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Europe’s leaders must not subsidise fossil fuels with next EU budget, say NGOs

Luxembourg — Ahead of discussions this week about how the next one trillion euros EU budget will be spent, EU ministers are being urged to get rid of provisions that would allow public money to subsidise the fossil fuels industry.

An open letter [1] endorsed by more than 20 leading environment groups comes in response to the draft negotiating text for Tuesday’s General Affairs Council. At this meeting EU Members States will make decisions on the investment priorities under the next 2014-2020 Cohesion Policy funds, [2] building on a proposal prepared by the European Commissions last year [3].

The groups have concerns that two provisions within the regulation on the European Regional Development Fund [4] will pave the way for projects involving oil, gas and even coal or carbon-intensive technologies like carbon capture and storage and the exploitation of shale gas [5]. A significant portion of these funds has previously been earmarked under the Commission’s proposal for measures to decarbonise the European economy and contribute to achieving long-term EU climate objectives.

Markus Trilling, EU funds campaigner for CEE Bankwatch Network and Friends of the Earth Europe said “We can’t afford to let subsidies for fossil fuels slip in the back door, nor can we afford investments that will lock us in to carbon-intensive energy system and maintain our dependency on fossil fuels for decades. Instead, the EU budget should invest in energy savings and shift our energy systems towards renewables.”

For more information, contact:

Markus Trilling
EU Funds campaigner
CEE Bankwatch Network/Friends of the Earth – Europe
Mobile: + 32 484 056 636

Notes

1. Read the open letter here
https://bankwatch.org/sites/default/files/Letter-June-GAC.pdf

2. According to the European Commissions proposal Cohesion Policy funds for the period 2014-2020 will account for EUR 336 bln of the next seven-year, EUR 1025 bln multiannual financial framework, the EU budget.

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

4. The European Regional Development Fund is one of the main regional funds within the EU budget, aimed at decreasing disparities among European regions.
http://ec.europa.eu/regional_policy/thefunds/regional/index_en.cfm

5. The two provisions read as follows: “developing smart gas and power distribution, storage and transmission systems” and “promoting the use of high-efficiency co-generation of heat and power.”

Member States stepping back from EU’s low-carbon investment agenda

Brussels – Representatives of EU Member States meeting tomorrow in Brussels intend to promote the financing of gas distribution, storage and transmission from Cohesion Policy funds meant for low-carbon measures in the next EU budget. Such support for gas would mean the EU’s dependency on fossil fuels will continue for decades, undermining global efforts to combat climate change.

At their meeting in Brussels tomorrow, member state ambassadors to the EU (1) have to agree on their position on investment priorities for the next round of Cohesion Policy funds (2014-2020) set out by the European Commission last year (2). While the Commission’s proposal intended that a significant financial contribution from EU funds goes to the decarbonisation of European economies, member states are now trying to include “developing smart gas and power distribution, storage and transmission systems” (3) among the measures to be financed from the European Regional Development Fund (4), even though ERDF was one of the instruments that was supposed to promote the EU 2020 climate targets to reduce CO2 emissions.

This unexpected promotion of fossil fuel subsidies from the EU budget comes weeks after a similar proposal from the REGI (Regional Development) Committee of the European Parliament. Jan Olbrycht, a Polish MEP who will lead the negotiations with the Council on the next regional funds from the Parliament side, proposed last month to include oil and gas transit and storage infrastructure among the investments to be financed with funds specifically earmarked for low-carbon measures from the ERDF. (5)

“This jointly promoted resurrection of carbon intensive energy sources is threatening the EU’s economies even in the medium-term”, comments Markus Trilling, CEE Bankwatch Network and Friends of the Earth Europe EU funds coordinator. “Subsidising gas today means not only that we crowd out financing opportunities for new renewables and energy savings, which need the subsidies more, but also that we lock in our economies into fossil-fuel dependency for three-four decades to come. Simply put, we are willingly choosing to further intensify the current climate crisis.”

