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ISSUE 55 Bankwatch mail March 2013 CEE Bankwatch Network's newsletter on international development finance www.bankwatch.org

New nuclear risks in – EBRD EIB hit by activist urged not to back lifetime extensions hoax, pledges to continue hitting under the guise of ‘safety’ climate

The European Bank for Reconstruction to safety measures, including the decom- The European Investment Bank’s and Development is expected to take missioning of old reactors, not prolonging annual press conference in the final a decision this month on whether their lifetime.” week of February proved to be or not to provide a EUR 300 million Chief among the concerns of campaign- significantly more revealing about for a nuclear power plant ers is that the SUP has not been designed the bank’s commitment to fueling to guarantee the safe operation of Ukrain- Safety Upgrade Programme (SUP) climate change than is the norm for ian nuclear units after the expiration of the in Ukraine. Bankwatch and other original design life. the EU bank. environment groups are questioning As Holovko explains, the option – clearly the logic of the proposed SUP as it a very realistic option under Energoatom Reacting to a fake press release – circulated by plans – of plant operations exceeding the will result in some of Ukraine’s old activists on the eve of the bank’s set piece event design period has not been assessed: “In nuclear units continuing to operate in Brussels – which had announced that the EIB the main ecological assessment report would be pulling out of coal investments with for another 20 years. prepared for the SUP, only impacts within immediate effect, EIB president the design lifetime were analysed. To take told journalists that such claims were “pure non- In recent weeks, Alexander Shavlakov, the the specific case of the South Ukrainian sense”. Nonetheless, Hoyer pressed on and stuck technical director of Energoatom, the state Unit 1 that expires this year, its potential to his script, maintaining that the EIB remains a nuclear operator, acknowledged the real- environmental impacts beyond the closure frontrunner in the fight against climate change. ity of the programme, telling a meeting date have been deemed by Energoatom to The surrealism inside the in February of the trade union of Ukrain- be ‘non-significant’ because ‘in previous building mounted as the EIB president then re- ian nuclear industry workers: “Without years of operation no significant impacts ceived the ‘Coal Down’ award of a flower vase the Safety Upgrade Programme, [nuclear] were observed’. This is a highly irrespon- in the shape of a smokestack from a ‘citizen of units’ lifetime extension is out of the ques- sible approach to nuclear safety.” Europe’, one of the activists involved in the tar- tion. We should be conscious of this.” The whole concept of nuclear safety in geting of the EIB. The ‘nuclear safety’ billing of the SUP Ukraine remains highly contentious. The fi- Journalists further pressed President Hoyer appears to be blinding EBRD decision- nal decision on whether to close or extend and EIB colleagues about the bank’s efforts to makers to the full implications of the pro- specific nuclear operations lies with the combat climate change and to clarify its position posed investment, although discussions state nuclear regulating authority (SNRIU) on future lending for coal-fired power plants in and negotiations around the deal have based on periodic safety review results. Europe. It was reiterated that the EIB was not cur- been taking longer than expected – the The capability, though, of SNRIU to base rently ready to announce dropping coal from its EBRD board date for the decision is now its decisions purely on safety considera- portfolio, and that gas too will continue to feature scheduled for March 12, some six months tions remains far from certain – currently in its multi-million energy lending. later than planned. no nuclear decommissioning plans exist, The EIB is currently undertaking a review of its For Iryna Holovko, a Bankwatch energy the only plan being to extend the lifetime energy lending policy, a process that takes place campaigner in Ukraine, there is a funda- of nuclear units. once every 5-6 years. Bankwatch and NGO allies mental issue at stake: “Would the proposed Another major question mark hang- such as Counter Balance (the group behind the EBRD loan help to guarantee the safe op- ing over the SUP deal concerns financ- EIB hoax action, with help from the Yes Lab) that eration of Ukraine’s 15 operating nuclear ing – principally whether Energoatom is have been participating in the public consulta- units, 12 of which are designed to finish in any position to contribute the required tion for the policy review contend that such is the operating by 2020? Our answer is ‘no’. 60 percent of the programme’s overall acuteness of the climate change challenge the The SUP has got to be exclusively geared funding.

