Bulgarian governments have never been big fans of the European Union's climate policies. They would prefer that the billions of euro allocated to reducing greenhouse gases were spent on highways and sports halls instead. The latest push from the European Commission to raise the 27-member bloc's ambitions to tackle climate change hasn't aroused much enthusiasm either. "The Green Deal will be a big problem for us," said Bulgarian Prime Minister Boyko Borissov just before the EU summit in February. His words were a very polite way of saying that the proposals leave Sofia cold.
The Green Deal, which is the cornerstone policy of the new European Commission headed by Ursula von der Leyen, in its essence is a trade in which the coal-dependent countries in the EU agree to shut down their mines and old power plants in exchange for financial support for the transition to cleaner energy. The need for speedier exit from coal is driven by the agreement of all EU member states (minus Poland) to achieve climate-neutral economies by 2050. In order to do that, in ten years the 27 countries will need to cut their CO2 emissions by at least 50 or 55% instead of 40% as has already been agreed. The higher goal means that coal should stop being used as an energy source by the end of the next decade. This is a serious challenge for a country like Bulgaria that sources about 45% of its electricity from coal-fired power plants.
Sofia came grudgingly on board only when it became crystal clear that Brussels' green drive can't be stopped by a few East European countries clinging to their coal. But being on board doesn't mean that Bulgaria has a clear policy.
The green offer
Under the deal, a new Just Transition Fund (JTF) will provide 456 million euro for the two most affected coal-mining regions in Bulgaria - Maritza East and Bobov Dol. However, there is a catch.
In order to get access to the funding, Bulgaria will need to top up the sum by 1.2 billion euro, or around 10% of all EU structural funds for the country for the period 2021-2027. This is money that will not be allocated to railways and tunnels, reducing the available pot for Bulgaria in the EU budget. In addition, the government will need to prepare development plans for the two regions together with clear paths for gradually exiting from the coal industry. The speed of this withdrawal is still unclear, but it is more likely to be fast than slow which is not favoured by the mining trade unions - the last strong labour organizations that can stir mass protests and wreak havoc in Bulgaria's energy system.
The money from the JTF could be mainly used for social measures like retraining former workers in the coal industry, funding start-ups or re-cultivating abandoned mines. The replacement of the old power plants will need to be financed as a normal investment project. According to the European Commission's projections, Bulgaria will be able to mobilize at least 4.5 billion euro in private and public investments, using EU guarantees and loans from the European Investment Bank.
Bulgaria will also have access to other sources to finance its energy transition. The main one is the Modernization Fund, a dedicated facility for the poorer countries in the EU that could provide Bulgaria with a further 450 million euro (the exact amount depends on the prices of CO2 emission allowances). The fund could support the modernization of power producers and industrial companies that also need to get rid of their carbon footprint.
Bulgaria's disoriented reply
Sofia has been slow to react to the new green mood in Brussels. In the last couple of years, the Bulgarian government has been trying to derail as much as possible the provisions of the new EU climate and energy legislation. For example, it threatened to sue the European Commission over the introduction of new and much higher environmental standards for coal-fired power plants. During its presidency of the Council of the EU in the first half of 2018, it pushed for reduced emission cuts.
Still reeling from those rear-guard battles it simply missed the determination of the new members of the European Parliament (elected in May 2019) and most West European EU member states to set a much more ambitious climate agenda. In September last year, Bulgarian Minister of Energy Temenuzhka Petkova was still trying to placate the trade unions with promises for continued government support for the coal industry well beyond 2040. In addition, the government plans to restart the construction of the nuclear power plant in Belene, frozen in 2012 over lack of funds, diverted much of the resources and the attention of the energy ministry.
The first coherent response came at the end of February with the Framework Position on the Green Deal. But some of its main points seem wildly off the mark.
The bottom line of the Bulgarian position is to resist any attempts by other member states to set higher CO2 emission reduction goals. Under Sofia's current plans electricity production from coal-fired power plants will start gradually decreasing in 2025 to end in 2040. This is possible only if emission standards remain unchanged.
However, the emissions' train has already left the station. The European Commission will publish an impact assessment in September as part of its proposed Climate Law that will estimate whether the member states could cut their greenhouse emissions by 50 or 55% by 2030. Following the impact assessment, the new targets will be adopted by qualified majority by the member states and Bulgaria has practically no way to prevent this.
The second main element of the Bulgarian position is the proposal to include nuclear energy in the green deal. "The role of nuclear energy should be adequately foreseen in the upcoming initiatives," the government says in the Framework Position. Sofia hopes that the EU budget will somehow support the construction of the Belene nuclear power plant which the government sees as an adequate substitute for the existing coal power plants. The problem is that the EU has never directly funded a nuclear power plant project and it will most certainly not do it now. Nuclear energy was also squeezed out at the end of 2019 from the EU's green finance scheme.
Money not enough
Funding opportunities are not making the Bulgarian government happy either. The first reason is the obvious mismatch between the money envisaged for energy transition and real needs. According to the government's own estimates, Bulgaria will need to invest more than 33 billion euro over the next decade to meet the new EU emission goals.
Even though this sum includes some controversial projects, like the above mentioned Belene nuclear power plant which will cost at least 10 billion euro, the funding gap is certainly there. To accomplish the transition, Bulgaria will effectively need to allocate all the money the EU budget provides to it. This means there will be none left for other badly needed projects. The second reason for Sofia's cold response to the European Commission's proposal has to do with Bulgaria's legacy in the energy sector. Households and businesses in Bulgaria now enjoy the lowest electricity prices in the EU mainly because investments in most energy producers had been repaid long ago.
However, this situation was easily tipped in recent years with the introduction of new and more expensive renewable energy sources or coal-fired power plants (which came on-line in 2012). A rise in energy prices led to mass street protests in 2013 that toppled the first government of current Prime Minister Boyko Borissov. This is a cautionary tale for every Bulgarian politician which makes them averse to ideas of massive investments in energy infrastructure.
Bulgaria has some country-specific problems - it faces increased competition from neighbours which do not need to follow the EU's strict climate legislation. In the last two years, Bulgaria began importing more and more electricity from Turkey and Serbia, which do not need to burden their power producers with CO2 allowances. In practice, Bulgaria is restricting its own coal-fired power plants but instead imports electricity produced from coal abroad.
A similar process is unfolding in heavy industry. Cement producers, also heavily reliant on coal, are eyeing North Macedonia and Turkey, freezing their investment plans in Bulgaria. Fertilizer producers are ceasing production of ammonia, preferring to import it.
Another problem identified by the Bulgarian authorities is the proposed inclusion of transport and housing in the European CO2 trading scheme. Since Bulgaria's vehicle and housing stock is very old and inefficient, Bulgarians would see a comparatively higher increase in their fuel and heating bills than citizens of some of the more developed EU member states.
The government complains that Bulgaria will need to bear the burden of very ambitious energy and climate policy before the country has modernized its energy sector accordingly. The required massive investments in new energy assets will crowd out badly needed investments in other sectors, hampering Bulgaria's economic growth. As the government sees it, the Green Deal is a lemon that can't be used to make lemonade.