Southeast Europe: Climate and energy policy The above NGOs have prepared this briefing for Members of the European Parlia- ment in order to flag some of the most pressing issues related to climate and energy in the EU accession countries of Southeast Europe (SEE). SEE countries within the Energy Community framework FINLAND NORWAY Contracting parties All countries of the SEE region have either EU can- Candidate ESTONIA SWEDEN didate or potential candidate country status. Total Observers LATVIA surface area is approx. 210,000 km2 and is inhabited European Union* LITHUANIA by almost 20 million people. According to the World IRELAND Bank data, national economies are largely in the up- UNITED per middle income range while their key features KINGDOM NETHERLANDS POLAND UKRAINE include both high energy intensity and high green- BELGIUM GERMANY CZECH house gas emissions per capita. LUXEMBOURG REPUBLIC SLOVAKIA MOLDOVA AUSTRIA FRANCE HUNGARY * 19 of the 28 European Union Member States ROMANIA SLOVENIA GEORGIA CROATIA hold a Participants status to the Treaty. BOSNIA AND SERBIA ARMENIA HERZEGOVINA ** This designation is without prejudice to BULGARIA MONTENEGRO PORTUGAL KOSOVO** positions on status, and is in line with UNSCR FYR OF ITALY MACEDONIA SPAIN 1244 and the ICJ Opinion on the Kosovo ALBANIA TURKEY GREECE declaration of independence. Source: http://www.energy-community.org/ CYPRUS portal/page/portal/ENC_HOME/MEMBERS MALTA Why care about SEE? sion and a requirement for regional cooperation have been key drivers for countries to change. The countries Southeast Europe has always been more than just a are now even more strongly connected to Europe, neighbour to the EU: it has been a strategic partner through EU accession negotiations that some of them in many areas, including trade, foreign policy, edu- have started, while others are still waiting to embark cation and energy. This cooperation has witnessed upon. The accession process is supported by the EU many challenges, particularly in times of turmoil in the through the Instrument for Pre-Accession Assistance, Western Balkans, during Yugoslavia’s break-up in the which will provide several billion euros of financial aid 1990s. However, peace has been restored and all the to the region by 2020. Finally, at a time when the EU is countries have – to a greater or lesser extent – chosen contemplating a strengthened joint energy policy via the road of reform and recovery. Although some obsta- an Energy Union, a strong and stable partnership in the cles still remain and general progress is slow, EU acces- energy sector with its neighbours is needed. SOUTHEAST EUROPE: CLIMATE AND ENERGY POLICY 1 From a difficult history to shared values environmental conditions, with the ultimate goal of and economic development integrating this energy market with the EU’s. In addi- tion, the functioning of the Energy Community is to- The countries of the Western Balkans are today in- day 95% funded by EU money. extricably linked – not only because they share com- mon history, but they also have similar challenges to At the moment, the Energy Community only requires deal with. This largely refers to the economic down- the adoption and implementation of patchy pieces of turn caused by the war in the 1990s, reinforced by EU environmental legislation, which are insufficient the global financial crisis in 2008. Still, the countries to ensure equal living conditions for citizens of the nowadays have the same interests, meaning econom- region. It is expected that the Energy Community re- ic recovery and EU accession. These two goals have form3 process that is underway will address this to a encouraged them to join their efforts into a regional certain extent, by introducing additional environmen- approach – led by the Regional Cooperation Coun- tal provisions (e.g. Chapter II of the Industrial Emis- cil1 – in a SEE 2020 Strategy aiming to achieve ambi- sions Directive, Ambient Air Quality Directive and oth- tious goals by 2020, including 1 million jobs across ers). Clearly, any future integrated energy market will the region. One of the key sectors that should deliver not be fair unless the same environmental standards this result is the energy sector. Moreover, according to are applied in SEE as in the EU. the Energy Community Regional Energy Strategy, 30 billion euros of investments in the energy sector are Renewable energy and energy efficiency planned by 2020, including some unsustainable ex- targets are in place… port plans.2 The establishment of the Energy Community has The Energy Community: towards a fair brought some progressive energy policies to the and integrated energy market mainly coal and large hydropower reliant SEE region (see graph below). These policies include the obliga- The regional approach in the energy sector has been tion to increase the share of renewable energy sources underpinned by the Energy Community, an intergov- (20% overall by 2020) and improve energy efficiency ernmental organization aimed at extending the EU’s (9% by 2018 each). The