Continued on page 2 Continued on page 2

Inside Page 5: Bankwatch prize-winners lead Page 7: Commission guidance for EIB on the way on sustainable EU funding sustainable energy

Page 3: The case for building renovation Page 6: Major challenges for EBRD in Page 8: The wild east – Shell’s shale gas in the EU budget Kosovo move in Ukraine Page 4: More crime and corruption at Page 7: Kyrgyzstan seeks to control Serbian mine Canadian gold miners he renovation of convergence, in line with the buildings to high Building renovation Strategy. And Tenergy performance with the need to restore and standards has the potential reinforce fiscal discipline, to be the most cost effective must be top of the “the value of each euro spent investment any European must be carefully examined nation can make, given the ensuring that the European benefits in terms of job Added Value and quality of creation, quality of life, EU budget priority spending under the future MFF economic stimulus and are enhanced”. energy security that such BPIE believes that investments deliver. For list for 2014–2020 allocating MFF resources these reasons the Buildings to building renovation is Performance Institute a wise investment that Europe (BPIE) is advocating Then there are the health as a current assignment. can help realise multiple for the maximum possible benefits from improved BPIE believes that if the co- benefits all across economic, allocation of EU funds to living conditions and lower benefits were systematically societal, environmental and the energy renovation of air pollution levels, resulting valued and monetised, they energy security dimensions. buildings under the recently in fewer working days lost could significantly exceed the Accordingly, we advocate agreed multi-annual to ill health and a lower energy cost savings. assigning high priority for financial framework (MFF) burden on state health So what have these multiple programmes that stimulate for 2014-2020. services. Addressing the dire benefits got to do with the building owners – from situation of families unable to MFF? Rather a lot, as it private households and small This bold assertion stems afford keeping their homes happens. businesses to public bodies from the fact that there is a adequately heated can only The EU’s new Energy and commercial real estate multiplicity of benefits that be solved in a long term, Efficiency Directive, adopted firms – to renovate their arise when energy saving sustainable and cost effective in October 2012, includes properties to very high energy from page 1 measures are applied to way by significantly improving a requirement for member performance levels. existing buildings. Most the thermal performance and states to develop long term Public funding alone cannot In December activists delivered a nuclear safety obvious are the savings on heating system efficiencies of renovation strategies for provide all the investment message directly to the EBRD's office in Kiev from page 1 EU MONEY FOR COAL-FIRED energy bills that accrue to the the housing stock. national building stocks. required to improve Europe’s building owner or . Yet building stock, so spending EIB must grasp this opportunity and commit to no Following nuclear ‘stress-tests’ imple- POWER PLANTS: HOW THE the totality of benefits is in programmes need to be further financing of coal fired power plants. Addressing the dire situation of families mented in 2011, the cost of Ukraine’s SUP EU'S BANK IS HELPING TO fact much greater. designed in a way that they According to Berber Verpoest of Counter Bal- rose to EUR 1.45 billion. In tandem with a DRIVE CLIMATE CHANGE Some of these additional unable to afford keeping their homes leverage private capital – be ance, “The presentation of this award and the loan from Euratom, the EBRD is expected benefits are also realised by “ that building owners’ own hoax press release were meant to emphasise the to provide up to 40 percent of the project the owner/investor, such as adequately heated can only be solved in a financial resources, or funding EIB to coal 2007–2011: EUR 2 billion deep contradiction at the heart of the EIB. On the costs. The remainder should be covered by improved comfort, better from financial providers one hand, this is the bank of the EU with the goal long term, sustainable and cost effective Energoatom’s own resources. internal air quality, improved and the wider investment EIB loans to fossil fuels 2007–2011: to fight climate change; on the other hand, the However falling tariffs announced in sound insulation and way by significantly improving the community. 19 billion (a third of overall energy EIB has been lending billions to coal, gas and oth- January this year for Energoatom’s electric- increased property value (sale Deep renovation of national lending) er fossil fuels and until last year its dirty energy thermal performance and heating system ity will undermine the company’s ability to or rental). These additional building stocks, in line with loans were equal to its support for clean energy. pay its end of the SUP deal. benefits are not readily the requirements set out in the Coal plants financed by the EIB since 2007: So with the hoax we wanted to make clear what efficiencies of the housing stock. Already this year Energoatom has ac- quantified and thus rarely get Energy Efficiency Directive, is we expect the future energy policy to look like.” knowledged to SNRIU that the reduced factored into the investment a long term venture spanning 1. Du-Walsum Coal Power Plant in Other than the press conference comments ” tariff rate will not allow for the implemen- calculation. There are energy system These strategies require a number of decades. The , 2007 from Mr Hoyer, the EIB also reacted to the hoax tation of all the planned SUP measures for However, many of the benefits too. It is cheaper to the mobilisation of funds period to 2020 is a crucial press release by posting a denial on its website 2013. The company has let it be known benefits are realised by save a unit of energy than to to invest in improving the time during which the market 2. PPC Environment in , 2007 that included the threat of legal action. At the that in order to implement the SUP in 2013 society at large, rather than supply one, thereby avoiding energy performance of needs to be transformed from time of going to press, there had been no fur- it requires 3 billion hryvnas (EUR 286 mil- the individual investor. the cost of new generation homes, offices, hospitals, low renovation rates (around 1 3. Enel Energia Rinnovabile & Ambiente ther indications of the bank actively seeking legal