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Climate action missing as ministers dance around EU budget ‘Pandora’s box’

Brussels, Belgium — Today’s General Affairs Council meeting to discuss the EU’s next Multiannual Financial Framework 2014-2020 (MFF) saw further stalemate between those member states seeking to ensure no cuts to the European commission’s outline MFF proposals, and those member states determined that cuts must occur while insisting that the emphasis must instead be on the ‘quality’ of future MFF spending.

CEE Bankwatch Network, an organisation campaigning for a more sustainable future EU budget, expressed its disappointment that for all the talk of quality, climate mainstreaming, one of the fundamental quality drivers within the current MFF proposals, was noticeably absent from the meeting discussions. [1]

The European Commission has proposed that a minimum of 20 percent of the MFF would be committed to tackling climate change in areas including Cohesion Policy, Common Agricultural Policy, Development Policy and Research and Development. Bankwatch is calling for a 25 percent climate action commitment in the MFF.

Markus Trilling, EU Funds coordinator for Bankwatch, commented:

“With only a few weeks to go now until decision time, these Budget 2014-20 negotiations are starting to make a mockery of the aspirations of Europeans, the pressing need to do something about climate change and the imperative to create sustainable jobs.

“The European commission has proposed a 20 percent allocation for climate action in the MFF, we are saying that a 25 percent climate allocation can really help deliver the EU’s 2020 climate change strategy and get the most out of the future budget, for people living in Europe. The member states, though, as we saw today are shadow-boxing around a negotiating box that without real figures attached to it is looking more and more like Pandora’s box.

“The longer that real figures remain off the table, the more likely it is that climate action will get crunched in the final outcome. Even if some ‘green’ concessions gain agreement, and increased percentages of climate money allocations are introduced, an overall reduced budget for 2014-20 could well lead to the perverse situation where, in real terms, there is less money than in previous budgets for vital climate spending. It’s time to see the figures, and for member states to make the case explicit for a high quality, climate action focused MFF.” [2]

For more information, contact:

Markus Trilling, EU Funds coordinator, CEE Bankwatch Network
Tel: +32 484 056 636
Email: markus AT bankwatch.org

Notes for editors:

1. Bankwatch was one of the signatories to a letter published on September 20 in the European Voice, making the case for increased climate action allocations in the EU budget 2014-20, available at: http://www.europeanvoice.com/article/imported/climate-change-must-be-part-of-budget-talks/75189.aspx

2. [2] A recent Bankwatch study suggests real figures for seven CEE countries by compiling investment needs for the energy efficiency and renewables sectors. Read more in Bankwatch’s press release:
https://bankwatch.org/news-media/for-journalists/press-releases/no-half-measures-investment-needs-energy-efficiency-and-re

World Bank and Others Poised to Invest in Rio Tinto’s Flawed Mongolian Mining Project

Ulaanbaatar, Mongolia — The World Bank Board of Directors has announced plans to consider a copper and gold mining project in the Mongolian South Gobi desert even though the Bank itself acknowledges that there is not enough water in the region to support the life of the Project. Despite ongoing community opposition to Rio Tinto’s Oyu Tolgoi mine and its associated facilities (“OT Project”), the World Bank is considering a financing package of US$900 million in loans and up to US$1 billion in political risk insurance for the OT Project in early November.

The OT Project has faced fierce community resistance in Mongolia for years. The company’s recently released Environmental and Social Impact Assessment (“ESIA”) does little to alleviate concerns that the Project will destroy the fragile South Gobi ecosystem, as well as the traditional way of life for the nomadic herders who have lived in the region for centuries. Richard Harkinson of the London Mining Network calls the ESIA “an elaborate and costly hoax, designed to avoid addressing the most controversial aspects of the OT Project.” As he explains, “the assessment only covers the construction phase of the Project, which is already over 94% completed. Rio Tinto, the Project manager, has not disclosed any plans for how it will manage the severe environmental impacts of the OT Project’s operations, which will begin in a few months.”

According to Jelson Garcia of the Bank Information Center, “The Bank should not even consider investing in the OT Project until an ESIA covering key stages of the Project, including operations and decommissioning or closure of the mine, has been disclosed and accepted. To approve the Project now, on the basis of an ESIA covering only the construction of the OT mine, would violate Bank policies and risk damaging its reputation.” Other investors currently considering the estimated US$13.2 billion Project, despite the woefully deficient ESIA, include the European Bank for Reconstruction and Development, the U.S. Export Import Bank, Export Development Canada, the Australian Export Finance and Insurance Corporation, Standard Chartered and BNP Paribas.

