{"id":74859,"date":"2022-02-04T17:34:31","date_gmt":"2022-02-04T17:34:31","guid":{"rendered":"https:\/\/chinadialogue.net\/?p=74859"},"modified":"2022-05-24T08:31:15","modified_gmt":"2022-05-24T08:31:15","slug":"chinas-overseas-coal-pledge-yields-mixed-results-in-serbia-and-bosnia","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/energy\/chinas-overseas-coal-pledge-yields-mixed-results-in-serbia-and-bosnia\/","title":{"rendered":"China\u2019s pledge to end overseas coal support yields mixed results in Serbia and Bosnia"},"content":{"rendered":"\n

The future of a 700 megawatt (MW) coal-fired power plant in Bosnia and Herzegovina is uncertain after it was unable to secure financing from Chinese banks.

\u201cThis is the first time the Chinese commitment to exit from overseas coal has been applied retroactively to a project announced before Xi Jinping made his pledge in September 2021. And it opens a realm of possibilities to move away from other coal projects in the Western Balkans,\u201d said Wawa Wang, director of Just Finance<\/a>, an NGO advocating for transparency in public financing. \u201cBut Chinese banks\u2019 refusal to provide financing for the Ugljevik III project is not enough.\u201d<\/p>\n\n\n\n

China and the EU after the pandemic<\/p>

Read more from this series<\/a>, in which we compare the post-Covid policies of China and the European Union, and how their relationship is evolving<\/p><\/div><\/div>\n\n\n\n

The expansion of Ugljevik III, which is located in Republika Srpska (one of the two entities of Bosnia and Herzegovina), has been on the cards since 2013, when Russian-owned Comsar Energy was granted the concession for it. In June 2021, the China National Electric Engineering Company (CNEEC<\/a>) and Sunningwell International Ltd, a company registered in Poland, signed a contract<\/a> to construct the plant.<\/p>\n\n\n\n

In 2020, Republika Srpska\u2019s commission for concessions had found that Comsar Energy \u201cwas not fulfilling its obligations<\/a>\u201d, by failing to progress with the project within the agreed time limits. The Center for Environment, an NGO from Republika Srpska, twice challenged the environmental permits for the project. \u201cYet, the government of Republika Srpska extended Comsar Energy\u2019s concession from 30 to 44 years, and even [planned to] increase the capacity of Ugljevik III to 700 MW, contrary to Republika Srpska\u2019s Energy Development Strategy,\u201d says Majda Ibrakovi\u0107 from the Center for Environment. \u201cAnd now, despite the announcement that the financing is not secured… the permitting process for the plant is still ongoing.\u201d It is unclear where the financing for Ugljevik III might come from. It would not qualify for any export credit support from OECD countries, as late last year the OECD approved a ban on export credits<\/a> to new unabated coal plants.<\/p>\n\n\n\n

Since Chinese banks refused financing, Sunningwell has been \u201cexploring other alternative sources\u201d according to an open statement<\/a>. It is not clear yet where this may come from given the strong international signals<\/a> of an end to coal finance coming from last year\u2019s COP26 climate summit in Glasgow.<\/p>\n\n\n\n

Shifts amid growing cooperation<\/h2>\n\n\n\n

In the last decade, China\u2019s footprint in the Western Balkans\u2019 energy sector has grown. Research, published in December 2021 by the Balkan Investigative Reporting Network (BIRN), identified 136 Chinese-linked projects<\/a> in the Balkans worth more than 32 billion euros (US$36 billion). Most of these projects are in Serbia (61 in total) and Bosnia and Herzegovina (29), in the field of infrastructure and energy.<\/p>\n\n\n\n

Over the years, various environmental NGOs have expressed concern<\/a> about the hefty environmental cost of the 11 coal-related projects in the region, stating<\/a> that most of them breach environmental, procurement and state-aid law, at both national and EU levels.<\/p>\n\n\n\n

In Serbia, the China Exim Bank signed off a loan for a third unit at the Kostolac B3 lignite power plant in 2014, even though it had an incomplete<\/a> environmental impact assessment. The 2017 installation of a desulphurisation system on the existing two units, supposed to reduce pollution levels, is still not operational<\/a>. Meanwhile in Bosnia, the Tuzla 7 coal power plant and coal mine project received a loan from China Exim Bank in 2017, despite irregularities<\/a> related to the environment<\/a>.<\/p>\n\n\n\n

In both Serbia and Bosnia, despite environmental and transparency controversies, the coal-related projects were able to move forward because they brought the promise of quick investment, new jobs and infrastructure, without wider conditions. China\u2019s approach to financing is characterised by its non-interference philosophy, Wang stated: \u201cUnlike Western donors and multilateral development institutions, China does not typically condition the financing \u2013 either debt or equity \u2013 onto reforms such as economic, environmental or social reforms.\u201d<\/p>\n\n\n\n

\"Aerial<\/div>
Aerial view of the Tuzla thermal power plant in Bosnia and Herzegovina, a project mired in environmental controversies (Image: Dado Ruvic\/Alamy)\u00a0<\/div><\/div><\/div><\/div>\n\n\n\n

In Bosnia, the seventh unit of the Tuzla thermal power plant has been stalled for years, and currently has no valid environmental permit. The 450 MW plant has been criticised by the Energy Community, an organisation aiming to create a pan-European energy market integrating the EU and its neighbours. In December 2021, its Secretariat ruled<\/a> that the Bosnian state guarantee for a Chinese loan for Tuzla 7 constitutes state aid and violates Energy Community rules. In an email to China Dialogue, a representative explained: \u201cThis means concretely that the State aid authority has to review its decision (…) Should the incompliance not be remedied by next summer, the Secretariat can ask [its] Ministerial Council to find that Bosnia and Herzegovina commits a serious and persistent breach of Energy Community law.\u201d<\/p>\n\n\n\n

Then, in summer 2021, the contracted equipment supplier, US conglomerate General Electric, decided to pull out from the project<\/a>, after announcing in 2020 that it would stop building coal-fired power plants. So far, the project\u2019s leading contractor, Chinese firm Gezhouba, hasn\u2019t managed to secure a replacement supplier. Despite the setbacks, Amir Andelija, general manager of the Public Electric Utility of Bosnia and Herzegovina (EPBiH), the state-owned company that generates and distributes electricity, said<\/a> in October 2021 that there was \u201cno alternative\u201d but to continue building Tuzla 7.<\/p>\n\n\n\n

The company\u2019s outlook is contested. \u201cI believe that the government is well aware of the fact that the project has no future. It has been delayed for so long; it would make our energy more expensive in the future because of the EU carbon tax… But it is hard to change the narrative, after supporting the project for the past 15 years,\u201d said Denis \u017di\u0161ko, energy and climate change programme coordinator with the the Center for Ecology and Energy, an NGO based in the city of Tuzla. \u201cThey need to find a way to pull out of the project, without losing the votes of those working in the mining industry in the next election in autumn,\u201d he believes.<\/p>\n\n\n\n

\u017di\u0161ko says that people\u2019s attitude towards coal has also changed. \u201cFive or even three years ago, when I was fighting Tuzla 7, people weren\u2019t necessarily against the project. Now, they have grown tired of pollution and failed promises.\u201d<\/p>\n\n\n\n

Can China\u2019s pivot aid the energy transition?<\/h2>\n\n\n\n

Serbia and Bosnia remain among the most coal-dependent countries in the world, with Serbia still producing 70%<\/a> of its electricity from coal, and Bosnia\u2019s share hovering at around 65%<\/a>.<\/p>\n\n\n\n