lion), yet under this year’s tariff it will gen- More efficient use of energy capacity and other supply retail outlets, educational percent of total floor area each in , 2007 redress. erate only 620 million hryvnas (EUR 59 reduces energy imports, infrastructure. Lower heating establishments and the myriad year) and shallow renovation Such steps from the EIB, though, would surely million). thereby improving balance demands in winter, and of other buildings that we (typically 20-30 percent 4. TES - THERMAL Power Plant Sostanj indicate that it is missing the basic, highly serious This is not the first time that safety of payments – a key issue cooling demands in summer, spend most of our lives inside. energy saving) to high rates in , 2007 and 2010 point at the heart of the activist hoax. modernisations at Ukrainian nuclear plants given that nearly all of reduce the traditional peaks in Yet finding the financing for (2.5 to 3 percent per year) and As Xavier Sol from Counter Balance explained have been jeopardised: a previous mod- Europe’s member states rely energy supply which are the such investments has always depths (saving 60 percent or 5. Power Plant Karlsruhe in Germany, 2008 in the aftermath of the press conference high jinx ernisation programme saw the imple- on imported energy to meet most expensive to supply, so been one of the biggest more). in Brussels: “The EIB has been working hard over mentation of only 80 percent of 253 pilot demand. costs are reduced for all users. barriers. The MFF 2014-2020 can 6. Fortum CHP And E-Metering in , the past years to clean up its lending. We com- measures and 37 percent of 472 adopted Investment in building Furthermore, according to This is where EU funding provide member states and 2009 mend them for those efforts and we hope that measures. renovation creates jobs – in the Intergovernmental Panel via the MFF can – and regions with the resources they take this hoax for what it really is: not so Given these highly uncertain factors manufacturing, installation on Climate Change, saving should – play a key role in to kickstart the required 7. SE Power Plant And Forest Industry R&D much an attempt to make fun, but an alarm bell hanging over the SUP, it is incumbent on and throughout the extensive energy in buildings is the the forthcoming seven year transformation. in Poland, 2010 that time is running out and subsidies for fossil the EBRD’s board of directors to say no to supply chain of products cheapest way of reducing budgetary period that the fuels must be ended today if we want to avoid Dan Staniaszek heads Buildings the loan as it is currently conceived. and services that support carbon emissions. member states are now 8. South Poland CHP in Poland, 2011 catastrophe.” Performance Institute Europe’s such investments. These Quantifying the combined starting to plan for. Read more: Background information on the jobs reduce unemployment impact of all these benefits is Under the MFF deal data management, renovation and Ukrainian nuclear power plant Safety Upgrade 9. Paroseni Power Plant in , 2011 Find out more: Check out how the EIB hoax financing portfolios, and has broad costs, increase tax receipts not an easy task, yet it is one reached in early February, Programme is available at: http://bankwatch.org/ unfolded, including footage of the ‘Coal Down’ and stimulate local economic that the energy efficiency team future spending should experience across the sustainable our-work/projects/nuclear-power-plant-safety- award handover, at: http://storify.com/ growth through increased at the International Energy support growth, employment, energy sector spanning 25 years. upgrades-ukraine ceebankwatch/eib-divests-from-coal disposable income. Agency has taken on board competitiveness and

2 Bankwatch Mail­ | issue 55 march 2013 | www.bankwatch.org Bankwatch Mail­ | issue 55 march 2013 | www.bankwatch.org 3 Win win win – CEE The Footbridges for bird-watching project in Kolubara mine “mired in crime and corruption” Liepaja city will develop footbridges and set up public show how to The ‘Bicycles save trees’ project involves a low- information billboards in Lake Liepaja in order to carbon separate waste collection system in the encourage people to learn about nature in the At a press conference in January, It has emerged, though, that Savatijević’s best it can. Yet the strong position adopted inject quality into EU city of Koprivnica. The concept is based on indi- city, do bird-watching and find new ways of bal- ’s energy minister Zorana property – not even registered in his name, by Serbia’s energy minister in this latest in- vidual waste pick-up with bicycles on demand ancing human and natural needs. Mihajlovic spoke out strongly against a basic fact that should have disqualified stance suggests that Kolubara’s corruption funded projects from the users of the service. The service is pro- the Kolubara mining complex, him from receiving any resettlement com- problems are far from being resolved and vided for free and is entirely financed by the sell- Macedonia pensation – was hugely overvalued in or- that the real victims of the EBRD’s support Bankwatch’s competition devoted describing it as being “mired ing of the collected materials. The main beneficial der to qualify for such a big payout. The for Serbian coal have been ignored. to showcasing ideas for EU funds in crime and corruption” while impacts of the project are reduced consumption, The ‘Meteo’ sensor boxes project in Skopje aims house in question was somehow estimated The EBRD often argues that even when investments that can generate CO2 reductions, and saving trees for paper pro- to provide free and easily accessible information also announcing that a thorough to have the same value as dwellings of a corruption allegations descend on its cli- sustainable development for duction. related to environmental pollution. The NGO Free investigation is ongoing into thousand square metres in the Serbian ents in central and eastern Europe, it pre- The Urban gardening in Zagreb project aims Software has designed a special box containing corrupt practices by the Kolubara capital . Moreover, the EPS board fers to stay involved in order to exercise has proved to establish shared urban gardens, where the custom selected sensors that can measure vari- member received this money while numer- pressure and ensure that any such clients to be a big success – and it should management. Bankwatch believes residents of large residential buildings can have ous environmental parameters. The boxes can be ous other families, whose homes had been clean up their act. that this latest confirmed