The lack of information in the ESIA about the true impacts of the OT Project is exacerbated by Rio Tinto’s inadequate consultations with the most directly affected nomadic herders. “Rio Tinto has not organized meaningful, participatory, and culturally appropriate public consultations with the affected herders,” explains Sukhgerel Dugersuren, Executive Director of OT Watch, an organization working with affected herders. “Although Rio Tinto organized one meeting on the ESIA in Khanbogd, it was deeply flawed and inaccessible. Notice was given only 2 days before the meeting, making it impossible for many affected herders to attend, given that they live between 20 and 60 kilometers from Khanbogd. Additionally, only 2 copies of the Mongolian translation of the ESIA were provided during the meeting, thus those attending were not able to review the document before the meeting. Instead of organizing further meetings, Rio Tinto intends to speak with affected herders individually. This tactic of talking to herders one-on-one tends to intimidate them, making it unlikely that they will raise their concerns about the Project.”

Several herders have already experienced devastating herd loss and other impacts after being forced to resettle because of the OT Project. They have found Rio Tinto largely unresponsive to their concerns. The long-delayed release of the ESIA, and the rapidly approaching date for the World Bank Board of Directors’ consideration of the Project, gives concerned community members and the organizations assisting them little time to meaningfully comment on the details of the 2,000-page assessment. Additionally, despite the voluminous nature of the document, it does not comprehensively address the destruction of pastureland, the diversion of the Undai River, the impacts of the mine’s associated facilities, including the company’s the company nearby international airport, being built on the herders’ reserve pasture, and the 450 megawatt coal-fired power plant that will be built to provide power to the Project, or the cumulative and aggregate impacts of all projects in the region.

For more information, please contact:

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

Jelson Garcia, Bank Information Center,
+1 202 624 0622
jgarcia AT bicusa.org

Sarah McNeal, Bank Information Center
+1 202 624 0622
smcneal AT bicusa.org

Richard Harkinson, London Mining Network
+44 7563 238179
research AT londonminingnetwork.org

Vladlena Martsynkevych, CEE Bankwatch Network
+380 44 353 78 42
vladlena AT bankwatch.org

Regine Richter, Urgewald
+49 3028482270
regine AT urgewald.de

Sarah Singh, Accountability Counsel
+1 415 296 6761
sarah AT accountabilitycounsel.org

EBRD should not invest in Polish energy company suspected of corruption, say European NGOs

Warsaw – The European Bank for Reconstruction and Development is considering participating in a EUR 772 million loan for a subsidiary of major Polish energy group ENEA, whose management is currently being investigated by authorities because of alleged irregularities in management and misuse of public funds.

On October 30, the EBRD is set to decide whether it would participate with approximately EUR 194 million* to a total EUR 772 million loan from several international development banks benefiting ENEA Operator, a fully owned subsidiary of ENEA S.A., the majority state-owned top company of the ENEA Group (1). The European Investment Bank has already decided in favour of contributing to this loan. (2)

CEE Bankwatch Network together with a coalition of 20 European environmental NGOs (3) is asking the EBRD not to offer European public money to ENEA Operator until allegations of mismanagement and misuse of public funds at the mother company, ENEA S.A., are cleared by investigators. At the moment, the Polish Interior Security Agency (ABW) and Central Corruption Agency (CBA) are closely checking alleged irregularities in ENEA’s management and the district public prosecutions office in Poznań has opened a corruption investigation of ENEA (4). Furthermore, financial irregularities at ENEA S.A. have been repeatedly discussed publicly in the Polish Parliament. (5)

“After years of monitoring the EIB and the EBRD, we have seen too many cases of these banks signing public loans for corrupted Eastern European company managers; it happened as recently as last year in Serbia and in Slovenia,” says Kuba Gogolewski, Polish energy coordinator at CEE Bankwatch Network. “More and more eyes are turning to the practices of the banks and they simply cannot afford to get involved in yet another case where corruption is suspected.”

