Energy Community: Kosovo direct coal subsidies highest in the region compared to energy produced

Tuesday, 26 March 2019 – Subsidies for coal mining and electricity generation in the Western Balkans give coal an unfair advantage over other, less polluting energy sources and hamper the transition towards clean energy, shows a study (1) released yesterday by the Secretariat of the Energy Community Treaty.

According to the study, Kosovo has the highest direct coal subsidies in the region compared to the amount of energy produced. The Kosovar state handed out EUR 66.77 million to the coal industry between 2015-2017, or an average of EUR 22.26 million, thus perpetuating the country’s over-reliance on coal.

While not the highest subsidy in the region in absolute terms, it is the highest per unit of electricity generated, equal to EUR 4.15 per megawatt hour. The subsidies included direct budget transfers, debt write-offs, loans from the budget, and provision of state loan guarantees.

Altogether, Western Balkan countries propped up coal mining and electricity generation with direct and indirect public subsidies totalling just over EUR 1.2 billion between 2015 and 2017, according to the study, entitled Analysis of Direct and Selected Indirect Subsidies to Coal Electricity Production in the Energy Community Contracting Parties, which covers the Western Balkans and Ukraine (2).

Kosovo also provided an indirect subsidy to its coal industry worth EUR 114.5 million in 2017 alone, by failing to apply a carbon price for every tonne of CO2 emitted into the atmosphere. However, such payments will have to be made when Kosovo enters the EU, and most likely before that, making coal a bad choice economically as well as environmentally.

Rather than decreasing, subsidies to the Kosovo coal sector look set to increase in the coming years if the controversial ‘Kosova e Re’ project goes ahead. Under the contracts signed with ContourGlobal, the Kosovar government would not only buy off all the electricity from the planned plant but would even provide payments when not operating, as well as numerous other guarantees for the company.

The Energy Community has already expressed concerns that the contracts may even bankrupt the country (3) as they would result in high costs for customers and/or subsidies by the Government, while ContourGlobal would enjoy guaranteed and risk-free profit (4).

Kosovo, like other Western Balkan states, has committed to prohibit energy sector subsidies that give certain companies an unfair advantage. This is a condition of its Energy Community membership and Stabilisation and Association Agreement with the EU. Kosovo is required to evaluate the proposed compatibility of subsidies with EU rules, and this is done by the State Aid Commission, which was voted by the Kosovo Assembly on 7 March 2019. (5)

Commenting on the study, Visar Azemi, Director of the Balkan Green Foundation, said “The Kosovar Government is handing out subsidies to the coal sector as if it has money to waste. But every cent that goes to the coal sector is a cent that should be going to hospitals, schools, water supply or energy efficiency. It‘s high time for Kosovo to make the State Aid Commission functional - not only because it’s an international obligation, but because it prevents wastage of public funds.”

Contacts:

Rinora Gojani, Program Manager, Balkan Green Foundation, Tel: +383 49 728 019, E-mail: rinora.gojani@balkangreenfoundation.org

Pippa Gallop, Research Co-ordinator, CEE Bankwatch Network, Tel: +385 99 755 9787, E-mail: pippa.gallop@bankwatch.org

Notes for editors:

  • The study is available at: https://www.energy-community.org/news/Energy-Community-News/2019/03/25.html#_ftn1
  • The study covers countries signing the Energy Community Treaty which use significant amounts of coal - Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia and Ukraine.
  • See speech by Energy Community Director Janez Kopac at an event in the European Parliament on 22 November 2018, https://www.facebook.com/balkangf/videos/2206632606119128/
  • https://energy-community.org/news/Energy-Community-News/2018/06/14.html
  • See Assembly News: http://www.kuvendikosoves.org/?cid=1,128,10383

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