scandal offer inspiration to EU and national access to land for growing vegetables. The pro- placed anywhere, as long as they have internet prioritised on resettlement lists, were still The fact remains, however, that in all level decision-makers as the task ject will reduce the distance for food transport access. The project is a direct result of the city at Kolubara should be giving the waiting to be offered fair alternatives and these years of EBRD loans to EPS, the com- and enable Zagreb’s citizens to produce their own of Skopje’s inability last year to cope with huge EBRD serious pause for reflection compensation. pany’s practices remain highly dubious. of setting operational programmes, healthy food under the supervision of experi- air pollution, that resulted in an increased number as it considers yet another loan to A huge corruption scandal at Kolubara Abuses regarding resettlement continue. the blueprints for how to spend the enced producers. of deaths due to air pollution. The project can be the Serbian electricity company EPS, is not exactly news any more. What is new And there remains too the nagging suspi- EUR 960 billion pot for the 2014– The Karlovac waste recycling project aims to implemented by municipalities at the local level now, though, is that a government minister cion that some of the uncovered financial heavily implicated in these latest tackle the fact that waste collection is impossible and it will not only increase information flows for has opted to speak out so strongly in this abuses may have involved the very public 2020 budgetary period, now gets revelations. for modern motor vehicles in the city’s old historic the public but also provide the necessary push for case. Equally significant is the spotlighting development money provided by the EBRD. underway. town area. The NGO involved will collect recycled municipalities to deal with air pollution locally. of how corrupt practices are impacting the The EBRD should cut its losses and with- Coverage of the EU budget negotiations in the last waste on a voluntary basis and transfer it to recy- The investigations, being carried out by a resettlement of communities on the min- draw from Kolubara at the earliest oppor- year has tended to focus exclusively on the ‘big- cling companies. Poland department within Serbia’s energy minis- ing perimeter – indeed for many years lo- tunity. numbers game’. There has been an alarming lack try, concern abuses related to the expro- cal people have been complaining about Read more: Background information on the of media attention given to the voices of those The Centre for eco-passive building technolo- priation of properties neighbouring the abuses and mistreatment from EPS man- Kolubara mine and the EBRD’s role in it is available who can and do benefit from EU funded projects. gies in Kock would offer consulting, training and mining complex. Mihajlović claimed that agement. at: http://bankwatch.org/our-work/projects/ Indeed as our competition entrants have shown, A community garden scheme in Stredokluky the production of eco-passive building technol- financial abuses committed by the manag- In spite of all this, the EBRD appears to kolubara-lignite-mine-serbia there is tremendous appetite for direct public en- that promises to create jobs in a rural area, pro- ogy, and would employ around 15-20 people. ers responsible for the Kolubara complex be determined to continue its long-stand- gagement in the formulation of EU projects that vide local, ecological food and restore land and The Rainwater for a rainy day project aims involve millions of euros. As reported by ing support for EPS. can serve local community needs. . to construct four reservoirs for rainwater located Serbian news agency b92, a range of un- Last summer, the EBRD approved a EUR In the second half of 2012 we sought ideas for close to three settlements in Krzeszowice. The derhand practices have taken place in re- 80 million loan to EPS for ‘environmental EBRD added value at the projects that could best contribute to sustainable project’s main aim is to solve the problem of tem- cent years, from the payment of high sala- improvements’ at the Kolubara mining ba- Kolubara lignite mine development in central and eastern European porary water shortages that occur in the ries to non-existent employees, to buying sin, a major financial commitment that will communities. The results suggest that supposed The Mend it yourself! project in Pécs aims to mostly from spring to autumn. During the draught over-priced equipment, as well as using contribute to the expansion of extractive 540,000,000 tonnes of estimated lignite EU fatigue may well be yet another ‘Euro myth’. show young people how they can implement period inhabitants would be able to collect water resettlement compensation to pass bloat- operations – and, in turn, to the burning of reserves in the EBRD-financed mining fields Our national campaigners who closely follow the sustainability in their own lives, how they can use from the reservoirs and use it in their daily farm ed sums of money to people close to the more lignite. This was the fourth EBRD loan in Kolubara. use of EU money in their respective countries and repair old, out-of-order tools, toys, household work. In total the system should supply water to management. to EPS since 2001, with a fifth approved were surprised – and inspired – not only by the machines and bikes in alternative ways. Thus they 40 households and 15 small farms. On this latter point, Mihajlović detailed subsequently and a sixth currently in the 500,000,000 tonnes of estimated CO2 number of project ideas that were submitted, but can develop their social competences and other that the board managing EPS, which man- bank’s project pipeline. emissions that will result from burning also by their inherent quality. skills suitable for everyday community life and for ages the exploitation of the Kolubara basin, Confronted last year by corruption in- these reserves. The final award ceremony took place in Brus- securing employment. paid EUR 1.2 million in compensation to one vestigations opened against numerous for- sels last month, where the competition winners Tree-planting project along channels to de- The ‘Village jumble sale’ project aims to create a of its own members, Radoslav Savatijević, mer EPS managers, the EBRD declared itself 200,000 tonnes of estimated reductions in gathered to describe their ideas and how EU fund- velop local energy production and promote the roofed market place, a sort of jumble sale where whose house was apparently one of those satisfied that the company is doing the