Notes for the editors:

(1) COREPER are the ambassadors of member states to the European Union. While COREPER meetings rarely make headlines, the position taken by this body tomorrow will provide the fundamental guidance for the General Affairs Council deciding on the next EU budget June 26. Details about tomorrow’s meeting here:
http://eu2012.dk/en/Meetings/Coreper-PSC/Jun/COREPER-II-14-6

(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) No mentions of gas support from ERDF funds existed in the Commission proposal; gas support is currently being pushed by some member states of the EU. The gas insertions appear in a draft prepared for the COREPER meeting tomorrow seen by Bankwatch.

(4) The ERDF if one of the main regional funds, aimed at decreasing disparities among European regions. http://ec.europa.eu/regional_policy/thefunds/regional/index_en.cfm

(5) Read more about the Olbrycht proposal and its significance for the decision-making process over the next EU budget:
https://bankwatch.org/news-media/blog/fossil-fuels-rebranded-low-carbon-also-cohesion-policy-discussions

For more information, contact:

Markus Trilling
EU Funds Coordinator
CEE Bankwatch Network and Friends of the Earth Europe
markus.trilling AT bankwatch.org

The EU’s electricity imports from neighbouring countries: at what cost?

Kiev — Despite being the place of one of the most terrifying nuclear accidents in the world, Ukraine is currently working on expanding the lifespan of 13 of its old Soviet-style reactors, with electricity exports to the European Union in mind. In a study published today, CEE Bankwatch Network is revealing how the EU and its financing institutions are promoting electricity imports to the EU which are likely to have highly damaging consequences for the exporting countries.

Entitled “A Partnership of Unequals” (1), the study is made up of a series of case studies from Ukraine, Georgia and the Western Balkans, which raise concerns about how EU’s plans to import electricity from these countries could negatively affect the exporters.

In Ukraine, the European Bank for Reconstruction and Development and Euratom are currently planning to finance with up to 300 million euros each safety upgrades at all Ukrainian nuclear reactors, some of which would not be necessary unless the reactors’ lifespan is extended. In another EBRD financed project, an ambitious ultra high-voltage transmission line, called the Second Backbone Corridor, will link four nuclear power plants and two pumped storage plants into a continuous line and connect them with Europe. (2)

“By supporting Ukraine’s ambitions to increase electricity exports from its nuclear power plants to the EU, European decision-makers are giving the Ukrainian government an extra incentive to go ahead with prolonging the life of old reactors, thus increasing overall nuclear risks in the region and pushing aside renewables and energy efficiency improvements in Ukraine,” says Iryna Holovko, campaigner at the National Ecological Centre of Ukraine. “At a time when a number of European countries are choosing a nuclear-free future, no European money should be spent on supporting nuclear outside the EU.”

In the case of Georgia and the Western Balkans, the main source of electricity targeted for export to the EU is hydro power. The EBRD is financing transmission lines and large hydro power plants in these countries, presenting hydro power as sustainable energy, when in fact if done improperly it can have damaging effect on biodiversity and water systems. Additionally, linking hydro development to exports to the EU from the start means that much of the countries’ renewables potential will be used to meet EU clean energy targets, making it more difficult for these countries themselves to meet any targets when demanded of them.

“While electricity exports are a normal activity, the problem arises when the exporting countries have lower environmental, social and safety standards than the importing countries, and when exporting energy reduces the exporter’s ability to develop its own renewable energy. At this point electricity exports become an energy grab”, commented Pippa Gallop, CEE Bankwatch Network.