renewables target has been internal energy policy into non-EU Member States in broken down into national commitments, in the same Southeast Europe, and also into Moldova and Ukraine. way as in the EU, only against a 2009 baseline. This Its aims include bringing investments into the energy results in variable national targets varying from 11% sector, improving security of supply and enhancing in Ukraine to 40% in Bosnia and Herzegovina. Shares of Fuel in Gross Inland Consumption in 2012 100% RES including all hydro Exported electricity 80% Nuclear Oil and oil products 60% Natural gas Solid fossil fuels 40% Source: http://www.energy-community.org/ 20% portal/page/portal/ENC_HOME/ ENERGY_COMMUNITY/Overview 0% Albania Bosnia and Kosovo FYR of Montenegro Serbia Energy EU-28 Herzegovina Macedonia Community SOUTHEAST EUROPE: CLIMATE AND ENERGY POLICY 2 ….but climate targets are still missing! mind that another 30 billion euros worth of invest- ments in the energy sector are planned in the coming Despite the fact that countries are on a path to the decades8, it will be essential to ensure tenders and EU accession and are signatories to the United Na- processes are performed in a transparent way. Also, tions Framework Convention on Climate Change and compliance with EU rules in areas of state aid and the Kyoto Protocol, none of them have greenhouse public procurement needs to be ensured in the region gas emission reduction targets in place. The European through the Energy Community framework and EU ac- Commission encourages SEE countries to adopt such cession negotiations. targets but to date, none of the countries actually complied with this. In October 2014, the EU Commis- Large energy import dependency sion published Progress reports for each of the SEE in light of devastating floods and the countries, inviting them to put forward their climate Ukraine crisis commitments ahead of COP 21 in 2015. A persistent effort will be needed to ensure governments actually On average, the import share of energy in the region is abide by this ask. 30%9. As in the EU, this largely relates to imports of oil and gas but it also includes electricity. However, elec- Overwhelming energy intensity is tricity imports became a particularly prominent issue coupled with regulated prices… in Serbia after the May 2014 floods, which resulted in electricity imports of 400,000 euros per day after large Data from the latest Annual Implementation report mines and power plants were flooded. The floods -ex of the Energy Community Secretariat, indicates that posed how potentially vulnerable SEE energy systems in 2012, the energy intensity4 of the concerned SEE could be, as they affected both the largest coal plant countries was three times higher than the average and coal mine in Serbia, the latter is still under water. energy intensity in the EU. Commercial and technical losses amount on average to about 20% in the region, In addition, gas stress test results10 published by the according to a report5 published by a group of NGOs Commission indicate that cooperation with EU neigh- within the SEE SEP project. The explanation for such bours will be particularly significant for securing ener- staggering differences is to be found in the structure gy supply in the short and midterm. This is why import of economic activities (manufacturing vs. services) dependency should be tackled jointly with the EU, but also in low levels of energy efficiency. The key cul- within the 2030 Climate & Energy framework, as well prits are old and inefficient energy facilities, mainly as the Energy Security Strategy and the Energy Union coal-fired thermal power plants, as well as poorly in- initiative. In this regard, fostering further energy effi- sulated houses and inefficient practices such as using ciency measures will be particularly significant, given electricity for heating6. In addition, energy prices are the vast potential of the SEE region, as well as devel- still regulated across the region and are kept artificial- oping EU policies and needs11 in this field. ly low, which essentially acts as market entry barrier to other energy providers. This lack of competition The environment and people’s health enables existing energy providers to act like monopo- are under pressure lies without any real market incentives to change their behaviour, namely increasing the use of renewable The region’s heavy reliance on fossil fuels, particularly sources of energy and improving energy efficiency in coal, has led to major environmental and health prob- production and distribution of energy. lems. Areas around coal mines and coal-fired power plants are well-known as environmental ‘black spots’, ….while corruption thrives across with poor air quality and polluted water and soil. the region! Medical records in these areas testify to the increas- ing number of respiratory diseases, with health costs A report7 published by a group of NGOs within the amounting to over 1 billion euros annually in Serbia SEE Sustainable Energy Policy (SEE SEP) project ear- alone12.