best CO2 emissions resulting from the EBRD- ing can benefit their countries. EU funds decision- conservation of biodiversity in Derekegyház. Along members of the public can bring unused items properties in the Vreoci municipality that it can to clean up its act. In the same vein, financed project. makers would do well to take note. drainage channels owned by the local government (e.g. old tables, chairs, TVs, radios, washing ma- needed to be relocated to make space for the EBRD appears to be persuaded that EPS and operated by a water management company, chines, etc.) in order to prevent items ending up in the expansion of mining operations. is trying to handle the resettlements as Prize-winning projects the project promoters plan to plant trees of local waste collection points, scrapyards or even illegal origin. This would contribute to the conservation dumps. As a result, the amount of waste in the of biodiversity, provide employment in the local region will be reduced. community, increase forest areas, decrease loss of The Rail cycle-park Bratislava branch project Monsanto drops off the EBRD menu at least for now The mountain bike park ‘Hissarya’ project in water due to evaporation and provide raw material features an old neglected train station that would central Bulgaria aims to develop three mountain for the heating of local public buildings. This will be cleaned and revitalised. The aim of the project bike routes: a short length route for beginners and reduce dependency on foreign energy sources and is to create a cycle track in the station between "Please be advised that, in this Thus via an email from the EBRD in late Monsanto choose to reapproach EBRD for nature lovers, a 4-5 hour route for professionals and increase local energy sovereignty. the tracks to ease the traffic in that part of town, particular transaction, the EBRD January, Bankwatch was informed of the support – a prospect that should not be ruled an all day long tour, combined with sightseeing. to plant trees to improve the environment and and Monsanto were unable to find bank’s decision not to proceed with a pro- out given the bank’s comments. The urban solar charger project aims to renovate the building and create a new com- a satisfactory project structure posed USD 40 million 'risk-sharing facility' What this case does highlight, however, is charge any portable electronic devices while munity and cultural centre while maintaining the that would have enabled medium-large a distinct problem faced by a large institu- for financing. Each institution users are resting on a bench and surfing the In- The Eco-thoughts express project in Riebini aims spirit of railways. Furthermore, a small commu- farmers and distributors in , Ukraine, tion such as the EBRD – it is difficult to reach will continue to explore other ternet. Four such chargers could be built and de- to increase environmental awareness among chil- nity vegetable garden with composting potential Serbia, Hungary, Bulgaria and to individual farmers without intermediaries, ployed using the EUR 1000 award. dren and youngsters and help mobilise them to would be installed to motivate people to produce opportunities in order to provide buy Monsanto's seeds and agro-chemicals because the bank does not have the on-the- The city park bees project will be implement- deal with global environmental challenges while their own food, recycle and make use of biologi- farmers and distributors with in installments, without Monsanto losing ground infrastructure or local knowledge to ed on the roof of a public building in one of the contributing to local sustainable development. cal waste. adequate and time-appropriate money if they got into debt. provide thousands of small individual loans. many parks in the Bulgarian capital, Sofia. Work- The ideas and activities have been developed Were the multinational’s notoriously un- This is a problem that needs to be addressed financing, which we recognize to be shops for both children and adults will be run by by youngsters themselves and they include the Find out more: Video clip interviews with some palatable negotiating tactics just too much by central and eastern Europe’s govern- one of the key challenges to increase professional beekeepers, biology teachers and production of information materials and drawing of the competition winners can be seen at http:// for the EBRD to stomach? ments and farmers' unions if the EBRD is not volunteers. Children will be given the opportunity books, giving thematic lectures and regularly or- bankwatch.org/news-media/blog/these-eu- agricultural productivity in the Bank’s We may never fully find out, though Bank- to end up courting such unsavoury business to produce honey themselves. ganising events in the county’s schools. citizens-have-better-ideas-eu-funds region of operations." watch will be quick to react again should partners again in the future.

4 Bankwatch Mail­ | issue 55 march 2013 | www.bankwatch.org Bankwatch Mail­ | issue 55 march 2013 | www.bankwatch.org 5 Kyrgyz parliament votes In the environmental part of the report, the under which it was signed, and adopt measures to EBRD enters Kosovo: Past IFI failures must be heeded State Commission argues that mining by Centerra avoid similar mistakes in the future. to renegotiate Kumtor has caused irreparable damage to nearby gla- Centerra has indeed enjoyed surprisingly fa- ciers, including destroying the largest glacier in the vourable terms: a generous tax regime, fixed gold mine contract area, Davidov. Results from German and Slovene environmental charges (USD 310 000 per year), As Kosovo becomes the EBRD’s latest In recent years, due to a lack of initiative to households. At the same time, prevailing laboratories show that mining activities have led to an extended allowance to operate the open-pit country of operation, the bank needs and vision from Kosovo’s decision-makers, inadequacies in water and electricity pro- In a landmark ruling in late February, the pollution of the Kumtor, Taragay and Naryn river mine until 2026 and very low payments for future to listen to civil society, writes Visar a clear feature of international agency en- vision remain the main obstacles for do- the Kyrgyz parliament voted to basins and will continue to do so if no measures are recultivation works after the mine’s closure. Azemi. gagement has emerged: the international ing business in Kosovo. Given these water renegotiate a contract signed in taken. Currently, there is a substantial risk that the These come on top of other beneficial factors institutions have had to write strategies issues, it’s even more