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Energy and climate - financing the energy shift to stop climate change

Investing in true solutions for the challenge of climate change – solid renewable energy projects and energy efficiency schemes – is in countries' interest, in the environment's interest, and it is in the EU's economic interest.


Carbon dioxide concentrations transported around Earth by atmospheric circulation. (NASA/JPL)

Climate change is one of the most serious risks our world is facing, including the economic, social and environmental disruptions it would create. Phasing out fossil fuel based energy production by shifting to renewable energy and increasing energy efficiency are core solutions to the issue.

Such vital, radical change involves a revolution in how the world’s economies are organised and fuelled. This cannot happen without proper stimulation.

International financial institutions can and should make use of their financial leverage and clout to provide incentives for renewable energy and energy efficiency investments.

But they often fail to do so.

With a focus on EU Structural and Cohesion Funds, the European Investment Bank, and the European Bank for Reconstruction and Development, Bankwatch challenges these institutions to finance more than a few green showcase projects, but to support solutions for decarbonising the energy sector.

Energy efficiency and innovation

There is enormous potential to reduce energy consumption, particularly in central and eastern Europe:

While the technical solutions are readily available (thermal insulation of buildings, efficient appliances, energy improvements in industrial production), energy saving measures are economically (and politically) less attractive and funding is hard to come by.

It is international financial institutions and governments who should step in to promote energy efficiency as the first priority in energy policy and funding.

Renewable energy sources and smart grids

Promoting renewable energy promises to bring energy security, create new jobs and break the spell of our fossil fuel addiction.

Nevertheless, international financial institutions still invest billions in unsustainable energy production and do too little to facilitate renewable energy:

  • the lending of both the European Bank for Reconstruction (pdf) and the European Investment Bank (pdf) has not only lacked clear commitment to green energy, but has even seen a growth in fossil fuel projects in recent years
  • EU funding (pdf) still is far away from fulfilling its potential to inspire a change in EU member states' energy policy

To increase renewable energy production and its distribution and regulation through smart electricity grids, financial support as well as a new set of policies will be necessary.

Bankwatch calls on the IFIs, the EU and its member states to respond to this necessity and eventually help consumers to gain more control over the energy system and their energy consumption.

 


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Kosovo currently wastes much of the electricity it produces in its two filthy lignite plants: In 2015, 33 percent was lost through technical losses and theft, and much more is wasted through lack of energy efficiency measures. Yet the Kosovo government, heavily backed by the US government and World Bank, plans to build a new 500 MW lignite plant, Kosova e Re or New Kosovo, also sometimes known as Kosovo C.

World Bank Group
Energy & climate

The Southern Gas Corridor, a system of mega-pipelines meant to bring gas from the Caspian region to Europe, is unnecessary in light of gas demand projections in the European Union's 2050 Energy Strategy. Neither will the project make European countries independent from Russian gas. At the same time, the USD 45 billion investments will boost Azerbaijan's dictatorial regime and cause damage to local communities and the environment in transit countries like Turkey and Italy.

EBRD
EIB
Commercial banks
ADB
Energy & climate
Social & economic impacts

While the European Union is trying to help Ukraine's political transition, Europe's financial support is cementing the country's dependence on an outdated and highly unsafe nuclear sector. To avoid further instability and political and environmental risks, European institutions need to offer better oversight and funding for alternative energy sources.

EBRD
Energy & climate

Slovenia has built a new 600 MW unit at the Šoštanj lignite power plant (TEŠ6) which has turned out to be a financial disaster, as well as locking the country into a carbon-intensive future with tens of millions of annual losses for the next four decades.

EBRD
EIB
Energy & climate

The existing Pljevlja thermal power plant in the north of Montenegro, near the border with Serbia and Bosnia and Herzegovina, has been operating since the early 1980s. Now the Montenegro government is proposing a second 254 MW lignite-fired unit at the site.

Chinese investors
Energy & climate

The 350 MW Banovići coal power plant project is being developed alongside the existing Banovići mine just a few kilometres away from Tuzla by the predominantly state-owned RMU Banovići (Banovići Brown Coal Mines). The power plant would be a greenfield facility and a cement plant is also planned nearby. This project is in direct competition with the Tuzla 7 lignite power plant.

Energy & climate

The 450 MW Tuzla 7 project would result in additional coal capacity compared to the current situation. The city already suffers from significant air pollution due to the existing power plant and several other industrial facilities. The project would be implemented by the China Gezhouba Group Co. and is slated for financing from the China ExIm Bank.

Chinese investors
Energy & climate

EFT’s 300 MW Stanari power plant, constructed by China's Dongfang, and financed by the China Development Bank, is located near Doboj in Bosnia and Herzegovina, in the Republika Srpska part of the country. Originally it was planned to be a 420 MW plant but this was considered to be on the edge of economic viability and the capacity was reduced to 300 MW.

Chinese investors
Energy & climate

The Serbian government is planning a new 350 MW lignite plant at Kostolac in the country’s north-east. In spite of high level support and Chinese financing, the project is being plagued by concerns over pollution, state-aid and legal challenges.

Chinese investors
Energy & climate

Tasked with stimulating the European economy, the new investment fund may just become an extention of the European Investment Bank’s normal lending with very limited additional (green) finance.

EIB
EU Funds
Energy & climate
Transport
Social & economic impacts