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Bank and the Industrial and Commercial Bank of China (ICBC), supported by some of the few other players who have not withdrawn from coal, such as Russia’s Sberbank, Italy’s Intesa and Slovenia’s NLB.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.
Use of public money to support Tuzla 7 coal power plant must be investigated, shows new complaint Press release | 25 September 2018
Risks for coal and electricity investments in the Western Balkans, Ukraine and Moldova due to state-aid rules Study & press briefing | June 8, 2015
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 | 14 January, 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.
Independent dust monitoring
In 2016/17, Bankwatch and our partner organisations from the region conducted independent dust monitoring in four selected locations in Western Balkan countries, plus two more in Bulgaria 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.
Read more: 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 Western Balkans holds breath for better air quality Blog post | June 26, 2017
Exaggerated job promises in the coal sector
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 countless new power plants materialise. Governments, coal workers and their wider communities need to work together towards a just transition.
Read more: Labour productivity in mines in the Balkans and other regions Infographic | November 14, 2017 Deceptive promises of new jobs in the coal sector don’t help workers, communities or the climate A closer look at some of the mines and pointers to alternatives for a more just transition. Blog post | November 14, 2016 Overblown job promises in southeast Europe’s coal sector show the need for a just transition Press release | November 14, 2016
A new breed of investors
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. Therefore most planned plants are due to be financed by Chinese state banks – the ExIm Bank and the China Development Bank (CDB).
Read more: Balkan energy projects with Chinese involvement – state of play June 2017 (pdf) Briefing | June 1, 2017 The Balkans may become the achilles heel of EU-China climate leadership Blog post | June 1, 2017 Guest post: China stokes global coal growth Blog post | June 26, 2017
Corruption in the Balkan energy sector
South-eastern Europe has high potential for energy efficiency and sustainable renewable energy investments. Yet, as a Bankwatch study illustrates with a number of examples, countries have shown little ability to absorb investments at a large scale without systemic corruption and patronage. See summary of the examples in the map here or more details in the full study.