remarkable that the 2009 with the Canadian mining firm dam on Lake Petrov may break because of pressure such as a high gold component in the ore (on aver- Kosovo has just celebrated the fifth an- and other important political and econom- World Bank remains intent on supporting from mining operations, with the potential to result age 2.9 g per ton and more), relatively low spending niversary of independence. In these five ic documents for Kosovo. In such process- the new lignite power plant for which vast Centerra Gold Inc. for the exploitation in a disastrous spill of tailings downstream. on gold production (USD 502 per ounce) and signifi- years, Kosovo has achieved membership of es, including policy making and the imple- quantities of water are needed for the plant of the Kumtor gold mine, near the The reassessment of the terms on which cant proven and probable remaining gold reserves certain international financial institutions mentation of these policies, international to operate. border with . The 2009 deal is Centerra can mine in the future is good news in (approximately 900 tonnes of gold, compared to (IFIs): having already joined the IMF and institutions have been rather closed to civil Finally, when it comes to energy use, other ways too. New open pit mines planned by 260 tonnes produced in the period 1997–2011). the World Bank, on December 17 last year society organisations in Kosovo. Kosovo is the most inefficient country in the most recent form of the contract Centerra would negatively affect more glaciers in The parliament’s ruling should serve as a Kosovo became the 66th member of the As it starts to formulate and design its the region. Over 60 percent of the electric- between the Kyrgyz state and Centerra the region. In addition, the company is also cur- wake-up call, both for all Kyrgyz authorities with European Bank for Reconstruction and De- first strategy for partnership with Kosovo, ity produced is used to heat households. that has had a presence in the central rently exploring territories that intersect the ter- any influence on the direction of the country’s de- velopment. Yet what can Kosovo’s citizens the EBRD has to be alive to civil society and Similar to the water problem, energy losses Asian republic since the late nineties. ritory of the Sarychat-Ertash nature reserve, per- velopment, and to the international financiers of expect from EBRD membership? other independent experts, and not only to here stand at 37 percent as a result of an mission for which was approved on July 5, 2012 Centerra – including the EBRD, which in 2010 ex- For one thing, there is a definite need local institutional authorities. Civil society’s old grid and electricity theft. EBRD backed Among a range of issues, Kyrgyz parliamentarians re- by the government. A reassessment of the con- tended a revolving debt facility to the company. to learn from past international financial role in this initial process has to be a lot energy efficiency programs could reap big ferred to serious environmental concerns underpinning tract could yet result in the Kyrgyz authorities tak- The voices of citizens and civil society groups, who institution mistakes in the country. Kosovo more than merely symbolic. wins, helping to decrease energy demand their decision. This can be considered a success for local ing a tougher stance on restricting such activities. have for years warned about Centerra’s Kyrgyz opera- still has a wide range of serious economic, And where should the EBRD focus its while boosting employment at the same activists that have for years campaigned against the Beyond to environmental harm, the State Com- tions, should not be pushed to the sidelines by ‘sustain- environmental and social problems – a fi- attention in these early days? Those sec- time. negative impacts of Centerra’s mining activities. mission informed Kyrgyz legislators that the deal able development’ claims. On the contrary, local voices nancial and budgetary crisis ongoing since tors that have been largely overlooked by The challenges in Kosovo are huge, but The day before the vote the Kyrgyz parlia- with Centerra had failed to provide adequate ben- should be heard and be permitted a say in the deci- 2001 has not been alleviated by World Bank international donors and other IFIs should certain solutions are staring us in the face. ment heard from a State Commission appointed efits for Kyrgyzstan – the Kumtor mine is the Center- sion-making over such investments from the outset. membership. At the same time, the World surely be the most compelling if the EBRD Civil Society in Kosovo would like to be to undertake a comprehensive investigation into ra’s main profit-generating project, accounting for Bank has mistakenly devoted too much is intent on improving living standards part of building a partnership strategy be- the risks and benefits of the Canadian firm’s gold 92 percent of the Canadian company’s income in Find out more: See the Kumtor Gold Mine project focus and energy to building a new lignite and economic prospects – investments are tween Kosovo and the EBRD. Key to this is mining operations in Kyrgyzstan. This in fact was 2011. The Commission advised Kyrgyz authorities to page at: http://bankwatch.org/our-work/ power plant, spending millions of euros on acutely needed in agriculture, multi-modal meaningful dialogue and engagement. The the third official investigation since 2011. renegotiate the contract, investigate the conditions projects/kumtor-gold-mine-kyrgyzstan associated technical assistance and stud- transportation, energy efficiency, renew- EBRD, though, must grasp the importance ies. And the process continues to be mis- able energy and for ensuring a sustainable of not replicating the mistakes of its sister managed by the World Bank. water supply, organisations. Only offering documents to European industry to develop in new sectors (and The Commission is currently impact assessing Meanwhile Kosovo’s economic develop- After Serbia, Kosovo has the largest be signed off by Kosovo’s authorities after Commission lays down potentially gain competitiveness there), but it also several options for an environment, climate and ment is the worst in Europe. Official un- percentage of agricultural land (52 percent) they have been drawn up elsewhere, and ensures intra-EU and sustainable energy sources. energy framework for unconventional fossil fuels employment stands at around 47 percent, and tilled land (27 percent). In spite of this, not holding proper consultations with civil sustainable energy and in particular shale gas development in the EU. with youth unemployment reckoned to