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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

The European Investment Bank is not ready for a capital increase, NGOs say

Brussels – As EU Ministers of Finance are currently gathering at the Annual General Meeting of the European Investment Bank (EIB) to discuss a possible capital increase, civil society organisations that monitor the EIB say the bank is not ready for such a move.

“First and foremost, the quality of EIB lending has to improve, and only then can it substantively contribute to the fight against the current recession sweeping across Europe’s member states,” stated Desislava Stoyanova, co-ordinator of Counter Balance, a coalition of European NGOs that campaigns to improve EIB lending.

Caught in the narrow debate between growth and austerity, the EIB is being put forward by some policy makers as one of the few alternatives to budget cuts and fiscal orthodoxy. Meanwhile the real question of whether the bank is actually able to lead the EU out of the current crisis and into a sustainable – economic, social and environmental – future remains unanswered.

Due to a lack of transparency and performance indicators it remains uncertain whether increased EIB loans can effectively contribute to a sustainable way out of the European debt crisis. When it comes to supporting SMEs, employment and climate action – three top priorities of the bank – tangible results are unclear or remain below par. [1]

A direct link between EIB loans and job creation, for instance, is not clear. A recent report from MEPs on the EIB’s lending to SMEs has raised urgent concerns over the transparency of these loans that accounted for 18 percent of EIB lending in 2011. The European Parliament report[1] points out that while the European Commission is obliged to publish a list of the beneficiaries of EU Funds, currently nothing is known publicly about where – and for what – these EIB SME loans are going.

Berber Verpoest of Counter Balance explained: “If EIB president Hoyer is seriously proposing to extend the bank’s byzantine SME lending via a new capital increase, Europe stands to walk further off the cliff into the unknown. Hoyer and the EIB have to take responsibility for these kinds of loans. First of all, they need to be targeted at sustainable, job creating and ideally green sectors within the overall SME sector. And ultimately we need to see the evidence that they are delivering for the real needs of the very much ‘in need’ European economy.”

While it is positive that EIB loans for sustainable energy projects are rising, its loans for polluting fossil fuel projects are equally on the rise. Increasing the capital of the EIB without appropriate conditions attached to prevent new climate-damaging investment runs the risk of reinforcing this trend.

“The challenge for the bank is not to increase the number of projects it invests in, or the size of its portfolio, but rather to invest in better projects and programmes working as a financial catalyst for achieving the EU’s objectives. By avoiding this discussion EU policy makers not only put a heavier burden on the EIB, they also take away a crucial incentive to make it perform better,” said Anna Roggenbuck, EIB co-ordinator of CEE Bankwatch Network, one of the members of Counter Balance coalition.

One such sectoral policy for which the EIB has already announced a review, to take place later this year, is its energy lending policy. If ambitious enough and in line with common EU policies such as the European Commission’s 2050 energy roadmap, this could be a first essential step in better equipping the EIB to deliver more qualitative results.

“We welcome the EIB’s review of its energy lending as it is urgently needed,” said Roggenbuck. “In 2010 the EIB still lent as much as EUR 5 billion to fossil fuel projects. This figure contains not only loans for gas but also support for coal, the dirtiest of the fossil fuels. The EIB needs to find a way to rapidly phase out financing of the economy based on fossil fuels.”

Counter Balance and CEE Bankwatch Network have presented a list of recommendations [2] to be included in the policy review in order to make it effective. The recommendations include a plan for the EIB to phase out support for all fossil fuel projects starting with coal, a ban on the financing of large scale dams and clearly prioritising energy efficiency projects.

Notes for editors:

[1] More detailed information can be found in the background paper: “Why the EIB is not ready for a capital increase”

[2] The full list of recommendations for the energy policy review can be found here: http://www.counterbalance-eib.org/?p=1832

For further information contact:

Anna Roggenbuck
+48 (0) 509 970 424
annar at bankwatch.org

Berber Verpoest
+32 (0) 484 508 416
press at counterbalance-eib.org

Video projected on the European Parliament questions potential European Investment Bank’s capital increase

Brussels – On Monday night a video was projected on the building of the European Parliament which denounced the unsustainable energy portfolio of the European Investment Bank (EIB). The 1 minute video concluded with: “Make the EIB chose a brighter future before increasing its capital”, a message for EIB governors which gather Tuesday 15 May in Brussels during the bank’s Annual General Meeting. The main topic will be a possible capital increase of the EIB.

“Under the current conditions the EIB is not ready for a capital increase”, says Anna Roggenbuck, EIB coordinator for CEE Bankwatch Network. “The bank should play a role in supporting environmental sustainability. Yet, in 2010 the EIB gave loans for EUR 5 billion to fossil fuel projects. This number is still on the rise. A capital increase allowing the bank to do more will only reinforce this trend”, Roggenbuck concludes.

