In contrast to most European countries, Serbia and Bosnia and Herzegovina still plan new lignite power plants, with the support of Chinese companies and banks. These plans starkly conflict with the Paris Agreement’s aim of limiting climate change to 1.5 degrees Celsius. All the projects have serious economic, environmental and legal weaknesses, which would burden electricity consumers and taxpayers for years to come.
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Compared to a few years ago, when all the countries of the Western Balkans, except Albania, were planning to build at least one new lignite unit, now Montenegro, North Macedonia and even the heavily coal reliant Kosovo are gradually dropping those plans.
With the exception of Stanari in Bosnia and Herzegovina, which started operations in 2016, all the plants are seriously delayed. Bankwatch has been working with local groups to make sure that no more coal plants are built and that southeast Europe finally speeds up the path to an efficient energy system, based on sustainable forms of renewable energy.
Serbia and Bosnia and Herzegovina are planning to build up to 5330 MW of new coal plants, making them the only two countries in the region still pursuing new coal-fired power stations.
Projects across the region, like Kosova e Re and Pljevlja II have been cancelled one by one in the last few years, due to a combination of financing difficulties and lack of economic viability, yet Serbia and Bosnia and Herzegovina still persist with their plans.
Plans for new coal bring serious economic risks: Contrary to popular belief, coal is not cheap – it only appears so when it does not pay its environmental and social costs, and when it is heavily subsidised.
For this reason, many financiers now see coal as a liability and refuse to finance new coal plants. In 2013 the European Investment Bank, the European Bank for Reconstruction and Development and the World Bank virtually halted lending for new coal power plants.
The remaining planned coal plants in the Western Balkans are now set to be financed by China ExIm Bank and the Industrial and Commercial Bank of China (ICBC), supported by some of the few other players who have not withdrawn from coal, such as Russia’s Sberbank, Italy’s Intesa and Slovenia’s NLB.
Subsidies for coal
In 2019, the Energy Community Secretariat found that direct subsidies for the coal sector in the Western Balkans and Ukraine amounted to EUR 1.2 billion in 2015-2017. On top of this, hidden subsidies, notably failure to impose CO2 pricing, totalled EUR 1.9 billion on an annual basis. In Bosnia and Herzegovina, Kosovo and Serbia, coal subsidies were significantly higher than renewables support.
Under the Energy Community Treaty, signed by all Western Balkans countries, Ukraine, Moldova, and Georgia, the countries have to follow EU state aid rules in the energy sector, meaning they are not allowed to continue subsidising the coal industry as they have done so far.
But Bankwatch’s work has exposed cases where that is exactly what they plan to do, such as a loan guarantee approved by Federal authorities in Bosnia and Herzegovina in 2019 for the new Tuzla 7 coal power plant. As a result of a complaint by the Aarhus Center Sarajevo and Bankwatch, the Energy Community Secretariat has opened an investigation against Bosnia and Herzegovina.
Risks for coal and electricity investments in the Western Balkans, Ukraine and Moldova due to state-aid rules Study & press briefing | June 8, 2015
Credit: Arben Llapashtica
CO2 prices not taken into account
Under the EU’s Emission Trading Scheme, the Western Balkans countries will need to apply a CO2 price as soon as they enter the EU, at the very latest. However, most coal projects fail to take the effects of CO2 prices into account, or use unrealistically low prices. CO2 prices rose from EUR 6/tonne in 2017 to nearly EUR 30/tonne in 2019 and are expected to increase further in the future. The plants are therefore likely to be uncompetitive, with taxpayers footing the bill.
New China-backed coal plants on EU’s borders could saddle states with massive carbon costs, Unearthed | January 14, 2020
Carbon costs for planned coal power plants in the Western Balkans and the risk of stranded assets Briefing | March 29, 2017
Sostanj lignite plant: A mistake not to be repeated
The TES6 lignite unit in Slovenia is a showcase of the risks for coal projects in the Western Balkans. It cost more than double the originally estimated amount and brings annual losses of tens of millions of euros for the country. It only created a fraction of the number of jobs promised.
Across the Western Balkans, state authorities often claim that the new coal plants will replace old, heavily-polluting units and will thus improve air quality, but this claim is massively overblown.
First, in some cases they will operate alongside existing units, not instead of them.
Second, coal pollution does not all come from chimneys. Open-cast lignite mining and the depositing ashes in huge ash ponds also results in serious dust pollution, as well as soil and water contamination.