be Kosovo still imports basic food items such society and independent experts in the pointers to EIB Is the traditional model for electricity transmis- The policy of the EIB should follow the lines to be as high as a staggering 73 percent. The as fruit, vegetables, flour and eggs. Indeed country – this kind of approach has not got sion and distribution changing? What implications presented by the Commission next year. This would figures for extreme poverty are equally at the end of 2012 the country’s trade defi- us very far in recent years. The public consultation on the EIB’s does this have for future investments in electricity contribute to a better avoidance of stranded assets. grim with around 13 percent of the pop- cit totalled more than EUR 2 billion. Invest- review of its energy policy is well Visar Azemi works at the Kosovo Civil Society networks? What is the future role of smart grids, ulation affected. Alongside Bosnia and ments for sustainable agriculture could Consortium for Sustainable Development, an underway now, with the bank’s offshore grids and energy storage solutions? What role will coal and lignite fired generation Herzegovina, Kosovo brings up the rear help decrease this deficit and increase em- umbrella organisation for non-governmental intention being to have the new policy The development of smart grids is the big chal- have in the EU power system in the medium in rankings that assess the ease of doing ployment at the same time. actors. lenge in terms of energy transmission and should term, with or without CCS, and how is this con- business in the region. Compounding mat- When it comes to water supply, again in place sometime this summer. represent the bulk of investments in the domain. sistent with the EU’s Climate Action goals and ters yet further, Transparency International Kosovo faces acute problems. Outages in While not part of the review process as such, following Together with energy storage, it will allow to fully in- its security of supply objectives? rates Kosovo as the most corrupt country drinkable water happen frequently, yet the an official request for information Bankwatch has re- corporate renewable variable energy into the system. This is very inconsistent with the Climate policy and in the region. government appears unable to tackle this ceived comments submitted by the Directorate-Gener- The promotion of off-shore grids is of importance as should be funded only if CCS is actually in the project The challenges then for the EBRD in Kos- problem. al for Environment of the to the it practically helps transferring the energy produced to (and not "CCS ready"). Security of supply can be en- ovo are extreme and deep-rooted – to start Within the region of Prishtina alone, be- EIB as part of ongoing exchanges between the bank the consumption centres, allowing for a much greater sured through many other sources, including renew- to overcome them, it would do well to em- cause of an old grid system, there is a huge and the Commission. We reproduce here a selection of area to be utilised for the production of energy and also able sources, which are most of the time domestic. bark on some innovative, new approaches. amount of water being lost before it gets these comments (EIB questions in italics, followed by the development of new technologies (wave energy DG Environment reactions). It is encouraging to read DG generation, off-shore wind turbines, etc). As nuclear power stations are ageing, should Environment’s persuasive arguments placing a strong their life be extended (where possible) or should Air pollution in Kosovo – Shocking emphasis on sustainable energy – it’s the kind of em- Gas is an important bridging fuel source in the they be replaced with other generation sources? phasis that Bankwatch would be delighted to see run- transition to a low carbon economy: to what Extending the life of nuclear plants is not a sus- World Bank statistics, shocking World ning through the heart of the EIB’s new energy policy. extent and under what conditions should gas- tainable option: it increases the risk of accident, fired generation be supported? and continues increasing the nuclear waste man- Particularly in the current economic climate, is Only if alternatives (renewables) have been con- agement problem. Ageing nuclear plants should Bank coal plans there a trade-off between promoting a com- sidered, assessed and compared, and if the overall be replaced by sources that petitive and secure energy supply and one effects (economic, social and environmental, as- create the least negative impacts (eg, wind, solar). which is environmentally sustainable? Where sessed on an equal footing) are in favour of gas. The World Bank’s plans to finance a major impacts are starkly immediate, bringing should the balance lie and what implications Recent studies from the IEA suggest that gas In a developing market context, where should the new coal power plant near Prishtina in Ko- very concrete and measurable distress for does this have for energy sector investments? will become more competitive than coal by 2017. balance lie between meeting local energy needs sovo have been put into sharp focus by a local populations and major dents in state The objective of the EIB should be to avoid any This provides opportunities to switch to an energy at least cost and reducing global greenhouse gas new campaign from KOSID that draws on budgets. trade off and to fund investments that promote mix with more gas, however it may also increase emissions – the trade-off between affordable en- the bank’s own startling figures related to Find out more: The KOSID campaign also at the same time sustainability, competitiveness dependency from the East for this provision or on ergy for all and sustainable energy for all? already existing air pollution in Kosovo. involves TV ads, see: http://www.youtube.com/ and security of supply. This is not only rhetorical: LNG from US and other more distant countries. There is not necessarily a trade-off if actions The campaign highlights that climate watch?feature=player_embedded&v=DZ29CSbK9_E for instance, by developing wind, solar or geother- Furthermore it may increase the search for and towards energy efficiency and local renewables impacts are not the only reasons to oppose mal energy production in the EU, it not only allows exploitation of shale gas in Europe. sources are promoted. energy production from coal. The health

6 Bankwatch Mail­ | issue 55 march 2013 | www.bankwatch.org Bankwatch Mail­ | issue 55 march 2013 | www.bankwatch.org 7 Shell’s new shale gas frontier in Ukraine: another fossil fuel opening for EBRD?