Berber Verpoest, Counter Balance: “This video is meant to be an eye-opener for EIB governors (mostly the Ministers of Finance of the member states) and other EU policy makers. In order to offer a long term solution to the crisis European citizens are currently facing, EIB backed projects should be economically, socially and environmentally sustainable. Right now this is not the case. Before talking about quantity, EIB governors should be discussing how the quality of EIB lending can be improved.”

The video has been projected on the European parliament at Place Luxembourg at 10 PM on May 14. This action is an initiative of Counter Balance which monitors the operations of the EIB.

Tomorrow on May 15, a press conference will be organised where we will explain in more detail our reluctance to a possible capital increase of the EIB and the need for more sustainable lending.

Notes for editors:

  • The press conference will start at 10 AM in the Aloft Hotel (near Schuman). More info can be found here: http://www.counterbalance-eib.org/?p=1824
  • The video of the action can be found here: http://youtu.be/ul-Ls5RfAbY
  • Pictures of the action can be found here: http://www.flickr.com/photos/counter-balance/sets/72157629732246256/with/7199507962/
  • Video producer: Blubvideo – http://vimeo.com/user764736

For further information contact:

Berber Verpoest
+32 (0) 484 508 416
press at counterbalance-eib.org

EBRD fresh plans show intent to pour more public money into coal

Brussels – In a draft mining strategy published yesterday, the European Bank for Reconstruction and Development (EBRD) made it clear that it intends to continue investing in the coal sector for years to come.(1) Supporting the coal sector with European public money is unacceptable, according to CEE Bankwatch Network, as it undermines the EU’s climate policy and the transition to a decarbonised European economy that the EU and the EBRD both claim to support.(2)

In its current formulation, (3) the EBRD’s mining strategy allows for new climate-damaging coal projects (4) and contributes to an energy market that still favours new polluting installations.

„Once coal is taken out of the ground, no technology can keep carbon from getting into the atmosphere, there is no point in deluding ourselves,” comments Ionut Apostol, Bankwatch EBRD coordinator. „Plus, coal plants built today will be pumping CO2 into the atmosphere for fifty years into the future, so putting money into coal plants now means making a complete mockery out of EU plans to decarbonise the European economy by the middle of this century.”

Between 2006-2010, the EBRD lent over 412 million euros for coal mining and combustion in its countries of operation, among them, Serbia, Slovenia, Poland, Mongolia and Kazakhstan.(5)

Climate change and the need for decarbonisation have moved up the political agenda recently. It is increasingly recognised, including in the EU Roadmap to a Low Carbon Economy and the EU Energy Roadmap to 2050, that an 80-95 percent reduction in greenhouse gas emissions is needed in the so-called ‘developed’ countries, with significant reductions needed elsewhere compared to a business as usual scenario. The EBRD mining strategy, in the form released yesterday, completely contradicts such targets.

„The European Commission and EU countries with a stake at the bank need to make sure that EBRD loans which should be in line with broad European objectives do not achieve the contrary result,” comments Apostol. „This means the mining strategy draft must be revised to ensure that no coal extraction or production project can receive financial support from the EBRD.”

„The European Investment Bank, owned by the EU, plans to increase investments in projects outside the EU promoting the reduction of CO2 emissions and phase out funding climate-damaging projects,” adds Apostol.  „How is it possible for the same shareholders to say we should ban coal lending at the EIB while allowing the EBRD to do otherwise?” (6)
 

Notes for the editors:

(1)  http://www.ebrd.com/downloads/policies/sector/draft-mining-strategy.pdf
The final version of the strategy is expected to be approved later on this year, following two months of public consultations and a reassessment of the draft by the bank staff.

(2)  The EBRD is a European public bank, its operations being supported with EU taxpayers’ money and the European Commission sitting on its management board.

(3)  “[…] the Strategy does not cover carbon-related issues such as the impact of thermal coal combustion on climate change […] The Mining Strategy will, however, cover other aspects of thermal coal mining activities, such as EHS&S issues.”

(4)  A few example of harmful projects currently in the bank’s pipeline:

https://bankwatch.org/our-work/projects/kolubara-lignite-mine-serbia

https://bankwatch.org/our-work/projects/mining-boom-mongolia

(5)  See an analysis of EBRD energy lending completed by Bankwatch in December 2011: https://bankwatch.org/sites/default/files/EBRD-energylending-Dec2011.pdf
and
https://bankwatch.org/ifi-energy-lending

(6) Put together, the EU, the EIB and EU member states own 62.8 percent of the capital of EBRD. Decision No 1080/2011/EU of the European Parliament and of the Council of 25 October 2011 granting an EU guarantee to the European Investment Bank against losses under loans and loan guarantees for projects outside the Union and repealing Decision No 633/2009/EC:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:280:0001:0001:EN:PDF

For more information, contact:

 
Ionut Apostol
Bankwatch EBRD coordinator
ionut AT bankwatch.org”
0040721251207