Notes for the editors:

(1) The study can be downloaded at:
https://bankwatch.org/sites/default/files/partnership-of-unequals.pdf

(2) Read more about EU and EBRD investments in the Ukrainian nuclear industry at:
https://bankwatch.org/our-work/projects/nuclear-power-plant-safety-upgrades-ukraine and https://bankwatch.org/our-work/projects/second-backbone-corridor-high-voltage-electricity-transmission-lines-ukraine

For more information, contact:

Iryna Holovko
NECU Ukraine
iryna at bankwatch.org
+38 050 647 67 00

For Western Balkans issues:

Pippa Gallop
Bankwatch research coordinator
pippa.gallop at bankwatch.org
+385 99 755 9787

New EBRD mining strategy promotes unstable dependency on raw materials exports, say NGOs

Moscow, Russia — In response to a public presentation today from the European Bank for Reconstruction and Development of its new mining strategy, NGOs CEE Bankwatch Network and Greenpeace Russia are calling on the bank to deprioritise investments in mining and mining-related infrastructure in order to avoid deepening the dependency of its countries of operation on raw materials exports.

The statement from Moscow echoes the EBRD’s own strategic priorities in Russia, [1] which the EBRD has repeatedly reiterated needs to be weaned off its dependency on the natural resources sector and towards a more diverse economy. Currently one third of all EBRD natural resource investments are made in Russia, [2] and the new strategy would further resource-based economic models in its countries of operations, including the extraction of resources from naturally-sensitive areas. [3]

“The EBRD must reorient its mining strategy away from the business-as-usual scenarios and towards a more diverse economic base, one that aligns itself with principles of sustainable development,” said Vladimir Chuprov from Greenpeace Russia. “The strategy must also commit to refuse financing in cases where projects violate Protected Natural Territories and intact territories.”

In Russia’s eastern neighbour Mongolia, the EBRD is also promoting an economically unsustainable overreliance on the extraction and export of natural resources. Since Mongolia joined the EBRD as a country of operation in 2006, its natural resources sector has received the lion’s share of the EBRD’s country portfolio at EUR 176 million. [4] Bankwatch estimates that as of 2010 more than 70 percent of investments in Mongolia have been invested in natural resources, and this proportion continues to rise.

With the percentage of Mongolia’s exports coming from minerals expected to rise from 80 to 95 percent in the next few years, [5] coupled with the expected IPO of the 6.5 billion tonne Tavan Tolgoi coal mine later this year, symptoms of ‘Dutch disease’ and related macroeconomic instabilities threaten the country’s development beyond minerals.

Vladlena Martsynkevych of Bankwatch said, “Mongolian GDP is expected to grow by nearly 20 percent this year, so it is very difficult for the EBRD to demonstrate its principle of additionality in this environment. Instead the bank should focus its investments to help diversify the economy away from natural resources if Mongolia’s development is to truly benefit the country’s people, a third of whom live in poverty, and become anything more than a mirage on the Gobi’s horizon.”

For more information contact:

Vladlena Martsynkevych
Central Asia Program, CEE Bankwatch Network
vladlena at bankwatch.org

Vladimir Chuprov
Energy Unit Head, Greenpeace Russia
Tel: +79031294651

Notes for editors

[1] EBRD Russia country assessment http://www.ebrd.com/pages/research/publications/flagships/transition/russia.shtml

[2] Between 1992-2009, the EBRD invested over EUR 1 billion in Russia for mining, oil and gas projects. EBRD evaluation department special study “Extractive industries sector strategy review” August 2011
http://www.ebrd.com/pages/about/what/evaluation/special.shtml

[3] From the EBRD draft Mining Strategy “Where mining operations may affect protected areas or protected species, the Bank requires that clients should complete studies equivalent to those of the Habitats Directive (Council Directive 92/43/EEC on the Conservation of natural habitats and of wild fauna and flora); – When developing projects in large areas of previously little to no development (thereby requiring new transportation infrastructure) clients should look to work with the government and other project proponents to address biodiversity on a regional scale.”
http://www.ebrd.com/downloads/policies/sector/draft-mining-strategy.pdf

[4] EBRD evaluation department special study “Extractive industries sector strategy review” August 2011 August 2011
http://www.ebrd.com/pages/about/what/evaluation/special.shtml

[5] https://bankwatch.org/publications/preliminary-comments-and-recommendations-ebrd-draft-mining-strategy and

Hunger strike begins in protest of cemetery removal at EBRD coal mine in Serbia

Belgrade – An official from the southern Serbian town of Vreoci has begun a hunger strike on Monday to protest against what he considers the unlawful exhumation of a local cemetery to make way for coal extraction at the nearby Kolubara mine. Last year the European Bank for Reconstruction and Development approved a loan of 80 million euros to support the expansion of lignite mining at Kolubara.