The industry frenzy surrounding in Ukraine’s potentially burgeoning shale ject’s long implementation period that had the development of shale gas in gas sector. been said to involve ‘cutting edge, western Europe is gathering pace, with the In his article, Puliti, curiously also standards’. Said project promoter at the announcement in late January of a a member of the supervisory board of OMV time was Shell. EUR 400 million deal between Shell Petrom SA, Romania’s biggest oil company If EBRD – and it would be a shrewd move, that is said to be assessing that country’s given historical experience – opts not to in- and Ukraine to develop the country’s potential for shale gas development, does volve itself in the hard end of project fi- shale gas potential. point to the environmental concerns in- nance for shale gas projects in Ukraine (or volved in Ukrainian shale gas development elsewhere), it may of course line itself up to However, the debate over the future of and the recent Shell deal: “There is vocal be a financial accessory to the industry as a shale gas in Europe is anything but static. environmental opposition to the develop- whole. As Puliti points out, “Once (legal and While the Ukraine deal may have provided ment of shale gas resources in Ukraine but, regulatory) change starts to happen, mid- fossil fuel proponents with some bragging by and large, the deal was perceived a suc- sized companies will follow the big boys rights, just a few weeks later Germany’s cess.” and help Ukraine bring real energy inde- upper house of parliament passed a reso- Not surprisingly, the article does not lin- pendence closer.” This could well be the lution urging the German cabinet to tight- ger long on such concerns – Puliti’s prime biggest risk for those who believe that an en regulations for hydraulic fracturing (or focus is on the potential for shale gas to international public bank, drawing on the ‘fracking’) in Germany. be a game-changer for Ukrainian energy taxpayer contributions of countries across Across the length and breadth of Eu- supply and independence, and on the in- the world, should not be dragging resourc- rope, from the UK to Ukraine, we are see- vestment opportunities. While not a clear es that could be deployed for much needed ing a tit-for-tat battle between shale gas declaration of intent from the EBRD, none- clean energy projects into ‘below the radar’ prospectors salivating over new reserve theless Puliti’s sentiments represent the support for the fossil fuel industry. finds, national parliaments that have been first public expression of at least vague Ultimately, arguments against the EBRD issuing shale gas moratoria and local com- interest from an international financial in- – and other IFIs such as the EIB – support- munities clearly very concerned about the stitution in European shale gas. ing shale gas may boil down to fundamen- general disruption and environmental hav- Why should this be an issue of concern? tal banking rationales that environmental oc that shale gas exploitation has brought There are a string of reasons but mention campaigners have often found themselves to so many places across the US. of just a few will suffice for now. at the sharp end of when trying to persuade A telling tweet from Terry Macalister, the For one thing, the environmental op- the IFIs not to fund climate-damaging in- Energy editor of The Guardian newspaper, position to shale gas in Ukraine, largely vestments: namely, ‘bankability’. goes a long way to explaining what is play- glossed over by Puliti, is founded on some For a variety of reasons including dif- ing out as the fossil fuel industry attempts stark realities, including the location of fering geological and infrastructure con- to make the case for its latest strand of fi- shale reserves in protected nature areas ditions, shale gas exploitation in Europe nancial life support. According to Macalis- and seismically active zones. Most wor- is regarded by potential as being ter, tweeting on December 13 last year: “In ryingly at the present time is the fact that economically unpalatable, certainly when two decades I have never come across such Ukraine’s environmental impact assess- compared to the US experience. Accord- heavy lobbying than for shale gas. What ment (EIA) regime has no teeth under cur- ing to a analysis published a pity renewables cant get that financial rent legislation: exploitation projects in last year, European shale gas will cost twice muscle.” Ukraine do not require EIAs. as much to produce as US shale gas. The Joining the fray in its own special way, If the EBRD chose to get involved direct- German bank has let it be known: “Those and following the January announcement ly in a shale gas project – and this could waiting for a shale gas 'revolution' outside of the Shell and Ukraine’s shale gas deal take several years to materialise, as we are the US will likely be disappointed, in terms (Chevron has also signed shale gas con- only at the assessment stage right now de- of both price and the speed at which high- tracts with Ukraine recently), was the Euro- spite the industry hoopla – the bank could volume production can be achieved.” pean Bank for Reconstruction and Devel- argue that it would demand the upholding The logic of banking principles may opment. In a Financial Times blog post, the of European environmental standards. The sometimes be hard to fathom, but it would EBRD’s managing director for energy and same was true of the Sakhalin II oil and gas certainly be more unfathomable to see the natural resources, Riccardo Puliti, reacted project, though at the time of its pull-out EBRD backing a loser such as European to the Shell-Ukraine shale deal with what from that controversial project in 2007, the shale gas. Or is the bank now giddy about appeared to be an expression – albeit a EBRD had not been in a position to extending its fossil fuel subsidies, beyond circumspect one for now – of the develop- final environmental approval to the project all reasonable environmental and econom- ment bank’s interest in becoming involved promoters. This was in spite of the pro- ic logic?

Editorial board: Greig Aitken, Claudia Ciobanu, Sven Haertig-Tokarz, Newsletter of the CEE Bankwatch Network on International Financial Flows Petr Hlobil, David Hoffman Address: CEE Bankwatch Network Na Roczesti 1434/6 Contributors: Vizar Azemi, Pippa Gallop, Iryna Holovko, Zvezdan Kalmar, Praha 9, 190 00 Czech Republic Vlada Martsynkevych, Patrycja Romaniuk, Dan Staniaszek E-mail: [email protected] Design: rjones73.carbonmade.com Web: www.bankwatch.org Layout: Tereza Hejmová Twitter: @ceebankwatch

8 Bankwatch Mail­ | issue 55 march 2013 | www.bankwatch.org