Third, operators of the planned coal plants have no intention to apply the latest EU pollution control rules – the so-called 2017 LCP BREF – making them dirtier than necessary.
Pollution from existing plants
Alarming levels of air pollution
Every winter, towns across the Balkans face the same problem of heavily polluted air, and residents are increasingly concerned about the health implications. Ageing coal power plants and open-cast lignite mines play an important role in aggravating the situation.
The Chronic Coal Pollution report, published by the Health and Environment Alliance, Bankwatch and others, showed that in 2016, 16 coal power plants in the Western Balkans emitted as much dust and sulphur dioxide as all the 250 plants in the EU.
As a result, it is estimated that they are responsible for around 3,900 premature deaths annually, spread between the region and nearby EU countries, and costing both health systems and economies a total of EUR 6.1-11.5 billion per year.
Since 1 January 2018, existing coal plants have been obliged to comply with pollution control rules under the Energy Community Treaty. But as Bankwatch’s Comply or Close report from December 2019 shows, in 2018, plants across the region breached sulphur dioxide limits by more than six times. One plant in Serbia, Kostolac B, single-handedly emitted more SO2 than the total allowed emissions for four countries – Bosnia and Herzegovina, Kosovo, North Macedonia and Serbia – together. Ironically, this is the only plant that had desulphurisation equipment fitted in the years leading up to the 2018 deadline. The same company which installed the desulphurisation equipment has also been entrusted by the Serbian Government to build the new unit, Kostolac B3.
Independent dust monitoring
Air quality data in the region is either unavailable or unreliable. Official measuring stations are placed in irrelevant locations and often important pollutants are simply not monitored. The stations are poorly maintained and often not operational for long periods.
Since 2016, Bankwatch and partner organisations from the region have been conducting independent dust monitoring in nearly all coal regions of the Western Balkan countries, as well as in Bulgaria, Hungary and Romania. In all cases we have found worrying levels of particulate matter, dust so small it enters deep into our lungs and blood streams causing irreversible damage and respiratory and cardiovascular diseases.
Alarming levels of air pollution in settlements in coal regions are choking Central and Eastern Europe, results of independent monitoring carried out between October 2018 and December 2019
Lifting the smog, a tailored health impact analysis of 6 months exposure to PM2.5 pollution in Tuzla, BiH
Red alert: how alarming levels of air pollution in the Western Balkans require urgent government action Blog post, February 5, 2020
Peak pollution Multimedia briefing on monitoring results and video interviews with locals | June 26, 2017
Up in smoke – Why urgent action is needed on air quality in the Western Balkans Multimedia briefing on protests | February 29, 2016
Jobs myths and the case for a just transition
Hardly any coal operations across the region are economically viable, and as a result many coal workers, especially in the mines, are set to lose their jobs, even if the plans for new power plants materialise.
Bankwatch’s 2018 report, the Great Coal Jobs Fraud, found that while proponents of coal say almost 30,000 jobs will be created or maintained in southeastern Europe if new coal plants are built, in reality it is more likely that at least 5,000 jobs will be lost.
Rather than persisting with dangerous myths about the future of coal, governments, coal workers and their wider communities need to work together towards a just transition.
The future is renewable
While the energy savings and renewables revolution may not be taking place in the region as fast as we would like, there is no doubt that it is gathering pace. In February 2020, North Macedonia became the first Western Balkan country to publish a national energy strategy with options for concrete coal phase-out dates.
It has also led the way in the redevelopment of its Kichevo coal region, by planning a solar photovoltaic plant on the site of a former opencast coal mine.
Serbia’s EPS is also planning a 66 MW wind farm and 97.2 MW of solar photovoltaics near Kostolac – unfortunately still much less than the new coal capacity it is planning.
Yet considerable work remains to be done to cut the region’s high levels of energy wastage, especially in the distribution system, as well as to ramp up renewable energy ambitions to a level on a par with that of the EU. A huge public outcry across the region about hydropower has also underlined the fact that renewable energy development needs to take biodiversity and other factors into account.
The heating and cooling sector presents particular transition challenges, as there has been a tendency so far to keep district heating systems running on coal, or switch to gas, biomass or even waste, rather than more sustainable solutions.
Reducing demand through household insulation and thermostats, using heat pumps, solar water heating and solar district heating all need to play an increased role in the region if air pollution and climate change are to be tackled.