Ion Muntean, an Associated expert in energy issues, Institute for Development and Social Initiatives (IDIS) „Viitorul”
In late March, 2021 OECD issued a report “Sustainable Infrastructure for Low-carbon Development in the EU Eastern Partnership”. The report analyses planned infrastructure projects, decision-making frameworks related to infrastructure development and strategic planning documents in the six countries of the EU Eastern Partnership: Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.
Prior to the COVID-19 pandemic, the countries of the Eastern Partnership had experienced rapid growth and, in many cases, begun undertaking sweeping market reforms, the report reads.
The current infrastructure gap in EaP countries combined with the economic downturn resulting from COVID-19 represent a major challenge in the region, but also an opportunity to promote infrastructure projects that will boost investment and employment while contributing to progress towards long-term objectives of the Paris Agreement and the Sustainable Development Goals (SDGs).
StrategEast has interviewed major experts from EaP countries. Here are the answers from Moldovan expert.
Do you consider the infrastructure projects planned and under construction in your country fully support country’s long-term development and climate objectives?
As a former Soviet country, the Republic of Moldova inherited an outdated, inefficient and energy-intensive infrastructure. Since independence was gained, the pace of infrastructure development has been overtaken by its physical and moral degradation. The evolutions of this sector failed to meet the real needs, despite various policy and strategic documents being approved by state authorities. Such efforts were not enough to boost the economic development of the country and many big enterprises have either gone bankrupt, or their activity has dramatically shrunk. Broadly speaking, this situation also explains the insufficient capital investments in infrastructure development.
The situation regarding the development of the infrastructure projects improved after the Republic of Moldova began collaborating with the international financial institutions and development agencies. This step had a positive impact, which was nevertheless dented by the corruption and slow progress in the implementation of the reforms the authorities committed to.
Concerning the development and climate objectives of the country, the progress evolves in a different manner. According to the latest information presented by the Ministry of Agriculture, Regional Development and Environment, the Republic of Moldova has reduced by approx. 69% its GHG emissions compared to 1990, exceeding by 4% its commitments under the Paris Agreement, including the intermediate targets for 2020. The most significant reductions in GHG emissions were recorded in agriculture, where the intermediate targets for 2020 where surpassed by 26%, and in the electricity and heat production sector – by 19%. These results cannot be attributed to infrastructure project implementation efforts only. In the case of the agricultural sector, a negative trend of its GDP contribution has been recorded for the past 10 years, from 13.2% in 2020 to 10.5% in 2019. In addition to projects implemented in the energy sector, an important role in achieving these results were achieved by accounting in Moldova’s 2018 energy balance the consumed biomass in rural areas.
However, for other sectors of the economy, there are significant increases in GHG emissions compared to the pre-set targets for 2020,for instance in the residential sector – by 49%, in transport – by 37%, in industrial processes – by 39%. The emissions increases in these sectors is explained mainly through the increase in energy consumption. For example, in the case of the transportation sector, during 2010 and 2019 the number of vehicles registered in the Republic of Moldova increased by 53.6%. During the same period, fuel consumption has increased by 27%.
The current and planned infrastructure projects will undoubtedly contribute to Moldova’s long-term development and climate objectives but are not sufficient for their fulfillment. Especially in the energy and transport sectors, the results are conditioned by external financing which can be ensured if pro-European governments are able to implement the reforms Moldova has committed to in the coming years. Besides the issue of the availability of finance and expertise, there is a need for significant progress in the fight against corruption in order to avoid the previous experience when big infrastructure projects were blocked for years from these reasons.
It also has to be considered that some of the hotspot projects identified in OECD’s database such as the Ungheni-Chișinău natural gas pipeline have a strategic, rather than an economic importance or environmental importance.
Do you believe your country needs to improve the integration of climate change and other environmental concerns into infrastructure development decision-making processes?
The Republic of Moldova cooperates with the EU in the framework of the European Neighborhood Policy and its eastern regional dimension, the Eastern Partnership. In addition, it is a member of the Energy Community. Contracting parties commit themselves to implement the relevant EU energy acquis communautaire, to develop an adequate regulatory framework and to liberalize their energy markets in line with the acquis under the Treaty. In this regard, Moldova has already taken an important step towards the integration of environmental concerns into infrastructure development decision-making processes by transposing key EU directives. However, their late implementation and the superficial approach in this regard remain a weakness.
A new study commissioned by the Energy Community and published in November 2020 „Carbon Pricing Design for the Energy Community” states that „with the European Green Deal unfolding, it becomes clear that Europe’s transition to climate neutrality can only be effective if the block’s immediate neighborhood also takes meaningful climate action.” Thereby the need for a swift inclusion of the contracting parties of the Energy Community in the EU Emission Trading System (ETS) or in the institution of carbon taxes, is obvious. Thus, Moldova needs to prepare a regulatory framework for any of these two options. In this regard, the energy consumption in household and transportation sectors have to be approached as a priority, since they carry the biggest potential for GHG reduction. At the same time, especially the energy sector represents an opportunity for a residential energy efficiency subsidy program. Combining the Paris Agreement Article 6 trading, with the choice of EU approximation policy of either EU ET entry or the imposition of a carbon tax, the total potential carbon trade revenue for Moldova is more than 300 million EUR over 10 years (based on the Feasibility Study on Using Carbon Trade Revenue to Finance Residential Energy Efficiency Investments in the Republic of Moldova, elaborated in collaboration with BEZK z.s.).
Surprising are also some decisions taken by the authorities, especially in the transportation sector. The lack of consistency in fiscal policies has a negative impact on achieving the objectives in the transport sector. Starting with 2020, the government canceled the 50% reduction on custom duties on the import of hybrid cars. Starting with January 1st 2021, the government also removed the age limit restrictions on imported cars. These decisions demonstrate a lack of coherence in the efforts to integrate environmental concerns into policy initiatives.
Another relevant example, which expresses the same lack of coherency in the implementation of state policy in the energy and environment sectors, is that of the big program in the field of biomass, which has closed in 2018. Despite a positive impact and significant contribution to the national targets on renewables and environment, the sustainability of the achieved results is going to be compromised, as the policies of state support for the biomass sector are missing. At the same time, this is an example that demotivates eventual similar initiatives and showcases neglect for environmental concerns. In such circumstances, the discrepancy between the declared priorities and the actual ones has to be castigated by civil society.
Not less importance for the integration of climate change and other environmental concerns into infrastructure development decision-making process has the stability of the political and institutional setup.