Additionally, the NGOs are asking the EBRD not to decide in favour of this loan on the grounds that it would indirectly contribute to the expansion of coal power use in Poland (6) at a time when no more investments in fossil fuels should be made because of the climate imperative and after a year in which Poland has blocked a series of EU climate-friendly initiatives not least because of its extensive coal dependence. (7)

Notes for editors:

* This is the equivalent of the PLN 800 milion amount quoted on the EBRD website describing the project:
http://www.ebrd.com/english/pages/project/psd/2012/43001.shtml

(1) About ENEA Group:
http://www.ir.enea.pl/en/information_about_the_enea_capital_group/

(2) The European Investment Bank has not yet signed the contract, but it has already approved the loan on the 24th of April 2012: http://www.eib.org/projects/pipeline/2011/20110355.htm

(3) The European Coal Finance Campaign is made up of over 20 member and partner organizations, a list of which is available here
http://www.banktrack.org/show/pages/europe

(4) See two articles in main Polish media:
http://polska.newsweek.pl/psl-w-biznesie–czyli-elektrownia-ludowa,94258,1,1.html
and
http://www.ekonomia24.pl/artykul/706160,927127.html?p=1
and read the letter sent by NGOs to the EBRD on the topic of mismanagement at ENEA at:
https://bankwatch.org/sites/default/files/letter-EBRD-ENEA-13Sep2012.pdf

(5) Details on the ongoing investigations in Poland on the Bankwatch blog:
https://bankwatch.org/news-media/blog/another-case-alleged-corruption-cee-energy-company

(6) The PLN 800 million (EUR 192 million) are nominally to be invested by ENEA Operator into a better distribution network. But the main investment priority for ENEA S.A. in this period is the construction of a new 1000 MW coal block next to Warsaw (Kozienice unit 11). ENEA S.A. at the moment finds itself in a very good economic situation, with a net profit of PLN 456 million (EUR 111 million) in the first half of 2012. Additionally, ENEA S.A. has secured PLN 4 billion (one billion euros) through an agreement with a consortium of five banks on a corporate bond issue. This means that if the company was to drop its plan to invest PLN 6.28 billion (EUR 1.53 billion) in Kozience unit 11 (according to current estimates), it would dispose of sufficient resources to carry out the extensive investment programme upgrading ENEA Operator’s distribution network (estimated to cost PLN 3.2 billion, or EUR 0.77 million, for 2012-2015).

(7) Read more about Polish positions in EU negotiations on the Bankwatch blog:
https://bankwatch.org/news-media/blog/fossil-fuels-rebranded-low-carbon-also-cohesion-policy-discussions

For more information, contact:

Kuba Gogolewski
Bankwatch Polish energy coordinator
kuba.gogolewski at bankwatch.org
(0048) 22 892 06 14

No Half Measures: Investment Needs in Energy Efficiency and Renewables in Central and Eastern Europe

Brussels — At least 172 billion euros need to be invested in energy efficiency and renewables in central and eastern Europe over the next seven years to kick start the decarbonisation of the region and create hundreds of thousands of much needed jobs, shows a study published today by CEE Bankwatch Network [1]. The next EU budget (2014-2020) could contribute to these needs if current short-sighted attempts by some member states to cut the overall size of the budget are prevented.

The Bankwatch study compiles investment needs for the energy efficiency and renewables sectors from seven CEE countries, namely the Czech Republic, Poland, Hungary, Slovakia, Slovenia, Bulgaria and Latvia. Summed up, investment needs in these seven countries amount to 24.626 billion euros yearly, adding up to 172.382 billion over seven years.

Last fall, the European Commission proposed that approximately 30.83 billion euros would be available for all 27 EU member states for low carbon measures from the next European budget, primarily from regional funds (the European Regional Development Fund and the Cohesion Fund).

“Compared to the calculated investment needs for just 7 CEE countries, it is clear that the amount suggested to be set aside by the European executive is not enough and can only give a small push in the right direction,” comments Ondrej Pasek, Bankwatch energy campaigner and coordinator of the study. “If member states decide to cut the entire next EU budget, any chance for a real positive change would be compromised.”

Governmental and scientific studies of existing projects and future projections reviewed by Bankwatch in the study show that investments in energy efficiency and renewables come not only with important climate benefits but also with positive economic and job creation effects that cannot be ignored in times of economic crisis.

For example, the Bulgarian National Renovation Programme calculates that renovating 680 000 households by 2020 could lead to avoiding emissions of half a million CO2 tonnes, while at the same time creating over 60 000 jobs. To achieve these results, around 2.1 billion euros have to be invested by 2020.

