisis, protect biodiversity, and help stop the worst impacts of climate change. A 25 percent ‘green’ EU budget for 2014-2020 would unlock even more investment money for projects, like energy savings and renewables, which will cut our greenhouse gas emissions, create millions of new green jobs and reduce fuel poverty.”

Speaking on greening commitments for the Common Agricultural Policy, Stanka Becheva, agriculture campaigner for Friends of the Earth Europe said: “European rural areas have lost millions of farmers, and intensive agriculture practices have led to the loss of biodiversity and polluted soil and water. The present economic and planetary crises are putting small scale sustainable farmers out of business. Linking direct payments to obligations to protect the environment – strong mandatory greening – will ensure targeted spending that tackles these challenges.”

Transport and Environment maintain that support for regional airports in Poland and Spain with little air traffic do not justify the significant costs incurred. European money should be spent on more efficient projects – those that manage existing infrastructure more smartly, such as road user charges or the European Rail Traffic Management System.

Nina Renshaw, deputy director of Transport & Environment, said: “Our prime ministers and presidents have a real opportunity to prove that they have learnt from past mistakes and have smarter, more sustainable plans for our money. In the past, EU money has been wasted, with subsidies for highly polluting industries, new airports and highways being built in the wrong places, for the wrong reasons. These kind of projects cost far more in false hope than they gave back to local communities.”

“This time around the EU should direct the billions to where they can make the biggest difference, such as smart grids to bring clean renewable energy to homes and to electrify transport, and to projects which save energy and ultimately save money, instead of wasting it,” Nina Renshaw concluded.

For more information please contact:

Markus Trilling
EU Funds campaigner at CEE Bankwatch/Friends of the Earth Europe
Tel: +32 (0) 484 056 636
markus.trilling at foeeurope.org

Sam Fleet
Communications officer, Friends of the Earth Europe, (EN)
Tel: +32 (0) 2893 1012
Mob: +32 (0) 470 072 049
samuel.fleet at foeeurope.org

Notes for editors:

[1] EU funds in Central and Eastern Europe: Roadmap to sustainability or dead-end investments. The CEE Bankwatch map presents environmentally and socially harmful projects financed or in line for financing by the European Union during the period 2007-2013:
https://bankwatch.org/billions/

[2] Visit http://www.wellspent.eu to see how European projects funded by Cohesion Policy are working for the environment, society and the economy.

[3] http://www.foeeurope.org/MEPs-positive-signal-greening-EU-budget-111012

Press Briefing for European Summit 22-23rd November: How to ensure strong green spending runs throughout the Multiannual Financial Framework 2014-2020

Download the full briefing as pdf

This week’s European Council will be crucial for ensuring that the Multiannual Financial Framework 2014-2020 (MFF) mobilises sustainable investments that can create millions of jobs and take Europe forward on a solid footing out of the crisis. Environment NGOs – Birdlife Europe, Conservation International Europe, CEE Bankwatch Network, European Environment Bureau, Friends of the Earth Europe, Transport & Environment and WWF – are campaigning for future EU funds to bring more environmental benefits and public goods, deliver on jobs and economic opportunities, cut harmful subsidies and achieve European 2020 and 2050 climate, energy and environmental targets.

Ensuring that funds are better spent is therefore our main priority. The current overall MFF proposal is far from green: it is a lost opportunity. There is a lot of room to shift MFF allocations towards better spending and to relocate funds to greener sectors. Therefore we wish to draw your attention to five key issues for the Council that could substantially increase the chances of the next MFF delivering multiple benefits:

1. Climate action: Ensure that 25% of the next MFF supports climate action

The European Commission introduced a 20% MFF support for climate action, endorsed by the Parliament and recently too by President of the European Council, Mr Van Rompuy. We are asking for 25%, a minimum for incentivising an eco-innovative economy based on renewables in Europe. It will help Europe to create new quality jobs, improve the well-being of EU citizens and achieve near decarbonisation by 2050.

2. Common Agricultural Policy (CAP): Ensure the delivery of public benefits

Increasing the long term sustainability of the farming sector is essential for preserving environmental public goods and for job creation in rural areas – achievable through mandatory greening of direct payments and a strong Rural Development pillar. We consider that half of total CAP funds should be allocated to Rural Development, of which at least 50% should be earmarked for the environment. In addition, a minimum 30% of direct payments should support a greening package of meaningful agricultural practices at the farm level linked to the basic payments.

However, the proposal of the President of the European Council, Mr van Rompuy, fails to rebalance the allocations between the two pillars – it may very likely be the opposite.

3. Cohesion Policy and Connecting Europe Facility (CEF): Put sustainability at the heart of regional development and infrastructure investments

In order to deliver on Europe 2020 objectives as well as 2050 climate and environmental objectives, Cohesion Policy and the CEF should aim at reducing – not increasing – energy and resource consumption in order to create sustainable and secure jobs and boost economic opportunities.

Prioritised support for energy savings, renewable energy and clean transport projects should be accompanied by the prevention of any harmful social and environmental impacts. For this purpose environmental safeguard mechanisms (‘climate and biodiversity proofing’) throughout the whole programming cycle need to be applied.

4. Ensure that LIFE (Environment and Climate fund) receives 1% of the next MFF

The Parliament is asking for LIFE to be strengthened. A modest 1% of the MFF for this successful fund will strongly contribute to achieving the EU target to halt biodiversity loss by 2020 through innovative environmental projects.

5. Europe’s external dimension: important international commitments that are being forgotten

The European Commission’s proposal for an increased Heading 4 is a bare minimum, as underlined by the Parliament. It should be maintained, and not cut, to allow Europe to deliver on its international development, climate and biodiversity commitments. President van Rompuy’s proposal does not satisfy this and threatens EU’s credibility at the global stage.

[…]

Download the full briefing as pdf