by Victoria Shevchuk
Countries in the Western Balkans and Ukraine, which signed the Energy Community Treaty and joined the newly created Platform for Coal Regions in Transition, continue to provide significant direct and indirect subsidies for hard coal and lignite. This paradoxical situation must end.
Last month, the European Commission launched the Secretariat of a new Initiative for coal regions in transition in the Western Balkans and Ukraine. The “pilot” beneficiaries of the Initiative will be 17 (yet unknown) coal regions, highly dependent on coal mining and coal-based energy production. The Initiative’s Secretariat will provide direct support for its implementation and ensure collaboration with international partners, such as the World Bank, the European Bank for Reconstruction and Development, Poland’s National Fund for Environment Protection and Water Management, the Energy Community Secretariat, and the College of Europe in Natolin.
“The EU has put ‘just transition’ at the very heart of its roadmap towards a resilient, climate-neutral and future-proof economy and the European Green Deal,” Ditte Juul Jørgensen, the Director General for Energy in the European Commission, said upon the launch of the Initiative’s Secretariat. “We recognise that not all regions and countries have the same starting point on the path to climate neutrality, and that is why the European Green Deal includes a ‘just transition’ chapter, which provides for specific support to the regions and people most affected by the transition. This includes regions with ongoing coal mining activity and people currently active in the coal sector.”
The Western Balkans and Ukraine should realise that they can no longer continue to subsidise coal while also pretending to support Just Transition if they are serious about the transformation process, as they claim to be.
Given that, the Initiative Secretariat must discourage these countries from keeping subsidising coal. Money currently wasted on propping up a dying industry are badly needed to finance the transformation of local economies in coal regions.
These countries can no longer at the same time declare a commitment to respecting EU state aid rule while also continuing to give state aid to coal – that is not only an unsustainable use of resources, but it also calls into question these governments’ credibility and their ability to steer just transition processes.
Subsidies to coal
From 2018 to 2019, the Energy Community Contracting Parties*, which use coal in their energy sectors channeled as much as EUR 900 million in direct subsidies to electricity generation from coal and lignite, as calculated by the Energy Community Secretariat. In absolute terms, the subsidies were the highest in Ukraine, Serbia, and Bosnia and Herzegovina.
Ukraine alone gave away EUR 751 million in direct and indirect support to the coal industry, from 2018 to 2019. In Serbia, the figure stood at EUR 88 million.
Serbia’s underground coal mining public utility Resavica has received more than EUR 260 million of state aid from 2013 to 2019, the most significant Western Balkans. It is set to receive a further EUR 80 million in state aid for 2020-2021.
Within the EU’s new climate policies and with the block’s 2050 decarbonisation goal, coal has no future. The Western Balkan countries have themselves signed the Sofia Declaration in 2020, aligning themselves to the decarbonisation goals of the EU and committing to decreasing and gradually phasing out coal subsidies, while strictly respecting State Aid rules as applicable already through the Energy Community.
As much as some of these countries try to deny it, the coal industry has a bleak future. As stated by European Commission Executive Vice-President Frans Timmermans at Ziarul Financiar’s ZF Power Summit, “The longer you wait with the transition, the more difficult and the more expensive it is going to become. So those who shift their investments early into decarbonized energy generation and sustainable energy generation will also profit more quickly”.
Climate neutrality and maximum economic and social benefits for local communities must be the priorities of the transition, and they must go hand in hand. Hence, there is a strong link between reforming public financial support for coal and financing a ‘just transition’ away from fossil fuels. Funds allocated for subsidies could significantly impact the re-development of the mining regions. The wise use of state funds could bring about the just transition, namely the reskilling of mine and power plant workers, the development of a new sustainable infrastructure for the regions’ economic growth, and level the playing field for lower-cost clean energy sources.
Coal industry subsidies have been widely criticised, but things on the ground are not changing fast enough. Some governments appear to think this conservative subsidy scheme – as ineffective and tremendously costly as it is – is reasonable. Yet, with every day, more and more citizens living in the coal regions are rejecting the idea of paying for these excesses with their health and futures.
*Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, Ukraine
Photo by Niels Ackermann / Lundi13 for Ecodiya