“Studies show that investments in deep renovation of buildings to make them energy efficient create more than twice as many jobs as the construction sector does on average, but this is a bit of information we do not hear that much in spite of its huge importance at a time when we deal with economic recession and when Europe struggles to reduce regional disparities,” comments Pasek.

“Helping to satisfy the huge investment needs in the EE and RES sectors in CEE is a straightforward way to put Europe on a smart, sustainable and inclusive development pathway,” adds the campaigner. “If Europe is to lead on decarbonisation efforts, it is crucial to set aside 30 percent of the next EU budget for low-carbon measures – even more so if member states decide to reduce the overall sum.”

Table: Examples of positive effects of energy efficiency and renewables investments from the 7 CEE countries under analysis.

Notes for the editors:

1. Read Bankwatch’s study “No Half Measures: Investment Needs in Energy Efficiency and Renewables in Central and Eastern Europe” at:
https://bankwatch.org/sites/default/files/no-half-measures.pdf

2. Read more about the European Commission’s proposals for the next EU budget published last year:
https://bankwatch.org/checklist-eu-cohesion-policy

3. Read Bankwatch and Friends of the Earth Europe’s more detailed recommendations for EU regional funds 2014-2020 and how they can put Europe on a sustainable development path, ‘Funding Europe’s future’ October 2011, at:
http://www.foeeurope.org/publications/publications2011.html

For more information, contact:

Ondrej Pasek
Bankwatch energy campaigner
ondrej.pasek at bankwatch.org
+420 608 381 602

Markus Trilling
Bankwatch EU Funds coordinator
markus.trilling at bankwatch.org
+ 32 484 056 636

State guarantee vote for TES 6 overshadowed by OLAF corruption investigation

A state guarantee law supporting the construction of a 600 MW lignite plant at Sostanj in Slovenia (TES 6) was passed this week despite allegations of corruption against the management of the company remaining unsettled. Even more, the European Anti-Fraud Office (OLAF) recently opened an official investigation into TES 6. (1)

The Slovenian parliament adopted Wednesday July 18 a state guarantee law necessary for the disbursement of four fifths of a 550 million euro loan from the European Investment Bank for the construction of a new unit at coal plant Sostanj.(2) The European Bank for Reconstruction and Development had expressed an intent to lend an additional 100 million euros for the project, with the two public banks together set to cover half of total costs. (3)

The state guarantee law was voted for by an unimpressive 29 parliamentarians (only 59 out of the total of 90 MPs were present at the vote, and of those present 20 opposed the law and 10 abstained). The law on state guarantee might still be put on hold next week if opponents of the project manage to collect 2.500 signatures to start the referendum initiative to reject the law.

More importantly, the state guarantee law was voted without important allegations of corruption and fraud raised earlier this year by a State Commission for the Prevention of Corruption (4) being properly investigated by national authorities. Investigations into corruption and fraud at TES 6 started by the National Investigations Office and local police had not been completed at the time of the vote.

Significantly, the European Anti-Fraud Office (OLAF) announced in June that it would open its own investigation into the corruption and conflict of interest allegations at TES 6. The EIB and the EBRD too are at the moment conducting their own internal investigations into the corruption allegations.

“The EIB and the EBRD could think that the approval of the state guarantee will allow them to finally move ahead with disbursing the payments,” comments Bankwatch energy coordinator Piotr Trzaskowski. “But this is far from the truth: the EIB and the EBRD cannot escape the responsibility of sorting out the corruption and fraud accusations related to this project. Only the completion of the banks’ own internal investigations and the finalisation of investigations by OLAF and the Slovene police can ascertain whether the two European public banks have been involved in an investment marred with illegalities.”

“With all the existing pressures to move ahead with the project, the EIB and the EBRD should not forget that opposition of Slovenians to this plant is strong,” adds Barbara Kvac, Head of the Climate Change Program at Slovenian NGO Focus. “The referendum could provide an opportunity for people to voice their concerns related to health, corruption and climate change which have so far been ignored by their own parliament. There are so many reasons to abandon this project that only blindness or indeed corruption can make it go further.”

