Green Deal vs fossil gas: Supporting Croatia LNG, a case of EU hypocrisy

The new decade just started with the approval of the European Green Deal and its €1 trillion plan to finance the transition to a low-carbon economy in Europe during the next ten years.

It’s a historic step that follows the approval of an ambitious policy at the European Investment Bank (EIB) just a few months ago. The EIB is the "EU Bank" and it now aims to phase out its support to fossil fuels by 2021 and to become the "EU Climate Bank". These commitments lie at the core of the financial delivery scheme for the European Green Deal.

So far so good. Were it not for a wave of controversial gas infrastructure projects that the European Commission is pushing through, in parallel to its much-touted climate credentials.

One of those gas projects is Croatia LNG, a flagship project of the Republic of Croatia, who currently chairs the EU Presidency.

Croatia LNG is a project aimed to build and operate the required infrastructure on the Krk Island for receiving, storing, reloading and re-gasifying liquefied natural gas (LNG). It is made of an offshore plant as well as an onshore one, whose construction is planned in a second phase.

The project is co-financed by the Croatian government and by the Commission through a €101,4 million grant. It is listed among the EU Projects of Common Interest (PCI) – a reference list of key cross border infrastructure projects at European level – and therefore eligible for funding by the EIB before its ban on fossil fuels enters into force. The newest version of this PCI list still needs to be adopted by the European Parliament in its plenary session this week.

On the ground, the project is facing tough opposition from local residents and public authorities who denounce the lack of democratic consultation around the project and its harmful impacts on tourism and nature. Among opponents we find the mayors of the various towns on the island, a broader coalition of environmental activists, as well as Croatian and international NGOs who have shared video testimonies with us.

Croatia LNG is described as a strategic alternative to the import of Russian gas, however it is still struggling to garner interest from private investors. Hungary and its energy company MOL showed interest to finance the project, but ultimately stepped back from it when a corruption trial against former Croatian Prime Minister Ivo Sanader was unfolding in Zagreb. The case allegedly involved a bribe paid by MOL to get an advantageous position in the privatization of Croatia’s energy company INA.

But the lack of private funding did not stop the project from moving ahead. The approval of a special LNG law in Croatia to facilitate the delivery of a permit and the approval from the EU antitrust regulators gave the final greenlight to start the project’s construction during the summer of 2019.

The company in charge of the construction is the Austrian company Strabag, who provided an update on the construction’s progress in December 2019.

Strabag is involved in one of the largest corruption scandals in Austria. It is being investigated by the Austrian fiscal authorities and is accused – alongside a dozen of other peers – of cartel forming and price-fixing of construction work tenders in Austria since 2003, in violation of Austrian and EU law. Strabag’s offices were raided by the authorities in 2019. According to media, the expected fines are estimated to reach tens of millions of Euro’s.

This adds an extra shade of grey to the Croatia LNG project, whose hidden interests have been challenged by international civil society in a report in 2019. Strabag, who won several multi-million tenders for public works in Croatia, should be scrutinised by the European Commission considering that its money is involved in this controversial project.

Moreover, Croatia LNG hardly fits the "green" image that the new Commission tailored for itself. In light of the climate urgency, supporting new gas infrastructure risks locking our energy system into fossil fuels up to 2060 as a minimum. If the EU is serious about reaching carbon neutrality by 2050, it should not support new LNG facilities which risk ending up as stranded assets, as flagged by a recent study from the consultancy firm Artelys. Investing in new fossil gas, knowing that it should be phased out in the near future, is simply the definition of hypocrisy. The EU’s credibility is at stake. There is a fundamental incompatibility between aiming on one hand at a low-carbon economy, while on the other hand pumping millions of Euros in gas infrastructure. Those things simply cannot go hand in hand.

If European institutions want to put their money where their mouth is and invest in the future, then support for the Croatia LNG project should not be on the table anymore.