The exhumations are being conducted by state-owned Elektroprivreda Srbija (EPS), the company in charge of the coal mine. Zeljko Stojkovic, the official on hunger strike, has said he will continue his protest until the exhumations – which are currently under dispute by Serbian judicial courts – are discontinued.

“The Vreoci municipality owns the local cemetery and without the municipality’s approval the cemetery cannot be moved,” says Stojkovic.

This is but one in a series of controversies plaguing the EPS Kolubara coal mine. During the last year, over 28 current and past EPS managers have been arrested over allegations of embezzling company funds. Locals that are being resettled to make way for the mining expansion have repeatedly complained that the resettlement is being done without them being properly consulted and to locations they’ve deemed inappropriate.

In spite of these problems, the European Bank for Reconstruction and Development approved last year an 80 million euro loan to EPS in support of coal mining operations at Kolubara. EPS has repeatedly benefited from EBRD loans in the past.

“Kolubara is a particularly egregious example of where the EBRD has supported a project that is likely to bring in good money, regardless of how dirty its local partners are or how many human rights abuses are committed in the process,” said Zvezdan Kalmar of Bankwatch. “The bank is right now reviewing its mining policy and the experience of Kolubara should really push them not only to introduce very strict criteria for the projects and partners it chooses but also to reconsider their general approach of jumping into mining projects just because they bring in money, no matter the social and environmental costs.”

Notes for the editors:

(1) The cemetery in Vreoci lies on an estimated 50 million tonnes of lignite coal and its exhumation is a precondition for digging an additional 600 million tonnes of lignite lying under the Vreoci municipality.

The Vreoci resettlement was agreed in 2007 after years of protests, negotiation and parliamentary discussions in the City of Belgrade, in which the Vreoci municipality has administrative jurisdiction.

Estimates are that the resettlement will finalise in 2012 and 2013 and that excavation of lignite reserves will begin in full swing in 2014.

(2) Read more about coal mining at Kolubara:
https://bankwatch.org/our-work/projects/kolubara-lignite-mine-serbia

(3) Read about the corruption scandal surrounding EPS:
https://bankwatch.org/news-media/for-journalists/press-releases/ebrd-board-directors-must-face-responsibility-long-term-pa

(4) Read a letter from the Vreoci community to the EBRD complaining about abuses committed by EPS and asking for withdrawal of financial support to EPS:
https://bankwatch.org/publications/vreoci-community-requests-ebrd-suspend-credit-arrangement-kolubara

(5) Read about the EBRD mining policy review:
https://bankwatch.org/news-media/for-journalists/press-releases/ebrd-fresh-plans-show-intent-pour-more-public-money-coal

For more information, contact:

Zvezdan Kalmar
Bankwatch Serbian national coordinator
zvezdan AT bankwatch.org
+381655523191

EBRD energy lending report: conflicting investments end up contradicting climate science

London – Almost half of the 6.7 billion euros lent by the European Bank for Reconstruction and Development (EBRD) between 2006-2011 goes to support for fossil fuels, according to a report issued today by CEE Bankwatch Network. Support for coal, oil and gas must be discontinued altogether, argues Bankwatch, if the bank’s commendable efforts on increasing financing for renewables and energy efficiency are to have a positive impact in the global fight against climate change.