Notes for the editors:

(1) Read the letter from OLAF announcing the opening of an investigation into corruption at TES 6: https://bankwatch.org/sites/default/files/Slovenia%20Investigation.pdf
(2) The state guarantee law asks for the following conditions to be met if the Slovenian budget is to guarantee the loans offered to TES 6 by the international banks:

• The investor must negotiate with all suppliers with the aim to lower the costs from NIP 4 (4th investment program; 1.302.747.010 euros);
• PV Coalmine Velenje and TES must sign a contract on the long-term supply of lignite at the maximum price of 2,25 EUR/GJ before the state guarantee is issued;
• The investor must ensure the project will be finished in accordance with the agreed timeline;
• The investor must ensure all the conditions are met for achieving an internal rate of return of the project in line with the sectoral energy policy;
• The investor must limit the CO2 emissions in line with investment program (NIP 4);
• The investor must sign a contract with two Slovenian ministries (finance and energy) to guarantee that the above conditions are fulfilled;

The parlimentary committee responsible for the law asked TES to prepare a new peer-reviewed investment program (NIP 5). This program has to be checked by an independent and technically competent reviewer. NIP 5 will be used to determine whether the government’s conditions are met.

(3) Read more about TES 6 and the involvement of the European banks here: https://bankwatch.org/our-work/projects/sostanj-lignite-thermal-power-plant-unit-6-slovenia
(4) Read more about the findings of the State Commission and their report here: https://bankwatch.org/news-media/for-journalists/press-releases/dirty-french-slovenian-connection

For more information, contact:

Piotr Trzaskowski
Bankwatch energy corrdinator
piotrt@bankwatch.org
0048509162988

Barbara Kvac
Head of Climate Change Program
Focus Slovenia
Barbara@focus.si
00386 40 722 149

MEPs call for responsible new EBRD mining strategy

Brussels – The new mining strategy of the EBRD risks contradicting the EU Resource Efficiency Roadmap and responsible mining principles, argue 22 MEPs in an open letter to European Commissioners which asks the EC to take a more active role in improving the EBRD mining strategy currently under review. (1)

“The EBRD is right in drafting a new mining strategy as raw materials policy is climbing to the top of political agendas,” says German MEP Reinhard Butikofer, the initiator of the open letter. “But this strategy must be in line with EU objectives and standards. The EBRD has financed coal mining without taking responsibility for coal-combustion’s contribution to climate change. This is not only short-sighted but at odds with the EU’s very own climate agenda.”

A review of the EBRD’s mining strategy shall happen by the end of 2012, with a first draft of the document published in April considered disappointing by environmental NGOs monitoring the bank, primarily because it continues to allow for financial support for coal mining despite opening up new coal resources being one of the main contributors to climate change. (2)

“What we also want to see is a genuine inclusion of civil society, particularly of potentially affected communities, in the decision-making over the future mining policy of the EBRD,” says Bankwatch EBRD coordinator Ionut Apostol. “The process of drafting the mining strategy is not open enough even though this document will impact in important ways the direction of development of countries in Central and Eastern Europe.

“The EBRD needs to make sure that it avoids to repeat mistakes from the past, specifically putting too much emphasis on intensive exploitation of natural resources as a supposed means of development,” Apostol added. “Too often, intensive resource extraction has been undertaken because of the existence of undemocratic regimes, fraud, corruption or weak environmental standards in the EBRD countries of operation; it hasn’t benefited local populations, on the contrary, it has contributed to putting these countries on unsustainable paths.”

The EBRD operations cover nine of the new EU member states and all accession and neighbouring countries that are also main commercial partners of the Union. The EU and EU member states own around 60 per cent of EBRD shares. In the last ten years, the EBRD has facilitated investments of around EUR 2 billion Euro in the mining sector.Notes for the editors:

(1) Read the open letter from the 22 Members of the European Parliament addressed to 3 Commissioners here: https://bankwatch.org/publications/greens-call-active-efforts-european-commission-ensure-improved-ebrd-mining-strategy
(2) Read the EBRD draft mining strategy at: http://www.ebrd.com/downloads/policies/sector/draft-mining-strategy.pdf
Read the Bankwatch reaction to the EBRD mining strategy: https://bankwatch.org/news-media/for-journalists/press-releases/ebrd-fresh-plans-show-intent-pour-more-public-money-coal
(3) Examples of harmful mining projects currently in the EBRD’s pipeline:
https://bankwatch.org/our-work/projects/kolubara-lignite-mine-serbia
https://bankwatch.org/our-work/projects/mining-boom-mongolia

For more information, contact:

Ionut Apostol
CEE Bankwatch Network EBRD coordinator
ionut@bankwatch.org
0040721251207

Anelia Stefanova
CEE Bankwatch campaigns coordinator
anelias@bankwatch.org