48 percent of the EBRD’s energy lending over the past six years has gone to fossil fuels, shows the Bankwatch report [1]. Fossil fuels are followed by loans for power sector energy efficiency (13 percent of the overall EBRD energy lending), new renewables and transmission lines (each at 11 percent), and nuclear-related investments and large hydro (standing at 5 and 3 percent respectively).

“Support for coal and, to a lesser extent, for oil, has generally increased over the past six years, at a time when precisely the opposite trend should have been noted,” comments Bankwatch research coordinator Pippa Gallop, one of the authors of the study. “At the same time, the bank needs to be commended for a steady and clear increase in financing for new renewables and power sector efficiency. Nevertheless, with such conflicting trends in the bank’s energy lending, the EBRD is stretching itself thin and therefore is likely to fail in positively contributing to the global struggle against climate change.”

The Bankwatch study further analyses the EBRD’s Sustainable Energy Initiative, under which the bank lent 8.7 billion euros between 2006-2011 for efficiency improvements in the energy sector, industry and municipal infrastructure. Worryingly, the study reveals that some investments under SEI have been used to extend operations at existing coal mines or replace old coal plants with new ones. [2]

“Such investments apparently clean up production processes at coal or gas facilities,” says Bankwatch climate and energy coordinator Piotr Trzaskowski. “But in effect what they do is lend a new lease of life to old coal plants or mines or even help build new units, perpetuating unacceptable levels of CO2 emissions at a time when such operations should be shut down altogether. When global GHGs should start to fall before the end of this decade, naming construction of an efficient coal power plant as part of a Sustainable Energy Initiative is an ironic joke.” [3]

The Bankwatch study concludes with a series of recommendations for the EBRD as regards its energy lending. Among them:

  • make clear in its new mining policy – currently under revision – that the bank will not support coal mining
  • as soon as possible, adopt a new energy policy that phases out fossil fuel investments altogether starting from an immediate halt to the most climate-damaging – coal
  • introduce more stringent criteria for renewables (so that, for instance large hydro plants that negatively affect biodiversity are excluded from lending), better distribute support for different types of renewables, and increase renewables support in less developed countries
  • expand demand-side energy efficiency investments, particularly residential energy efficiency

Notes for the editors:

(1) Read the Bankwatch report “Tug of War. Fossil fuels versus green energy at the EBRD” online at:
https://bankwatch.org/sites/default/files/EBRD-energy-tug-of-war.pdf

A briefing with the main findings of the study is available at:
https://bankwatch.org/sites/default/files/briefing-tug-of-war-ebrd-energy.pdf

Interactive graphs with energy lending of the European Bank for Reconstruction and Development and the European Investment Bank available here:
https://bankwatch.org/ifi-energy-lending

(2) For examples of coal investments that the EBRD considers acceptable, look at:

https://bankwatch.org/our-work/projects/sostanj-lignite-thermal-power-plant-unit-6-slovenia
or
https://bankwatch.org/our-work/projects/kolubara-lignite-mine-serbia
and
https://bankwatch.org/our-work/projects/mining-boom-mongolia

(3) According to the International Energy Agency (IEA), all energy sector investments after 2017 should be in zero-carbon utilities, unless existing infrastructure is scrapped before the end of its economic life-span, if the world is to avoid disastrous climate change (keeping within 2 degrees temperature change). In this context, it is important to keep in mind that any investment that will start construction from 2014 (2013 for coal and lignite) onwards in order to be zero-carbon needs either to include CCS technology (highly unlikely given that experts project CCS to be commercially viable in the late 2020s at the earliest) or to be renewable given that the time necessary to construct a gas power plant is of a minimum of four years and the construction a coal or lignite power plant takes at least five years. From that point of view, any replacement in energy generation after 2013 for coal and 2014 for gas should be turned down by the EBRD on the basis of climate science.

For more information, contact:

Pippa Gallop
Bankwatch research coordinator
pippa.gallop at bankwatch.org

Piotr Trzaskowski
Bankwatch energy coordinator
piotrt at bankwatch.org
Tel: +48509162988